<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
------------------------
(MARK ONE)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM JULY 1, 1994 TO DECEMBER 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 OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
11812 SAN VICENTE BLVD., LOS ANGELES,
CALIFORNIA 90049-5069
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 826-2355
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common stock, $.25 par value New York Stock Exchange
Pacific Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE.
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, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein.
NOT APPLICABLE X
As of February 16, 1995, the aggregate market value of the voting stock
held by non-affiliates of the Registrant was: $131,949,219.
As of February 16, 1995, the number of shares outstanding of the
Registrant's class of common stock, $.25 par value was: 6,498,105.
DOCUMENT INCORPORATED BY REFERENCE
Proxy Statement for the 1995 Annual Meeting
of Shareholders, May 9, 1995. PART III
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART I
ITEM 1. BUSINESS
Bell Industries, Inc. ("Bell" or "the Company") is primarily a national
distributor of electronic components. In addition, Bell also distributes graphic
arts and recreational-related products. Bell presently employs 1,400 persons.
ELECTRONICS
The Electronics Group (80% of 1994 sales) includes one of the nation's
largest electronic component distributors. The Electronics Group sells the
following products to over 20,000 customers nationally: semiconductors (Analog
Devices, IBM Microelectronics, Maxim, Microchip, National Semiconductor, SGS-
Thomson, Siliconix); passive components (Aromat, Bourns, Kemet, Vishay);
connectors (Berg); microcomputers and related products (Apple, Compac,
Hewlett-Packard, IBM); power supplies (Power-One) and board-level products. The
group provides value-added services including Bell's Just-In-Time Delivery
System, assembly of custom cables, harnesses and connectors, contract purchasing
and direct programming of chips. Group manufacturing operations produce
switches, push-buttons and electroluminescent panels used in commercial
aircraft; precision stampings used in the personal computer industry; and
electronic components including coils, filters and chokes marketed under the
J.W. Miller name.
The Electronics Group's distribution business markets electronic components
through seven regional service centers and almost 30 sales facilities located
throughout the United States. Regional service centers support selling
operations in the following geographic areas and locations: Northwest
(Sunnyvale, California); Southwest (Orange County, California); Central
(Chicago, Illinois); Heartland (Indianapolis, Indiana); Northeast (Boston,
Massachusetts); Mid-Atlantic (Philadelphia, Pennsylvania) and Southern (Orlando,
Florida). The group's microcomputer distribution and services business is based
in Indianapolis, Indiana and provides services through four facilities located
in Indiana, Ohio and Kentucky. Electronic manufacturing facilities are located
in Redmond, Washington; Mountain View, California; and Gardena, California.
The group's electronics distribution business markets electronic components
supplied by over 70 manufacturers and stocks 50,000 items at a primary
distribution center located in Southern California. During calendar year 1994,
the group's ten largest electronic component suppliers accounted for
approximately 50% of group sales. Sales of products from the group's two largest
suppliers, National Semiconductor and IBM Microelectronics, each represented
approximately 12% of group sales.
GRAPHIC ARTS
The Graphic Arts Group (12% of 1994 sales) distributes graphic arts
supplies and equipment throughout California, Nevada and Arizona to the
advertising and printing industries. The group is based in Los Angeles,
California and markets its products through six distribution facilities. Major
product lines distributed by the group include film, plates, chemicals and other
printing supplies from Agfa, DuPont, Eastman Kodak, and 3M, as well as prepress
and related electronic imaging equipment from Agfa, Apple, Howtek, Intergraph,
Linotype-Hell, and Screen.
RECREATIONAL PRODUCTS
The Recreational Products Group (8% of 1994 sales) distributes after-market
products for the recreational vehicle, mobile home, motorcycle, snowmobile, and
marine industries from facilities in St. Paul, Minnesota and Milwaukee,
Wisconsin. The group supplies more than 9,000 recreational vehicle-related
products, as well as over 8,500 marine items, 11,000 motorcycle items, and 4,000
snowmobile items. Major product lines distributed by the group include Alcoa,
Coleman/Recreational Products, Inc., Dunlop, NGK, and Nordyne.
1
<PAGE> 3
DISTRIBUTION
Bell has distribution agreements with its suppliers that typically are
renewable annually, specify geographic coverage and provide for inventory
pricing, rotation and return privileges. Distribution agreements are
nonexclusive and are generally cancelable by either party at any time or on
short notice. The loss of a major supplier would likely adversely impact the
operating results of the Company for some period. The Company believes that
alternative sources for most, if not all, products would be available through
other suppliers.
ITEM 2. PROPERTIES
At December 31, 1994, the Company leased 52 facilities containing
approximately 770,000 square feet and owned 9 facilities containing an aggregate
of approximately 333,000 square feet. The facilities utilized by each of the
Company's business segments are set forth in the following table:
<TABLE>
<CAPTION>
AREA IN SQUARE FEET
(NUMBER OF LOCATIONS)
------------------------------------
OWNED LEASED
--------------- ----------------
<S> <C> <C> <C> <C>
Electronics Group........................ 78,000 (4) 355,000 (36)
Graphic Arts Group....................... 85,000 (6)
Recreational Products Group.............. 67,000 (1) 98,000 (1)
Corporate and other...................... 36,000 (3)
Discontinued operations.................. 188,000 (4) 196,000 (6)
------- -------
333,000 (9) 770,000 (52)
======= =======
</TABLE>
For the most part, the Company's facilities are fully utilized, although
excess capacity exists from time to time, based on product mix and demand.
Management believes that these properties are in good condition and suitable for
their present use.
The Company has subleased all of the facilities related to discontinued
operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any litigation of a material nature which
might affect its financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of Bell Industries was held on November
1, 1994. The following matters were acted upon at the meeting.
1. ELECTION OF DIRECTORS.
Shareholders re-elected the incumbent directors set forth in the table
below. 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.................................. 4,640,549 -0- 128,175
Anthony L. Craig.............................. 4,482,002 -0- 286,722
Gordon Graham................................. 4,640,419 -0- 128,305
Bruce M. Jaffe................................ 4,640,543 -0- 128,181
Charles S. Troy............................... 4,538,964 -0- 229,760
Milton Rosenberg.............................. 4,541,294 -0- 227,430
Theodore Williams............................. 4,639,861 -0- 128,863
</TABLE>
2
<PAGE> 4
2. ADOPTION OF THE 1994 STOCK OPTION PLAN.
Shareholders adopted the 1994 Stock Option Plan, which received the
following vote:
<TABLE>
<CAPTION>
VOTES WITHHOLD
VOTES FOR AGAINST AUTHORITY
--------- ------- ---------
<S> <C> <C> <C>
1994 Stock Option Plan..................... 3,183,934 498,010 1,086,780
</TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of the Registrant, all of whom hold office until the
meeting of the Board of Directors following the next annual meeting of
shareholders and until their successors have been elected or appointed, are as
follows:
<TABLE>
<CAPTION>
YEAR FIRST
NAMED
NAME AGE POSITION OFFICER
- ------------------- --- ------------------------------------------------------ ----------
<S> <C> <C> <C>
Paul F. Doucette 48 Senior Vice President(1) 1981
Tracy A. Edwards 38 Vice President and Chief Financial Officer(2) 1991
Gordon M. Graham 60 Senior Vice President(3) 1986
D. J. Hough 58 Vice President 1984
Bruce M. Jaffe 51 President and Chief Operating Officer(3) 1973
Theodore Williams 74 Chief Executive Officer(3) 1969
Stephen A. Weeks 45 Treasurer and Corporate Controller(4) 1994
</TABLE>
- ---------------
(1) Mr. Doucette's wife is the niece of Mr. Williams.
(2) Mr. Edwards was a Senior Manager with Price Waterhouse for the five years
prior to his appointment as Vice President and Chief Financial Officer.
(3) Also serves as a member of the Board of Directors.
(4) Mr. Weeks was employed in several accounting management positions for the
five years prior to his appointment as Treasurer.
3
<PAGE> 5
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Bell's common stock (ticker symbol BI) is listed on the New York and
Pacific Stock Exchanges. The following table shows the high, low and closing
market prices for the Company's common stock during the ten most recent
quarters.
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30
- ----------------------------------------------- ------------ ----------- -------- -------
<S> <C> <C> <C> <C>
Six months ended December 31, 1994
Price: High.................................... $20.38 $ 22.88
Low...................................... 15.75 19.00
Close.................................... 19.75 20.38
Fiscal 1994
Price: High.................................... $17.13 $ 18.75 $19.75 $ 17.63
Low...................................... 13.38 16.50 14.63 14.50
Close.................................... 17.13 17.50 14.88 16.63
Fiscal 1993
Price: High.................................... $11.25 $ 12.50 $12.75 $ 14.00
Low...................................... 9.50 9.75 9.25 11.50
Close.................................... 10.00 11.63 11.88 13.88
</TABLE>
The Company declared and paid dividends of $.10 per share for the quarters
ended September 30, 1992 and December 31, 1992. No cash dividends have been
declared subsequent to December 31, 1992. In July 1993, the Company declared a
4% stock dividend payable to shareholders of record on August 20, 1993. In
October 1994, the Company declared a 5% stock dividend payable to shareholders
of record on October 28, 1994. Per share prices in the table above were not
adjusted for periods prior to the declaration of each stock dividend.
Approximate number of record holders of common stock as of February 16,
1995: 1,500.
4
<PAGE> 6
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,(4) YEARS ENDED JUNE 30,
---------------------- ----------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
-------- ----------- -------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales......................... $255,372 $ 208,959 $451,153 $365,323 $353,347 $317,125 $308,151
Income (loss) from continuing
operations, net of taxes(1)..... $ 5,309 $ 3,439 $ 9,075 $ 5,005 $ 919 $ (677) $ 6,050
Net income (loss)................. $ 5,619 $ 3,439 $ 9,075 $ (5,025) $ 417 $ 678 $ 8,202
Capital expenditures.............. $ 1,375 $ 1,462 $ 2,562 $ 5,744 $ 8,669 $ 5,725 $ 5,429
Depreciation and amortization..... $ 2,891 $ 2,731 $ 5,574 $ 5,735 $ 4,935 $ 5,695 $ 5,682
FINANCIAL POSITION
Working capital................... $116,118 $ 105,640 $107,455 $ 97,710 $114,715 $118,853 $ 90,924
Total assets...................... $200,367 $ 175,666 $184,713 $175,272 $191,557 $189,167 $175,947
Long-term liabilities............. $ 40,936 $ 43,166 $ 39,972 $ 47,569 $ 52,592 $ 57,159 $ 29,569
Shareholders' equity.............. $101,770 $ 89,842 $ 95,553 $ 86,288 $ 92,338 $ 93,996 $ 94,838
SHARE AND PER SHARE DATA(2)
Income (loss) from continuing
operations, net of taxes........ $ .80 $ .52 $ 1.38 $ .77 $ .14 $ (.11) $ .95
Net income (loss)................. $ .85 $ .52 $ 1.38 $ (.77) $ .06 $ .11 $ 1.28
Cash dividends declared(3)........ $ .20 $ .40 $ .40 $ 4.37
Shareholders' equity.............. $ 15.66 $ 13.93 $ 14.81 $ 13.41 $ 14.37 $ 14.68 $ 14.98
Market price -- high.............. $ 22.88 $ 18.75 $ 19.75 $ 14.00 $ 13.13 $ 18.38 $ 18.75
Market price -- low............... $ 15.75 $ 13.38 $ 13.38 $ 9.25 $ 9.00 $ 9.38 $ 13.25
Weighted average common shares
outstanding (000's)............. 6,643 6,565 6,576 6,494 6,471 6,430 6,391
FINANCIAL RATIOS
Current ratio..................... 3.0 3.5 3.2 3.4 3.5 4.1 2.8
Return on average shareholders'
equity.......................... 11.3% 7.8% 10.0% (5.6)% 0.4% 0.7% 7.9%
Long-term liabilities to total
capitalization.................. 28.7% 32.5% 29.5% 35.5% 36.3% 37.8% 23.8%
</TABLE>
- ---------------
(1) Includes before-tax provisions for computer write-down ($4,400) in 1992 and
facility closure ($3,500) in 1991.
(2) Adjusted to give effect to 5% stock dividend declared in October 1994 and 4%
stock dividend declared in July 1993 (excluding cash dividend and market
price data).
(3) Includes special cash dividend of $4.00 per share declared in 1990.
(4) During the six months ended December 31, 1994, the Company changed its
yearend from June 30 to December 31. Unaudited information for the six
months ended December 31, 1993 is presented for comparative purposes.
5
<PAGE> 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The Company changed its yearend from June 30 to December 31 during the six
months ended December 31, 1994. This resulted in the six month reporting period
included in this Transition Report on Form 10-K. Financial information for the
six months ended December 31, 1993 is unaudited.
RESULTS OF OPERATIONS
Results of operations by business segment were as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
------------------------ ----------------------------------
1994 1993 1994 1993 1992
-------- ----------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales
Electronics...................... $205,211 $163,952 $357,968 $282,190 $274,555
Graphic Arts..................... 30,431 29,452 58,764 55,410 52,790
Recreational Products............ 19,730 15,555 34,421 27,723 26,002
-------- -------- -------- -------- --------
$255,372 $208,959 $451,153 $365,323 $353,347
======== ======== ======== ======== ========
Operating income
Electronics...................... $ 13,176 $ 10,656 $ 23,741 $ 17,543 $ 15,935
Graphic Arts..................... 910 479 1,405 2,115 1,606
Recreational Products............ 1,586 1,056 3,050 2,550 2,536
-------- -------- -------- -------- --------
Operating income......... 15,672 12,191 28,196 22,208 20,077
Corporate costs.................... (4,632) (3,885) (7,975) (8,005) (8,272)
Computer write-down................ (4,400)
Interest expense................... (1,886) (2,325) (4,492) (5,538) (5,432)
Income tax provision............... (3,845) (2,542) (6,654) (3,660) (1,054)
-------- -------- -------- -------- --------
Income from continuing
operations....................... 5,309 3,439 9,075 5,005 919
Discontinued operations
Loss from operations, net of
taxes......................... (1,100) (502)
Reserve recovery (loss) on
disposal, net of taxes........ 310 (8,100)
Cumulative effect of accounting
change, net of taxes............. (830)
-------- -------- -------- -------- --------
Net income (loss).................. $ 5,619 $ 3,439 $ 9,075 $ (5,025) $ 417
======== ======== ======== ======== ========
</TABLE>
SIX MONTHS ENDED DECEMBER 31, 1994 COMPARED WITH
THE SIX MONTHS ENDED DECEMBER 31, 1993
OVERALL RESULTS
For the six months ended December 31, 1994, the Company's net sales
increased 22% to $255.4 million and operating income increased 29% to $15.7
million over the comparable period in the prior year. The Company recorded
income from continuing operations of $5.3 million, or $.80 per share, compared
to $3.4 million, or $.52 per share, in the prior year six months. After
including an after-tax gain from discontinued operations of $0.3 million, net
income for the current six months totaled $5.6 million, or $.85 per share. While
management is optimistic about continued growth in sales and earnings, the
operating results reported for the six months are not necessarily indicative of
future performance.
CONTINUING OPERATIONS
Sales of the Electronics Group increased 25% to $205.2 million and
operating income increased 24% to $13.2 million. The improved performance was
attributed to stronger shipments of electronic components, primarily
semiconductors. In addition, the group recorded increased sales of microcomputer
systems and
6
<PAGE> 8
services. Operating income improvement was primarily attributed to stronger
sales offset slightly by reductions in gross margins arising from product mix
changes, primarily increased sales of lower margin memory and microprocessor
products.
Graphic Arts Group sales increased 3% to $30.4 million and operating income
increased 90% to $0.9 million. The operating income improvement was primarily
attributed to programs to reduce operating expenses implemented in early
calendar year 1994.
Recreational Products Group sales increased 27% to $19.7 million and
operating income increased 50% to $1.6 million as a result of continued efforts
to penetrate the recreational vehicle, snowmobile and marine markets served by
this group.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
----------------------- -------------------------
1994 1993 1994 1993 1992
----- ----------- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold...................... (77.8) (77.5) (77.5) (75.3) (74.9)
Selling, general and administrative
expenses................................ (17.9) (18.6) (18.0) (20.8) (21.8)
Computer write-down........................ (1.2)
Interest expense........................... (.7) (1.1) (1.0) (1.5) (1.5)
----- ----- ----- ----- -----
Income from continuing operations before
income taxes............................... 3.6 2.8 3.5 2.4 .6
Income tax provision......................... (1.5) (1.2) (1.5) (1.0) (.3)
----- ----- ----- ----- -----
Income from continuing operations............ 2.1% 1.6% 2.0% 1.4% .3%
===== ===== ===== ===== =====
</TABLE>
Cost of products sold as a percentage of sales increased as a result of
product mix changes in electronics distribution noted above. Selling, general
and administrative expenses have decreased as a percentage of sales due to
ongoing cost control efforts. Corporate costs for the current six months
increased over the prior year period primarily as a result of deferred
compensation expenses. The decrease in interest expense was attributed to
reductions in average long-term debt borrowings. The Company's income tax rate
was approximately 42% for all periods in 1994 and 1993. In fiscal 1992, the
income tax rate of 53.5% resulted from lower earnings and the effects of certain
expenses for which tax benefits are limited, including goodwill and state income
taxes.
DISCONTINUED OPERATIONS
During the last half of the year ended June 30, 1993, the Company recorded
an after-tax charge of $8.1 million in connection with a plan to dispose of its
Building Products Group. Income tax benefits of approximately $5.9 million were
recorded in connection with the disposal charge. The Company has completed the
disposition of the discontinued operations and recorded a gain of $0.3 million
(net of taxes totaling $0.2 million) which represented residual reserves no
longer considered necessary. Remaining assets and liabilities attributed to
discontinued operations were not material.
FISCAL 1994 COMPARED WITH FISCAL 1993
For the year ended June 30, 1994 (fiscal 1994), net sales increased 23% to
$451.2 million and operating income increased 27% to $28.2 million. Income from
continuing operations, as well as net income, was $9.1 million, or $1.38 per
share, compared to income from continuing operations of $5 million, or $.77 per
share, in fiscal 1993. After providing for the effects of an accounting change
and losses on discontinued operations, the Company recorded a net loss of $5
million, or $.77 per share, in fiscal 1993.
Electronics Group sales increased 27% to $358 million and operating income
increased 35% to $23.7 million. The improved performance was primarily
attributed to strong electronic component shipments, including the first
significant sales from the Company's franchise agreement with IBM
Microelectronics. Operating income improvement was attributed to stronger sales,
while operating expenses remained unchanged due to the Company's restructuring
and cost control programs. These improvements were partially
7
<PAGE> 9
offset by reductions in gross margins in electronic components sales due to
product mix changes primarily arising from increased sales of lower margin
memory and microprocessor products.
Graphic Arts Group sales increased 6% to $58.8 million while operating
income decreased 34% to $1.4 million. Margin pressures resulting from adverse
economic conditions in California contributed to the overall decrease in
operating performance for the group. Results during the last half of fiscal 1994
improved over the first six months as a result of programs to increase gross
margins and reduce operating expenses.
Sales and operating income for the Recreational Products Group increased
24% to $34.4 million and 20% to $3.1 million, respectively. Sales and income
growth resulted from enhanced efforts to penetrate winter product markets and
the expansion of certain product lines.
FISCAL 1993 COMPARED WITH FISCAL 1992
For the year ended June 30, 1993 (fiscal 1993), net sales increased 3% to
$365.3 million and operating income increased 11% to $22.2 million. Income from
continuing operations was $5 million, or $.77 per share, compared to income from
continuing operations of $0.9 million, or $.14 per share, for the prior year.
The Company recorded a net loss of $5 million, or $.77 per share, compared to
net income of $0.4 million, or $.06 per share, in fiscal 1992.
Electronics Group sales increased 3% to $282.2 million and operating income
increased 10% to $17.5 million. Sales growth was primarily attributed to strong
electronic component and computer systems shipments in the eastern, southern and
southwestern United States. Value-added and telemarketing programs also
contributed to the solid sales performance. In addition, sales increased as a
result of strong shipments of precision-stamped metal products for the
electronics and computer industries. Operating income improvement was attributed
to sales growth and previously announced restructuring and payroll cost
reduction programs and increased manufacturing volumes. These improvements were
partially offset by reductions in gross margins in electronics distribution
during the year due to product mix changes and competitive pressures.
Graphic Arts Group sales were $55.4 million, a 5% increase over the prior
year. Operating income increased 32% to $2.1 million. Sales and operating income
benefited from the expansion into new product lines, including electronic
imaging equipment, and stronger market performance in northern California.
Operating margins improved as a result of efficiency programs.
Recreational Products Group sales increased 7% due to stronger marketing
efforts and favorable weather conditions. Operating income increased slightly as
a result of increased sales offset by decreases in gross margins due to
competitive pricing efforts and changes in product mix.
FINANCIAL CONDITION
At December 31, 1994, the Company continued to maintain a strong financial
position as set forth in the following table (dollars in thousands except per
share amounts):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1994 1994 1993
------------ -------- --------
<S> <C> <C> <C>
Cash and cash equivalents................................. $ 3,631 $ 4,370 $ 10,717
Working capital........................................... $116,118 $107,455 $ 97,710
Current ratio............................................. 3.0:1 3.2:1 3.4:1
Long-term liabilities to total capitalization............. 28.7% 29.5% 35.5%
Shareholders' equity per share............................ $ 15.66 $ 14.81 $ 13.41
Days' sales in receivables................................ 50 47 49
Days' sales in inventories................................ 87 73 91
</TABLE>
During the six months ended December 31, 1994, cash used by operating
activities totaled $4.8 million compared to $2.8 million in the prior year six
months. The change in operating cash flows was primarily attributed to increased
investment in inventories and receivables offset by increased profits during the
current
8
<PAGE> 10
period. Receivables and inventories at December 31, 1994 were higher than levels
reported at June 30, 1994 as a result of seasonal factors and the growth in the
Company's business. In fiscal 1994, operating activities generated cash totaling
$6.6 million compared to $2.7 million in the prior year. The increase in
operating cash flows in fiscal 1994 was primarily related to the growth in
earnings offset by increased investment in working capital required to support
the Company's electronics business. Cash provided by investing activities
included the proceeds from the sale of assets of discontinued operations.
Offsetting these proceeds were payments for accounts payable and other
obligations relating to the discontinued operations. In fiscal 1994, the Company
invested $5.9 million to acquire a microcomputer distribution and services
business. Investing activity cash flows in fiscal 1993 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.
Financing activity cash flows primarily included scheduled and optional
repayments on the Company's Senior Notes, bank borrowings and capital lease
obligations. Non-cash investing and financing activities included a $1.6 million
equipment addition in fiscal 1994 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, through available cash, bank borrowings and cash generated from
operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS PAGE
- -------------------------------------------------------------------------------------- ----
<S> <C>
Financial Statements:
Report of Independent Accountants................................................... 10
Consolidated Statement of Operations for the six months ended December 31, 1994 and
1993 and the three years in the period ended June 30, 1994....................... 11
Consolidated Balance Sheet at December 31, 1994, June 30, 1994 and June 30, 1993.... 12
Consolidated Statement of Shareholders' Equity for the six months ended December 31,
1994 and the three years in the period ended June 30, 1994....................... 13
Consolidated Statement of Cash Flows for the six months ended December 31, 1994 and
1993 and the three years in the period ended June 30, 1994....................... 14
Notes to Consolidated Financial Statements...........................................15-22
Financial Statement Schedule:
For the six months ended December 31, 1994 and the three years in the period
ended June 30, 1994
VIII -- Valuation and Qualifying Accounts and Reserves......................... 26
</TABLE>
The financial data included in the financial statement schedule should be
read in conjunction with the consolidated financial statements. All other
schedules have been omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.
The individual financial statements of the Company have been omitted since the
Company is primarily an operating company and the subsidiaries included in the
consolidated financial statements are considered wholly owned and deemed to be
totally held and do not have indebtedness to any person other than the Company
or its consolidated subsidiaries in amounts which together exceed five percent
of total consolidated assets as of December 31, 1994.
9
<PAGE> 11
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Bell Industries, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Bell Industries, Inc. and its subsidiaries at December 31, 1994,
June 30, 1994 and June 30, 1993, and the results of their operations and their
cash flows for the six months ended December 31, 1994 and for each of the three
years in the period ended June 30, 1994, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in the Notes to Consolidated Financial Statements, during the
year ended June 30, 1993 the Company changed its method of accounting for
postretirement benefits.
PRICE WATERHOUSE LLP
Los Angeles, California
February 1, 1995
10
<PAGE> 12
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
---------------------- ------------------------------
1994 1993 1994 1993 1992
-------- ----------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................................ $255,372 $208,959 $451,153 $365,323 $353,347
-------- -------- -------- -------- --------
Costs and expenses
Cost of products sold.................. 198,731 161,898 349,573 275,081 264,634
Selling, general and administrative
expenses............................ 45,601 38,755 81,359 76,039 76,908
Interest expense....................... 1,886 2,325 4,492 5,538 5,432
Computer write-down.................... 4,400
-------- -------- -------- -------- --------
246,218 202,978 435,424 356,658 351,374
-------- -------- -------- -------- --------
Income from continuing operations before
income taxes........................... 9,154 5,981 15,729 8,665 1,973
Income tax provision..................... 3,845 2,542 6,654 3,660 1,054
-------- -------- -------- -------- --------
Income from continuing operations........ 5,309 3,439 9,075 5,005 919
Discontinued operations
Loss from operations, net of taxes..... (1,100) (502)
Reserve recovery (loss) on disposal,
net of taxes........................ 310 (8,100)
Cumulative effect of accounting change,
net of taxes........................... (830)
-------- -------- -------- -------- --------
Net income (loss)........................ $ 5,619 $ 3,439 $ 9,075 $ (5,025) $ 417
======== ======== ======== ======== ========
SHARE AND PER SHARE DATA
Income from continuing operations........ $ .80 $ .52 $ 1.38 $ .77 $ .14
Discontinued operations
Loss from operations, net of taxes..... (.17) (.08)
Reserve recovery (loss) on disposal,
net of taxes........................ .05 (1.24)
Cumulative effect of accounting change,
net of taxes........................... (.13)
-------- -------- -------- -------- --------
Net income (loss)........................ $ .85 $ .52 $ 1.38 $ (.77) $ .06
======== ======== ======== ======== ========
Cash dividends declared.................. $ -- $ -- $ -- $ .20 $ .40
======== ======== ======== ======== ========
Weighted average common shares
outstanding............................ 6,643 6,565 6,576 6,494 6,471
======== ======== ======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
11
<PAGE> 13
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1994 1994 1993
------------ -------- --------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents.............................. $ 3,631 $ 4,370 $ 10,717
Accounts receivable, less allowance for doubtful
accounts of $1,041, $884 and $1,271................. 68,914 65,835 50,215
Inventories............................................ 95,910 80,179 71,543
Prepaid expenses and other............................. 5,324 6,259 6,650
-------- -------- --------
Total current assets.............................. 173,779 156,643 139,125
-------- -------- --------
Properties, at cost
Land................................................... 443 443 443
Buildings and improvements............................. 8,857 8,750 8,767
Equipment.............................................. 31,362 31,269 30,224
-------- -------- --------
40,662 40,462 39,434
Less accumulated depreciation.......................... (25,722) (24,284) (22,733)
-------- -------- --------
Total properties.................................. 14,940 16,178 16,701
-------- -------- --------
Other assets
Goodwill and other intangibles, less accumulated
amortization of $4,914, $4,638 and $4,126........... 6,462 6,738 5,521
Net assets of discontinued operations.................. 383 7,752
Deferred tax benefits and other........................ 5,186 4,771 6,173
-------- -------- --------
Total other assets................................ 11,648 11,892 19,446
-------- -------- --------
$200,367 $184,713 $175,272
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable....................................... $ 34,705 $ 28,885 $ 20,465
Accrued payroll........................................ 5,887 6,114 4,868
Accrued liabilities.................................... 6,236 5,254 5,643
Current portion of long-term liabilities............... 9,662 7,616 9,703
Income taxes payable................................... 1,171 1,319 736
-------- -------- --------
Total current liabilities......................... 57,661 49,188 41,415
-------- -------- --------
Long-term liabilities
Notes payable.......................................... 33,857 32,857 41,000
Obligations under capital leases....................... 2,463 3,234 3,364
Deferred compensation and other........................ 4,616 3,881 3,205
-------- -------- --------
Total long-term liabilities....................... 40,936 39,972 47,569
-------- -------- --------
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 -- 6,497,557, 6,453,412 and 6,436,943
shares............................................ 1,624 1,537 1,533
Other paid-in capital.................................. 54,080 47,167 46,981
Reinvested earnings.................................... 46,066 46,849 37,774
-------- -------- --------
Total shareholders' equity........................ 101,770 95,553 86,288
-------- -------- --------
Commitments and contingencies
$200,367 $184,713 $175,272
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
12
<PAGE> 14
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK OTHER
------------------- PAID-IN REINVESTED
SHARES AMOUNT CAPITAL EARNINGS
-------- ------ ------- ----------
<S> <C> <C> <C> <C>
Balance at June 30, 1991........................ 5,863,387 $1,466 $43,407 $ 49,123
Employee stock plans.......................... 18,850 5 270
Net income.................................... 417
Cash dividends................................ (2,350)
--------- ------ ------- --------
Balance at June 30, 1992........................ 5,882,237 1,471 43,677 47,190
Employee stock plans.......................... 12,400 3 150
Net loss...................................... (5,025)
Cash dividends................................ (1,178)
4% stock dividend............................. 235,785 59 3,154 (3,213)
--------- ------ ------- --------
Balance at June 30, 1993........................ 6,130,422 1,533 46,981 37,774
Employee stock plans.......................... 15,685 4 186
Net income.................................... 9,075
--------- ------ ------- --------
Balance at June 30, 1994........................ 6,146,107 1,537 47,167 46,849
Employee stock plans.......................... 42,874 10 588
Net income.................................... 5,619
5% stock dividend............................. 308,576 77 6,325 (6,402)
--------- ------ ------- --------
Balance at December 31, 1994.................... 6,497,557 $1,624 $54,080 $ 46,066
========= ====== ======= ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
13
<PAGE> 15
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
--------------------- ---------------------------------
1994 1993 1994 1993 1992
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers................... $ 251,690 $ 207,289 $ 437,143 $ 401,801 $ 410,532
Cash paid to suppliers and employees........... (250,614) (204,292) (421,052) (390,628) (383,791)
Interest paid.................................. (2,045) (2,613) (4,979) (5,664) (5,276)
Income taxes paid.............................. (3,786) (3,196) (4,561) (2,806) (528)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities................. (4,755) (2,812) 6,551 2,703 20,937
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases of equipment and improvements........ (1,375) (1,462) (2,562) (5,744) (8,669)
Disposal of discontinued operations............ 2,490 7,745 7,369
Purchase of business........................... (5,864)
Other.......................................... 37 164 121 43 363
--------- --------- --------- --------- ---------
Net cash provided by (used in)
investing activities................. 1,152 6,447 (936) (5,701) (8,306)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Bank borrowings (payments), net................ 9,000 (3,600) 2,000 (1,600) (1,600)
Proceeds from capital lease arrangements....... 5,411
Payments on Senior Notes....................... (6,000) (4,000) (12,600) (2,000)
Payments on capital leases..................... (725) (606) (1,362) (939)
Employee stock plans........................... 589
Dividends paid and other....................... (1,766) (2,532)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities................. 2,864 (8,206) (11,962) (894) (4,132)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................... (739) (4,571) (6,347) (3,892) 8,499
Cash and cash equivalents at beginning of
period......................................... 4,370 10,717 10,717 14,609 6,110
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period....... $ 3,631 $ 6,146 $ 4,370 $ 10,717 $ 14,609
========= ========= ========= ========= =========
Reconciliation of net income (loss) to net cash
provided by (used in) operating activities:
Net income (loss)................................ $ 5,619 $ 3,439 $ 9,075 $ (5,025) $ 417
Disposal of discontinued operations.............. (310) 8,100
Cumulative effect of accounting change........... 830
Depreciation and amortization.................... 2,615 2,461 5,011 5,036 4,090
Amortization of intangibles...................... 276 270 563 699 845
Computer write-down.............................. 4,400
Provision for losses on accounts receivable...... 606 617 755 2,022 1,457
Changes in assets and liabilities net of effects
of discontinued operations:
Accounts receivable......................... (3,683) (1,670) (14,010) (2,882) (3,872)
Inventories................................. (15,731) (11,296) (6,384) 866 5,614
Accounts payable............................ 5,820 4,714 8,168 (3,549) 3,642
Deferred compensation and other
liabilities............................... (193) (629) 857 (3,017) 3,317
Income taxes................................ 59 (654) 2,169 (327) 819
Other....................................... 167 (64) 347 (50) 208
--------- --------- --------- --------- ---------
$ (4,755) $ (2,812) $ 6,551 $ 2,703 $ 20,937
========= ========= ========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
14
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES
Principles of consolidation -- The consolidated financial statements
include the accounts of the Company and its subsidiaries, all of which are
wholly owned. All significant intercompany transactions have been eliminated.
Change in yearend -- During the six months ended December 31, 1994, the
Company changed its yearend from June 30 to December 31. The unaudited financial
information for the six months ended December 31, 1993 is presented for
comparative purposes and includes all adjustments (consisting of normal,
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation.
Cash and cash equivalents -- The Company considers all highly liquid
investments purchased with an original maturity date of three months or less to
be cash equivalents. The carrying amount of cash equivalents approximates fair
value.
Revenue recognition and receivables -- The Company is a distributor of
electronic components, graphic arts supplies and equipment, and
recreational-related products. Sales are recognized and trade receivables are
recorded when products are shipped. Concentrations of credit risk with respect
to trade receivables are limited due to the large number and general dispersion
of trade accounts which constitute the Company's customer base. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral. The Company estimates reserves for potential credit losses
and such losses have been within these estimates.
Inventories -- Inventories are stated at the lower of cost (determined
using weighted average and first-in, first-out methods) or market (net
realizable value).
Properties, depreciation and amortization -- All properties are depreciated
using the straight-line method based upon estimated useful lives which range
from 15 to 40 years for buildings and 3 to 10 years for machinery and equipment.
Leasehold improvements and assets recorded under capital leases are amortized
over the shorter of their estimated service lives or the term of the lease.
Intangibles -- Cost in excess of the fair value of net assets of purchased
businesses (goodwill) is amortized using the straight-line method over 25 years.
The costs of other intangible assets purchased from acquired businesses,
primarily composed of customer lists, franchise agreements and the assembled
work force, are being amortized using the straight-line method over their
estimated lives ranging from 5 to 10 years.
Income taxes -- Provision is made for the tax effects of temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities. In estimating deferred tax balances, the
Company considers all expected future events other than enactments of changes in
the tax law or rates.
Stock option plans -- The Company recognizes compensation expense relating
to nonqualified stock options granted at prices below fair market value in an
amount equal to the difference between the market value of shares at the date of
option grant and the expected proceeds upon exercise. Such compensation expense
is accrued ratably over the period to be benefited. When an installment of a
grant is exercised, common stock is credited with the par value of shares issued
and other paid-in capital is credited with the balance of market value at date
of grant.
Per share data -- Operating results data per common and common equivalent
share is based upon the weighted average number of common and common equivalent
shares outstanding, after adjustment to reflect stock dividends declared. Common
equivalent shares represent the net number of shares which would be issued
assuming the exercise of dilutive stock options, reduced by the number of shares
which could be repurchased from the proceeds of such exercises.
15
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ACCOUNTING CHANGES
During the year ended June 30, 1993 (fiscal 1993) the Company adopted two
new accounting principles, Statement of Financial Accounting Standards (SFAS)
No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions"
and SFAS No. 109 "Accounting for Income Taxes."
The Company provides postretirement medical coverage for qualifying
employees. Annual costs associated with these benefits, which were immaterial to
the Company's financial results, were previously expensed as incurred. In fiscal
1993, the Company implemented SFAS No. 106 and elected to record the previously
unrecognized obligation covering prior years for postretirement medical coverage
provided to qualifying employees. The charge of $830,000 relating to this
accounting change was recorded net of estimated tax benefits of $600,000.
Accumulated and vested benefit obligations relating to postretirement medical
benefits were not significant.
SFAS No. 109 replaced the Company's prior method of accounting for income
taxes under SFAS No. 96. The cumulative and current annual impact of the
accounting change was not material to the financial position or operating
results of the Company.
DISCONTINUED OPERATIONS
In April 1993, the Company's Board of Directors adopted a plan to dispose
of its Building Products Group. In connection with this plan, the Company
recorded an after-tax loss on disposal of $8.1 million which included a
provision for future operating costs during the phase-out period, primarily
lease commitments of approximately $2.0 million, and adjustments of net assets
to estimated realizable values. Income tax benefits of $5.9 million were
recorded in connection with the disposal charge.
Summarized operating results of discontinued operations through the
measurement date of March 31, 1993 were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------
1993 1992
------- -------
<S> <C> <C>
Net sales................................................ $36,818 $61,057
------- -------
Loss from discontinued operations, net of income tax
benefits of $639 and $474.............................. $(1,100) $ (502)
======= =======
</TABLE>
Operating losses of discontinued operations subsequent to the measurement
date through December 31, 1994 totaled approximately $0.6 million.
Net assets of discontinued operations at June 30, 1994 and 1993 included
the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30
-------------------
1994 1993
------- -------
<S> <C> <C>
Accounts receivable, net................................. $ 2,665 $ 5,661
Inventories.............................................. 1,749 9,061
Properties and other assets.............................. 2,490 2,738
Accounts payable and accrued liabilities................. (6,521) (9,708)
------- -------
$ 383 $ 7,752
======= =======
</TABLE>
In July 1993, the Company sold a majority of the assets of the discontinued
operations for approximately $11 million in cash. The Company retained
liabilities, primarily accounts payable and accrued payroll costs, in connection
with the asset sale. During six months ended December 31, 1994, the Company sold
substantially all remaining net assets of the discontinued operations for cash
and notes totaling approximately $4.5 million. The Company recorded a gain of
$0.3 million (net of taxes totaling $0.2 million) which represented residual
reserves no longer considered necessary. Remaining assets and liabilities
attributed to discontinued operations were not material.
16
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
COMPUTER WRITE-DOWN
During the year ended June 30, 1992 (fiscal 1992), management decided to
replace the mainframe computer which was utilized by a substantial portion of
the Company's operations. The resulting before-tax charge of $4.4 million
represented the remaining book value of the old computer equipment which was
replaced.
NOTES PAYABLE
Notes payable consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1994 1994 1993
------------ -------- --------
<S> <C> <C> <C>
Bank borrowings............................ $ 9,000 $ 2,000 $ 1,600
9.70% Senior Notes due 2001................ 33,000 37,000 48,000
------- ------- -------
42,000 39,000 49,600
Less current portion....................... 8,143 6,143 8,600
------- ------- -------
$33,857 $32,857 $41,000
======= ======= =======
</TABLE>
The Company's bank loan agreement provides for a $25 million secured
revolving line of credit which is available through October 1996. Borrowings
against the line accrue interest at either the bank's reference rate (8.5% at
December 31, 1994) or LIBOR plus .875%. The Company is subject to an annual
commitment fee of .25% on the unused line of credit.
The agreement underlying the 9.70% Senior Notes, as amended, requires the
Company to make annual principal payments. Interest payments on the Senior Notes
are due in semi-annual installments.
The fair value of the Senior Notes at December 31, 1994 was approximately
$34 million. The fair value was estimated using an interest rate currently
available to the Company for debt with similar terms and remaining maturities.
In connection with certain amendments to the Senior Note agreement during
fiscal 1993, the noteholders received warrants to purchase 196,560 shares of the
Company's common stock. The warrants may be exercised at any time prior to
February 1, 2001 at $12.43 per share.
The Senior Notes and bank borrowings under the revolving line of credit are
secured by receivables and certain inventories of the Company. These agreements
contain various provisions for the maintenance of financial ratios and amounts,
limitations on long-term borrowings, payments of cash dividends, and other
provisions.
Aggregate maturities of notes payable are as follows (in thousands):
<TABLE>
<S> <C> <C> <C>
1995........................ $ 8,143 1998........................ $7,143
1996........................ 10,143 1999........................ 7,143
1997........................ 7,143 2000........................ 2,285
</TABLE>
17
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
COMMON STOCK
The Company's 1990 Stock Option and Incentive Plan, which succeeded the
1981 Restricted Stock Purchase Plan, authorized 500,000 shares of common stock
to be available for purchase by employees. At the 1994 Annual Meeting, the
shareholders approved the 1994 Stock Option Plan which authorized an additional
500,000 shares of common stock.
A summary of changes under the plans follows:
<TABLE>
<CAPTION>
AVAILABLE SHARES
FOR FUTURE UNDER PRICE MARKET VALUE
GRANT OPTION PER SHARE PER SHARE
---------- ------- -------------- ----------------
<S> <C> <C> <C> <C>
Outstanding at June 30, 1991........... 570,785 50,270 $ .25
Termination of 1981 Plan............. (70,785)
Granted.............................. (26,500) 26,500 $ .25- $10.00 $ 9.25- $10.00
Exercised............................ (18,850)
Canceled............................. (1,520)
---------- ------- --------------
Outstanding at June 30, 1992........... 473,500 56,400 $ .25- $10.00
Granted.............................. (195,000) 195,000 $10.25- $13.75 $10.25- $13.75
Exercised............................ (12,400)
Canceled............................. 9,000 (12,425)
Adjustment for 4% stock dividend..... 11,500 9,063
---------- ------- --------------
Outstanding at June 30, 1993........... 299,000 235,638 $ .25- $13.22
Granted.............................. (2,500) 2,500 $19.25 $19.25
Exercised............................ (15,685)
Canceled............................. 4,966 (12,822)
---------- ------- --------------
Outstanding at June 30, 1994........... 301,466 209,631 $ .25- $19.25
Granted.............................. (261,000) 261,000 $16.00- $20.25 $16.00- $20.25
Exercised............................ (6,873)
Canceled............................. 27,468 (28,456)
Adjustment for 5% stock dividend..... 4,622 20,602
Adoption of 1994 Plan................ 500,000
---------- ------- --------------
Outstanding at December 31,1994........ 572,556 455,904 $ .25- $20.25
======== ======= =============
Exercisable at December 31, 1994....... 38,026 $ .25- $12.59
======= =============
</TABLE>
Under the stock option plans, both incentive and nonqualified stock
options, stock appreciation rights and restricted stock may be granted. At
December 31, 1994, 1,028,460 shares were reserved for future issuance under the
plans.
In fiscal 1994, the shareholders approved the Bell Industries Employees'
Stock Purchase Plan (the ESPP) under which 750,000 shares were authorized for
future issuance to Bell employees. Eligible employees may purchase Bell stock at
85% of market value through the ESPP. During the six months ended December 31,
1994, 36,001 shares were issued under the ESPP at purchase prices ranging
between $13.92 and $15.68. No shares were issued in fiscal 1994 under the ESPP.
In October 1994, the Board of Directors declared a 5% stock dividend
payable to shareholders of record on October 28, 1994. In July 1993, the Board
of Directors declared a 4% stock dividend payable to shareholders of record on
August 20, 1993. Share and per share amounts were adjusted to give effect to the
dividends.
18
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES
The income tax provision charged to continuing operations was as follows
(in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31 YEAR ENDED JUNE 30
---------------------- -----------------------------
1994 1993 1994 1993 1992
------ ----------- ------ ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current
Federal................. $3,335 $ 2,001 $5,240 $2,714 $1,219
State................... 846 552 1,444 782 221
Deferred
Federal................. (290) (22) (58) 329 (438)
State................... (46) 11 28 (165) 52
------ ------- ------ ------ ------
$3,845 $ 2,542 $6,654 $3,660 $1,054
====== ======= ====== ====== ======
</TABLE>
A reconciliation of the federal statutory tax rate to the effective tax
rate follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31 YEAR ENDED JUNE 30
---------------------- -----------------------------
1994 1993 1994 1993 1992
------ ----------- ------ ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal statutory tax
rate.................... 34.3% 34.4% 34.4% 34.0% 34.0%
State taxes, net of
federal benefit......... 5.9 5.8 5.8 5.8 15.2
Goodwill.................. .8 .9 .9 1.6 6.3
Other, net................ 1.0 1.4 1.2 .8 (2.0)
---- ---- ---- ---- ----
Effective tax rate........ 42.0% 42.5% 42.3% 42.2% 53.5%
===== ==== ==== ==== ====
</TABLE>
The provision (credit) for deferred income taxes from continuing operations
is summarized as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31 YEAR ENDED JUNE 30
---------------------- -----------------------------
1994 1993 1994 1993 1992
------ ----------- ------ ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Depreciation.............. $ (67) $(170) $(444) $(571) $(1,475)
Employee benefit
accruals................ (140) (29) (77) 463 (119)
Receivables allowance..... 30 142 371 (18) (34)
Inventory
capitalization.......... (66) 56 146 77 34
Facility closure
accrual................. 272 1,087
Other..................... (93) (10) (26) (59) 121
----- ----- ----- ----- -------
$(336) $ (11) $ (30) $ 164 $ (386)
===== ===== ===== ===== =======
</TABLE>
19
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Deferred tax balances were composed of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1994 1994 1993
------------ -------- --------
<S> <C> <C> <C>
Deferred tax assets:
Discontinued operations................... $2,959 $3,701 $5,234
Deferred compensation and other employee
benefits............................... 987 889 812
Receivables allowance..................... 413 443 814
Inventory capitalization.................. 657 591 737
Postretirement benefits................... 650 608 568
Other..................................... 386 253 170
------ ------ ------
Gross deferred tax assets......... 6,052 6,485 8,335
Deferred tax liabilities:
Depreciation.............................. (347)
------ ------ ------
Net deferred tax assets........... $6,052 $6,485 $7,988
====== ====== ======
</TABLE>
Current deferred income tax benefits included with prepaid expenses and
other and noncurrent deferred income tax benefits included with other assets
were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1994 1994 1993
------------ -------- --------
<S> <C> <C> <C>
Current deferred income tax benefits
Federal................................... $3,738 $4,375 $4,246
State..................................... 149 236 688
Noncurrent deferred income tax benefits
Federal................................... 1,883 1,628 2,947
State..................................... 282 246 107
------ ------ ------
$6,052 $6,485 $7,988
====== ====== ======
</TABLE>
EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS
The Company has a qualified, trusteed, savings and profit sharing plan for
employees of the Company and its subsidiaries. Employees must contribute at
least 1% of their annual compensation to participate in the plan. The Company's
contribution to the plan is determined by the Board of Directors. The Company's
contributions were $370,000 for the six months ended December 31, 1994, $500,000
in fiscal 1994, $250,000 in fiscal 1993, and $0 in fiscal 1992.
The Company has deferred compensation plans available for certain
directors, officers and employees. Expense associated with the deferred
compensation element of these plans was $510,000 for the six months ended
December 31, 1994, $331,000 in fiscal 1994, $343,000 in fiscal 1993 and $192,000
in fiscal 1992.
COMMITMENTS AND CONTINGENCIES
At December 31, 1994 the Company had operating leases on certain of its
facilities expiring in various years through fiscal 2000. Under certain of these
leases the Company is required to pay property taxes and insurance. Rent expense
pertaining to these leases was $1,936,000 for the six months ended December 31,
1994, $3,821,000 in fiscal 1994, $3,899,000 in fiscal 1993 and $3,692,000 in
fiscal 1992. The Company has certain computer equipment under capital leases.
Amortization of capitalized leases amounted to $809,000 for the six months ended
December 31, 1994, $1,580,000 in fiscal 1994 and $1,157,000 in fiscal 1993.
Non-cash investing and financing activities for fiscal 1994 included a $1.6
million equipment addition which was financed through a capital lease.
20
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Minimum annual rentals on these leases for years subsequent to 1994 are as
follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------ ---------
<S> <C> <C>
1995............................................... $1,724 $ 3,494
1996............................................... 1,724 2,796
1997............................................... 862 2,496
1998............................................... -- 1,502
1999............................................... -- 1,126
Thereafter......................................... -- 13
------
4,310
Less amount representing interest.................. (327)
------
Present value of net minimum lease payments under
capital leases................................... $3,983
======
</TABLE>
The Company is involved in litigation incidental to its business. In the
opinion of management, the expected outcome of such litigation will not
materially affect the Company's financial position or results of operations.
BUSINESS SEGMENT INFORMATION
Depreciation and amortization, identifiable assets, and capital
expenditures by business segment were as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
---------------------- ------------------------------
1994 1993 1994 1993 1992
-------- ----------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Depreciation and amortization
Electronics............................ $ 1,021 $ 976 $ 2,528 $ 2,429 $ 2,210
Graphic Arts........................... 60 54 112 103 105
Recreational Products.................. 108 80 104 189 181
Corporate.............................. 1,702 1,621 2,830 2,285 1,375
Discontinued operations................ 729 1,064
-------- ----------- -------- -------- --------
$ 2,891 $ 2,731 $ 5,574 $ 5,735 $ 4,935
======== ========= ======== ======== ========
Identifiable assets
Electronics............................ $149,393 $ 120,204 $134,299 $109,479 $111,436
Graphic Arts........................... 17,181 15,873 15,967 15,900 14,663
Recreational Products.................. 17,862 13,168 12,686 11,443 10,164
Corporate.............................. 15,931 26,414 21,378 30,698 26,025
Discontinued operations................ 7 383 7,752 29,269
-------- ----------- -------- -------- --------
$200,367 $ 175,666 $184,713 $175,272 $191,557
======== ========= ======== ======== ========
Capital expenditures
Electronics............................ $ 879 $ 1,104 $ 1,939 $ 2,151 $ 1,811
Graphic Arts........................... 118 120 203 96 124
Recreational Products.................. 170 49 123 106 112
Corporate.............................. 208 189 297 3,155 4,981
Discontinued operations................ 236 1,641
-------- ----------- -------- -------- --------
$ 1,375 $ 1,462 $ 2,562 $ 5,744 $ 8,669
======== ========= ======== ======== ========
</TABLE>
21
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The net sales and operating income of each of the Company's business
segments are included under "Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition." A description of the Company's
business and products appears under "Item 1. Business." Sales between product
groups are insignificant. Corporate assets are primarily cash, data processing
equipment and deferred income tax benefits.
The Company purchased a microcomputer distribution and services business
during fiscal 1994 for approximately $5.9 million cash. Goodwill involved in the
transaction was approximately $1.6 million. Operating results for the purchased
business were not significant.
22
<PAGE> 24
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
SIX MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------
SEPTEMBER 30, DECEMBER 31,
1994 1994
------------- ------------
<S> <C> <C>
Net sales.......................................................... $127,092 $128,280
-------- --------
Cost and expenses
Cost of products sold............................................ 98,638 100,094
Selling and administrative expenses.............................. 22,589 23,011
Interest expense................................................. 966 920
-------- --------
122,193 124,025
-------- --------
Income from continuing operations before income taxes.............. 4,899 4,255
Income tax provision............................................... 2,058 1,787
------- -------
Income from continuing operations.................................. 2,841 2,468
Discontinued operations reserve recovery, net of taxes............. 310
-------- --------
Net income (loss).................................................. $ 3,151 $ 2,468
======== ========
SHARE AND PER SHARE DATA
Income from continuing operations.................................. $ .43 $ .37
Discontinued operations reserve recovery, net of taxes............. .05
-------- --------
Net income (loss).................................................. $ .48 $ .37
======== ========
Weighted average common shares outstanding......................... 6,603 6,685
======== ========
</TABLE>
YEAR ENDED JUNE 30, 1994
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1993 1993 1994 1994
------------- ------------ --------- --------
<S> <C> <C> <C> <C>
Net sales................................... $106,718 $102,241 $113,507 $128,687
-------- -------- -------- --------
Cost and expenses
Cost of products sold..................... 82,560 79,338 88,064 99,611
Selling and administrative expenses....... 19,368 19,387 20,721 21,883
Interest expense.......................... 1,198 1,127 1,099 1,068
-------- -------- -------- --------
103,126 99,852 109,884 122,562
-------- -------- -------- --------
Income before income taxes.................. 3,592 2,389 3,623 6,125
Income tax provision........................ 1,527 1,015 1,540 2,572
-------- -------- -------- --------
Net income (loss)........................... $ 2,065 $ 1,374 $ 2,083 $ 3,553
======== ======== ======== ========
SHARE AND PER SHARE DATA
Net income (loss)........................... $ 0.31 $ 0.21 $ 0.32 $ 0.54
======== ======== ======== ========
Weighted average common shares
outstanding............................... 6,538 6,592 6,598 6,576
======== ======== ======== ========
</TABLE>
23
<PAGE> 25
YEAR ENDED JUNE 30, 1993
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1992 1992 1993 1993
------------- ------------ --------- --------
<S> <C> <C> <C> <C>
Net sales................................... $ 92,479 $ 86,182 $ 90,724 $ 95,938
-------- -------- -------- --------
Cost and expenses
Cost of products sold..................... 69,507 65,211 68,527 71,836
Selling and administrative expenses....... 19,374 19,016 18,449 19,200
Interest expense.......................... 1,421 1,412 1,383 1,322
-------- -------- -------- --------
90,302 85,639 88,359 92,358
-------- -------- -------- --------
Income from continuing operations before
income taxes.............................. 2,177 543 2,365 3,580
Income tax provision........................ 914 231 990 1,525
-------- -------- -------- --------
Income from continuing operations........... 1,263 312 1,375 2,055
Discontinued operations
Loss from operations, net of taxes........ (76) (443) (581)
Loss on disposal, net of taxes............ (8,100)
Cumulative effect of accounting change,
net of taxes........................... (830)
-------- -------- -------- --------
Net income (loss)........................... $ 357 $ (131) $ (7,306) $ 2,055
======== ======== ======== ========
SHARE AND PER SHARE DATA
Income from continuing operations........... $ 0.19 $ 0.05 $ 0.21 $ 0.32
Discontinued operations
Loss from operations, net of taxes........ (0.01) (0.07) (0.09)
Loss on disposal, net of taxes............ (1.24)
Cumulative effect of accounting change,
net of taxes........................... (0.13)
-------- -------- -------- --------
Net income (loss)........................... $ 0.05 $ (0.02) $ (1.12) $ 0.32
======== ======== ======== ========
Weighted average common shares
outstanding............................... 6,482 6,483 6,483 6,494
======== ======== ======== ========
</TABLE>
24
<PAGE> 26
CONSOLIDATED OPERATIONS SUMMARY (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
CONSOLIDATED RESULTS OF OPERATIONS (UNAUDITED):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales................................... $497,566 $395,621 $364,385 $330,992 $309,155
-------- -------- -------- -------- --------
Costs and expenses
Cost of products sold..................... 386,406 302,261 273,517 248,245 229,424
Selling, general and administrative
expenses............................... 88,205 76,404 77,953 75,460 67,963
Interest expense.......................... 4,053 5,030 5,508 5,599 2,827
Computer write-down....................... 4,400
Provision for facility closure............ 3,500
-------- -------- -------- -------- --------
478,664 383,695 361,378 332,804 300,214
-------- -------- -------- -------- --------
Income (loss) from continuing operations
before income taxes....................... 18,902 11,926 3,007 (1,812) 8,941
Income tax provision (benefit).............. 7,957 5,057 1,492 (433) 3,650
-------- -------- -------- -------- --------
Income (loss) from continuing operations.... $ 10,945 $ 6,869 $ 1,515 $ (1,379) $ 5,291
======== ======== ======== ======== ========
Net income (loss)........................... $ 11,255 $ (1,812) $ (591) $ (1,038) $ 7,619
======== ======== ======== ======== ========
SHARE AND PER SHARE DATA
Income (loss) from continuing operations.... $ 1.65 $ 1.05 $ .23 $ (.21) $ .82
======== ======== ======== ======== ========
Net income (loss)........................... $ 1.70 $ (.28) $ (.09) $ (.16) $ 1.19
======== ======== ======== ======== ========
Weighted average common shares outstanding
(000's)................................... 6,615 6,536 6,479 6,442 6,418
======== ======== ======== ======== ========
</TABLE>
OPERATING RESULTS BY BUSINESS SEGMENT (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales
Electronics............................... $399,227 $307,546 $282,192 $257,144 $238,463
Graphic Arts.............................. 59,743 57,134 55,566 48,553 45,854
Recreational Products..................... 38,596 30,941 26,627 25,295 24,838
-------- -------- -------- -------- --------
$497,566 $395,621 $364,385 $330,992 $309,155
======== ======== ======== ======== ========
Operating income
Electronics(1)............................ $ 26,261 $ 20,705 $ 16,626 $ 8,074 $ 15,359
Graphic Arts.............................. 1,836 1,320 1,928 1,579 1,782
Recreational Products..................... 3,580 2,734 2,493 2,487 2,325
-------- -------- -------- -------- --------
Operating income....................... 31,677 24,759 21,047 12,140 19,466
Corporate costs............................. (8,722) (7,803) (8,132) (8,353) (7,698)
Computer write-down......................... (4,400)
Interest expense............................ (4,053) (5,030) (5,508) (5,599) (2,827)
-------- -------- -------- -------- --------
Income (loss) from continuing operations
before income taxes....................... $ 18,902 $ 11,926 $ 3,007 $ (1,812) $ 8,941
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Includes provision for facility closure ($3,500) in 1991.
25
<PAGE> 27
CONSOLIDATED FINANCIAL POSITION AND RELATED DATA (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Working capital..................... $116,118 $105,640 $113,471 $119,630 $ 95,267
Total assets........................ $200,367 $175,666 $183,591 $188,606 $182,252
Long-term liabilities............... $ 40,936 $ 43,166 $ 54,380 $ 56,316 $ 30,941
Shareholders' equity................ $101,770 $ 89,842 $ 92,268 $ 94,068 $ 97,159
Depreciation and amortization....... $ 5,734 $ 6,152 $ 4,703 $ 5,419 $ 5,693
Capital expenditures................ $ 2,475 $ 4,385 $ 10,180 $ 4,857 $ 4,816
Days' sales in receivables.......... 50 47 50 48 49
Days' sales in inventories.......... 87 95 102 115 115
</TABLE>
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
---------- ----------
BALANCE AT CHARGE TO ACCOUNTS BALANCE
BEGINNING COSTS AND CHARGED AT END
DESCRIPTION OF PERIOD EXPENSES OFF OF PERIOD
- ------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended --
June 30, 1992.................................... $1,757 $1,457 $1,617 $1,597
June 30, 1993.................................... $1,597 $2,022 $2,348 $1,271
June 30, 1994.................................... $1,271 $ 755 $1,142 $ 884
Six months ended --
December 31, 1994................................ $ 884 $ 606 $ 449 $1,041
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
26
<PAGE> 28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors: The information required by Item 10 with respect to
directors appears in the Proxy Statement for the 1995 Annual Meeting of
Shareholders and is hereby incorporated by reference.
(b) Executive Officers: The information required by Item 10 with respect to
Executive Officers appears in Part I of this Transition Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 appears in the Proxy Statement for the
1995 Annual Meeting of Shareholders and is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 appears under "Election of Directors"
in the Proxy Statement for the 1995 Annual Meeting of Shareholders and is hereby
incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 appears in the Proxy Statement for the
1995 Annual Meeting of Shareholders and is hereby incorporated by reference.
27
<PAGE> 29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C>
(a) 1. Financial Statements:
The Consolidated Financial Statements and Report of Independent Accountants dated
February 1, 1995 are included under Item 8 of this Transition Report on Form 10-K.
2. Financial Statement Schedule:
The financial statement schedule listed in the Index to Financial Statements
included under Item 8 is filed as part of this Transition Report on Form 10-K.
3. Exhibits:
3.a) The Articles of Incorporation and By-laws are incorporated by reference to
Exhibits 2 and 4, respectively to Registrant's Form 8-B dated November 19,
1979.
b) Amendment to By-Laws of Bell Industries is incorporated by reference to
Exhibit 3 to Registrant's Form 8-K dated November 4, 1992.
4.a) The Specimen of Registrant's Common Stock certificates is incorporated by
reference to Exhibit 5 to Amendment number 1 to Registrant's Form 8-B filed
January 15, 1980.
b) The Note Purchase Agreement dated February 1, 1991 among Registrant and
Insurance Companies named therein providing for the issuance of
Registrant's $50,000,000 of 9.7% Senior Notes due February 1, 2001 is
incorporated by reference to Exhibit 4.b of the Form 10-K dated June 30,
1991.
c) The First Amendment Agreement, including as exhibits thereto, the
Collateral Trust Indenture and Security Agreement, dated June 1, 1992,
among Registrant and Insurance Companies named therein providing for
certain amendments to the Note Purchase Agreement dated February 1, 1991 is
incorporated by reference to Exhibit 4.c of the Form 10-K dated June 30,
1992.
d) The Second Amendment Agreement dated September 15, 1993, among Registrant
and Insurance Companies named therein providing for certain amendments to
the Note Purchase Agreement dated February 1, 1991 is incorporated by
reference to Exhibit 4.d of the Form 10-K dated June 30, 1993.
e) Warrant Agreement dated September 15, 1993 including Form of Warrant
Certificate issued to the named Insurance Companies included in the Note
Purchase Agreement dated February 1, 1991, as amended, is incorporated by
reference to Exhibit 4.e of the Form 10-K dated June 30, 1993.
f) Amendment Agreement dated March 29, 1994, between the Registrant and the
Security Trustee named therein providing for certain amendments to the
Collateral Trust Indenture and Security Agreement included with the First
Amendment Agreement dated June 1, 1992, is incorporated by reference to
Exhibit 4.f of the Form 10-K dated June 30, 1994.
g) Letter Agreement dated May 17, 1994, among Registrant and Insurance
Companies named therein providing for certain amendments to the Warrant
Agreement dated September 15, 1993, is incorporated by reference to Exhibit
4.g of the Form 10-K dated June 30, 1994.
10.a) The Employment and Deferred Compensation Agreements dated January 1, 1979
and the Amendment thereto dated August 6, 1979 concerning certain officers
of Registrant are incorporated by reference to Exhibits 9A, 9C and 9D to
Amendment number 1 to Registrant's Form 8-B dated November 19, 1979.
b) The 1990 Stock Option and Incentive Plan is incorporated by reference to
Exhibit A of Registrant's definitive Proxy Statement (File No. 1-7899)
filed in connection with the Annual Meeting of Shareholders held October
29, 1990.
</TABLE>
28
<PAGE> 30
<TABLE>
<C> <S>
c) The 1993 Employees' Stock Purchase Plan is incorporated by reference to
Exhibit A of Registrant's definitive Proxy Statement (File No. 1-7899)
filed in connection with the Annual Meeting of Shareholders held November
2, 1993.
d) The Amendment to Employment and Deferred Compensation Agreement dated
September 14, 1994 is incorporated by reference to Exhibit (10) of the
Registrant's Quarterly Report on Form 10-Q dated September 30, 1994.
e) The Bell Industries, Inc. Directors' Retirement Plan for Non-employees is
incorporated by reference to Exhibit (99) of the Registrant's Quarterly
Report on Form 10-Q dated September 30, 1994.
f) The 1994 Stock Option Plan is incorporated by reference to Exhibit A of the
Registrant's definitive Proxy Statement (File No. 1-7899) filed in
connection with the Annual Meeting of Shareholders held on November 1,
1994.
g) Employment and Deferred Compensation Agreement dated February 15, 1995
between the Registrant and Bruce M. Jaffe.
h) Employment and Deferred Compensation Agreement dated February 15, 1995
between the Registrant and Paul F. Doucette.
21. Subsidiaries of the Registrant.
23. Consent of Independent Accountants.
27. Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K:
None.
29
<PAGE> 31
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) 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 THEODORE WILLIAMS
--------------------------------
Theodore Williams
Chairman of the Board and
Chief Executive Officer
Date: February 21, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on February 21, 1995 by the following persons on
behalf of the Registrant and in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
THEODORE WILLIAMS Chairman of the Board
- ------------------------------------ and Chief Executive Officer
Theodore Williams
BRUCE M. JAFFE Director, President and
- ------------------------------------ Chief Operating Officer
Bruce M. Jaffe
JOHN J. COST Director and Secretary
- ------------------------------------
John J. Cost
GORDON GRAHAM Director and
- ------------------------------------ Senior Vice President
Gordon Graham
ANTHONY L. CRAIG Director
- ------------------------------------
Anthony L. Craig
MILTON ROSENBERG Director
- ------------------------------------
Milton Rosenberg
CHARLES TROY Director
- ------------------------------------
Charles Troy
TRACY A. EDWARDS Vice President and Chief Financial
- ------------------------------------ and Accounting Officer
Tracy A. Edwards
</TABLE>
30
<PAGE> 32
EXHIBIT INDEX
Exhibits
<TABLE>
<S> <C> <C>
3) Article of incorporation and by-laws (*)
4) Instruments defining the rights of
security holders, including indentures.
a) Specimen of Registrant's Common
Stock certificate. (*)
b) Note Purchase Agreement dated
February 1, 1991 among Registrant
and Insurance Companies named therein,
providing for the issuance of Registrants'
$50,000,000 of 9.7% Senior Notes due
February 1, 2001. (*)
c) First Amendment Agreement, including as
exhibits thereto, the Collateral Trust
Indenture and Security Agreement, dated
June 1, 1992, to the Note Purchase
Agreement dated as of February 1, 1991
(4.b above). (*)
d) Second Amendment Agreement dated
September 15, 1993, to the Note Purchase
Agreement dated as of February 1, 1991
(4.b above). (*)
e) Warrant Agreement dated September 15, 1993
including Form of Warrant Certificate
issued to the named Insurance Companies
included in the Note Purchase Agreement
dated February 1, 1991, as amended. (*)
f) Amendment Agreement dated March 29, 1994
to the Collateral Trust Indenture and
Security Agreement dated June 1, 1992. (*)
g) Letter Agreement dated May 17, 1994
amending the Warrant Agreement dated
September 15, 1993. (*)
</TABLE>
<PAGE> 33
10) Material contracts.
<TABLE>
<S> <C> <C>
a) The Employment and Deferred Compensation
Agreements dated January 1, 1979 and
the Amendment thereto dated August 6, 1979
concerning certain officers of Registrant. (*)
b) The 1990 Stock Option and Incentive Plan
included as Exhibit A to Registrant's
definitive Proxy Statement (File No. 1-7899)
filed in connection with the Annual Meeting
of Shareholders held October 29, 1990. (*)
c) The 1993 Employees' Stock Purchase Plan
included as Exhibit A to Registrant's
definitive Proxy Statement (File No. 1-7899)
filed in connection with the Annual Meeting
of Shareholders held November 2, 1993. (*)
d) The Amendment to Employment and Deferred
Compensation Agreement dated September 14,
1994 included as to Exhibit (10)
of the Registrant's Quarterly Report on
Form 10-Q dated September 30, 1994. (*)
e) The Bell Industries, Inc. Directors' Retirement
Plan for Non-employees included as
Exhibit (99) of the Registrant's Quarterly
Report on Form 10-Q dated September 30, 1994. (*)
f) The 1994 Stock Option Plan included as
Exhibit A of the Registrant's definitive
Proxy Statement (File No. 1-7899) filed in
connection with the Annual Meeting of
Shareholders held on November 1, 1994. (*)
g) Employment and Deferred Compensation Agreement
dated February 15, 1995 between the Registrant
and Bruce M. Jaffe.
h) Employment and Deferred Compensation Agreement
dated February 15, 1995 between the Registrant
and Paul F. Doucette.
</TABLE>
<PAGE> 34
21) Subsidiaries of the Registrant.
23) Consent of Independent Accountants.
27) Financial Data Schedule.
(*) Incorporated by reference.
<PAGE> 1
EXHIBIT 10(g)
EMPLOYMENT
AND
DEFERRED COMPENSATION AGREEMENT
AGREEMENT made as of February 15, 1995, by and between BELL
INDUSTRIES, INC., a Delaware corporation (hereinafter referred to as
"COMPANY"), and BRUCE M. JAFFE (hereinafter referred to as "EMPLOYEE").
WHEREAS, EMPLOYEE is employed by the COMPANY as its President and
Chief Operating Officer and has managed such office in a capable and efficient
manner resulting in substantial profits to the COMPANY, and
WHEREAS, it is anticipated that EMPLOYEE will be elected to, and will
assume, the office of Chief Executive Officer within the near future, and
WHEREAS, the COMPANY desires to retain the services of EMPLOYEE and
EMPLOYEE is willing to remain in the employ of the COMPANY in accordance with
the provisions hereinafter set forth.
IT IS THEREFORE AGREED:
1. CONTINUATION OF EMPLOYMENT.
EMPLOYEE shall continue in the employ of the COMPANY, and the COMPANY
shall continue to employ EMPLOYEE, as its President and either its Chief
Operating or Executive Officer until EMPLOYEE reaches age sixty-five (65), or
such later date as shall
<PAGE> 2
be mutually agreed upon; provided, however, EMPLOYEE may elect early retirement
at age sixty-two (62) pursuant to Section 3 hereof. Without first obtaining
EMPLOYEE's written consent, the COMPANY shall not require EMPLOYEE to undertake
responsibilities not commensurate with his position as President and Chief
Operating or Executive Officer, as the case may be, nor shall he be required to
perform his duties hereunder if the performance thereof would require his
maintenance of a residence outside of the Greater Los Angeles area. In the
event the COMPANY should violate the foregoing provisions and by reason thereof
EMPLOYEE should terminate his employment under this Agreement, such termination
shall be deemed a termination of EMPLOYEE'S employment by the COMPANY.
EMPLOYEE agrees to devote his full business time, attention, and
energies to the performance of the business of the COMPANY, and EMPLOYEE shall
not, directly or indirectly, alone or as a member of any partnership, or as an
officer, director or employee of any other corporation, partnership or other
organization, be engaged in any other duties which interfere with the
performance of his duties hereunder, or which, even if non-interfering, are
contrary to the best interests of the COMPANY. EMPLOYEE agrees that in the
performance of his duties hereunder he will comply with the policies and
directives of the COMPANY's Board of Directors.
2. REGULAR COMPENSATION.
<PAGE> 3
The COMPANY shall pay to EMPLOYEE as compensation for his services
hereunder a salary to be fixed annually by the Board of Directors, but not less
than Two Hundred Eighty-five Thousand Dollars ($285,000) per year, payable in
equal bi-weekly installments. Additionally, EMPLOYEE shall participate in the
COMPANY's bonus program which, at the time, is made available to its principal
corporate officers.
3. ADDITIONAL COMPENSATION.
(a) Early Termination of Employment.
(i) In the event that employment is, or is deemed, terminated
by the COMPANY, whether or not such termination was for "cause" (as hereafter
defined), or EMPLOYEE becomes totally disabled (as hereinafter defined) and
such termination is prior to age sixty-two (62) and not pursuant to clause (v)
hereof, EMPLOYEE shall receive an amount, as termination pay, equivalent to 75%
of the amount payable to EMPLOYEE in salary and bonus (if any) during the
twelve (12) month period immediately preceding the month of termination for a
further twelve (12) month period, payable in equal bi-weekly installments,
commencing on the date of termination. Unless employment was terminated for
"cause" after said twelve (12) month period, EMPLOYEE shall be entitled to
receive the same pay and retirement benefits, as hereinafter provided, as if
EMPLOYEE had elected early retirement at age sixty-two (62), irrespective of
EMPLOYEE'S age at the end of said twelve (12) month period, such payments to
commence immediately
<PAGE> 4
following the last of the bi-weekly installments payable pursuant to the
immediately preceding sentence.
(ii) In the event that employment is, or is deemed,
terminated, whether or not for "cause", by the COMPANY or EMPLOYEE becomes
totally disabled and if such termination occurs between ages sixty-two (62) and
sixty-five (65), EMPLOYEE shall be entitled to receive the same pay and
retirement benefits, as hereinafter provided, as if EMPLOYEE had elected early
retirement at age sixty-two (62); provided, however, that the pay and
retirement benefits shall be increased upward by adding to 33-1/3% (the
percentage of average annual income EMPLOYEE is entitled to receive pursuant to
subsection (c) hereof) a number (expressed as a percentage) determined by
dividing 16-2/3 by a fraction the numerator of which is 36 and the denominator
of which is the number of months employed after age sixty-two (62).
(iii) In the event that EMPLOYEE voluntarily terminates his
employment under this Agreement or his employment is terminated by the COMPANY
for "cause", before he reaches age sixty-two (62), then EMPLOYEE shall receive
no benefits until such time as he does reach age sixty-two (62); however,
thereafter, he shall receive the same pay and benefits as if he elected early
retirement at age sixty-two (62); provided however, that if employment was
terminated by the COMPANY for "cause", EMPLOYEE shall be entitled to receive
the termination payment
<PAGE> 5
described in the first sentence of paragraph (i) of this subsection (a).
(iv) In the event that EMPLOYEE voluntarily terminates his
employment under this Agreement between ages sixty-two (62) and sixty-five
(65), he shall receive the same pay and benefits as if he elected early
retirement at age sixty-two (62).
(v) In the event that following a Change in Control (as
hereafter defined), the COMPANY terminates EMPLOYEE'S employment under this
Agreement other than for "cause" or EMPLOYEE terminates his employment under
this Agreement for Good Reason (as hereafter defined) and EMPLOYEE is under age
sixty-five (65), then EMPLOYEE shall receive the same benefits as if he retired
at age sixty-five (65). Such payments shall commence immediately following the
date of such termination.
(vi) If EMPLOYEE'S employment is terminated under this
Agreement pursuant to clause (i), (ii) or (v), any unvested stock options held
by EMPLOYEE at the time shall become fully vested as of the date of
termination.
<PAGE> 6
(a) Regular Retirement. If EMPLOYEE elects to retire at age
sixty-five (65) or at any time thereafter, the COMPANY shall pay to EMPLOYEE an
amount equivalent to fifty percent (50%) of the average of the highest three
(3) years of salary and bonus paid to EMPLOYEE during the last ten (10) years
of his employment, for the balance of EMPLOYEE'S lifetime, in equal bi-weekly
installments. A termination of EMPLOYEE'S employment by the COMPANY at any time
whether or not for "cause" after EMPLOYEE has reached age sixty-five (65) shall
be deemed an election by EMPLOYEE to retire. For all purposes of calculating
payments to EMPLOYEE under this Agreement, only years during which he was
employed will be used to determine the ten (10) year period.
(b) Early Retirement. If EMPLOYEE elects to retire at age sixty-two
(62), then the COMPANY shall pay EMPLOYEE 33-1/3% of the average of the highest
three (3) years of salary and bonus paid to EMPLOYEE during the last ten (10)
years of his employment for the balance of EMPLOYEE'S lifetime in bi-weekly
installments.
(c) Change of Control. For purposes of this Agreement, a Change of
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
<PAGE> 7
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the COMPANY, or (ii) the stockholders 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
stockholders, of each new directors 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.
<PAGE> 8
(e) Cause. For purposes of this Agreement, "cause" shall exist if any
one or more of the following should occur: EMPLOYEE'S (A) failure to perform
his duties under, or breach of, this Agreement after first having received a
written notice of such failure or breach signed by at least a majority of the
COMPANY'S Board of Directors and EMPLOYEE having not taken reasonable steps to
cure such failure or breach within thirty (30) days of his receipt of such
notice, (B) willful and knowing breach of his fiduciary duty to the Company, or
(C) conviction by a court of competent jurisdiction of a felony or other
serious crime.
(f) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean any of the following (done without EMPLOYEE'S express written consent):
(i) the assignment to EMPLOYEE of duties inconsistent with
EMPLOYEE'S duties, responsibilities and status with the COMPANY immediately
prior to the Change in Control, or a change in EMPLOYEE'S title or office as in
effect immediately prior to the Change in Control; or
(ii) a change in EMPLOYEE'S base salary, bonus participation,
benefit plans and other compensation, taken as a whole, with the result that
such compensation package is less favorable to EMPLOYEE, on an after tax basis,
than that provided to EMPLOYEE immediately prior to the Change in Control.
<PAGE> 9
Following a Change in Control, at any time after the occurrence of an event
which EMPLOYEE believes, in good faith, constitutes Good Reason, EMPLOYEE may
(but is not obligated to) give written notice to the COMPANY setting forth in
reasonable detail the facts and circumstances claimed to be a basis for
termination for Good Reason. If the COMPANY disagrees that such facts and
circumstances exist and/or do not constitute Good Reason, the COMPANY shall so
notify EMPLOYEE within thirty (30) days of the giving of such notice of Good
Reason. The COMPANY'S response shall be in writing and shall set forth in
reasonable detail the reasons why it denies EMPLOYEE'S Good Reason claim.
Failure by the COMPANY to give EMPLOYEE a responsive notice within such thirty
(30) day period shall constitute an irrevocable admission by the COMPANY that
Good Reason does exist. If the COMPANY gives a responsive notice within such
thirty (30) day period, then the parties disagreement shall be determined by
legal proceedings, or, at the election of either party, by using the procedure
set forth in Section 9 hereof.
(g) Other Definitions and Assumptions. For purposes of this
Agreement, the term "years" upon which EMPLOYEE'S retirement benefits will be
based shall mean a calendar year running from January 1 through December 31.
For purposes of this Agreement, the term "total disability" shall mean the
inability of EMPLOYEE, due to illness, accident or other physical or mental
incapacity,
<PAGE> 10
to perform his duties in a normal manner for a period of six (6) consecutive
months or for a total of twelve (12) months (whether or not consecutive) in any
twenty-four (24) month period.
4. TERM.
The term of employment shall be for the period beginning January 1,
1995 and ending upon EMPLOYEE attaining age sixty-five (65), or until such
later date as shall be mutually agreed upon. Either party may terminate
EMPLOYEE'S employment under this Agreement upon thirty (30) days' written
notice. Notwithstanding the foregoing, nothing shall prevent EMPLOYEE from
electing early retirement and being entitled to receive the benefits set forth
in Section 3 hereof.
5. RESTRICTIVE COVENANTS.
During the term of this Agreement and thereafter so long as EMPLOYEE
is receiving the retirement benefits provided for hereunder, EMPLOYEE will not,
except as a shareholder, officer, employee or representative of the COMPANY or
any subsidiary thereof, directly or indirectly, own, manage, operate, join,
control or participate in the ownership, management, operation or control of
any business (either as a proprietor, partner, shareholder, officer, director,
agent, employee, consultant, trustee, affiliate .or otherwise), which business
shall be engaged in the manufacture, distribution and/or sale of any products
that are competitive with products presently manufactured or sold or offered
for sale by the COMPANY;
<PAGE> 11
provided, however, nothing contained herein shall be construed to prohibit
EMPLOYEE from owning, as a passive investment, up to five percent (5%) of the
outstanding stock of a publicly held company engaged in any of the
above-mentioned activities.
Additionally, EMPLOYEE acknowledges that his employment by the COMPANY
has brought and shall continue to bring him into close contact with many
confidential affairs of the COMPANY, including information about costs,
profits, markets, sales, products, key personnel, pricing policies, operational
methods, technical processes, and other business affairs and methods and other
information not readily available to the public, as well as plans for future
development. EMPLOYEE further acknowledges that the services to be performed
under this Agreement are of a special, unique, unusual, extraordinary and
intellectual character. In recognition of the foregoing, EMPLOYEE hereby
agrees: (i) that he will keep secret all material confidential matters of the
COMPANY which are not otherwise in the public domain, and will not
intentionally disclose them to anyone outside of the COMPANY, either during or
after the term of this Agreement, except with the COMPANY'S prior written
consent; and (ii) that he will deliver promptly to the COMPANY upon termination
of this Agreement or at any other time as the COMPANY may so request, at its
expense, all memoranda, notes, records, reports, and other documents (and all
copies thereof) relating to
<PAGE> 12
the COMPANY'S business, however or whenever obtained, which he may then possess
or have under his control.
If it is determined judicially or pursuant to Section 9 hereof that
EMPLOYEE has breached any provision of this Section 5 and such breach has
caused, or will likely cause, material monetary harm to the COMPANY, the
COMPANY shall have no further obligations to provide EMPLOYEE any pay or other
benefits then or thereafter due him under this Agreement, effective as of the
date of any such breach and all monies paid to EMPLOYEE pursuant to this
Agreement between the date of such breach and the date of determination shall
be returned to the COMPANY within thirty (30) days of the date of
determination.
6. INSURANCE AND HEALTH BENEFITS.
The COMPANY shall maintain during the term of employment and for the
period in which EMPLOYEE is entitled to receive pay and benefits pursuant to
this Agreement the life insurance and health benefits currently provided to
EMPLOYEE at a cost to EMPLOYEE not exceeding such cost as of the date of
termination of his employment.
7. REIMBURSEMENT FOR EXPENSES.
During the employment term of this Agreement, EMPLOYEE shall be
allowed reasonable traveling expenses and shall be furnished with an office and
accommodations suitable to the character of his position and adequate for the
performance of his duties.
8. LEGAL FEES.
<PAGE> 13
Promptly upon demand by EMPLOYEE, the COMPANY shall pay all legal fees
(including any reasonable retainer), costs of litigation and other expenses
incurred in good faith by EMPLOYEE as a result of the COMPANY's refusal to make
any payment to which EMPLOYEE becomes entitled under this Agreement, or as a
result of the COMPANY's contesting the validity, enforceability or
interpretation of this Agreement or of EMPLOYEE's right to benefits hereunder;
provided, however, that if the COMPANY is the prevailing party, it shall be
obligated to pay only its own attorneys' fees and costs, witness expenses and
related costs.
9. ALTERNATIVE DISPUTE RESOLUTION.
Either party shall have the right and option to elect (in lieu of
litigation) to have any dispute or controversy arising under or in connection
with this Agreement settled by utilizing the procedure hereafter set forth:
(a) the parties shall have discussions designed to reconcile their
dispute and any resolution by them shall be final, binding and conclusive on
the parties, and
(b) if the parties are unable to reach a mutually satisfactory
resolution within ten (10) days following written notice by one party to the
other asserting the existence of a dispute hereunder ("Notice of Dispute"), the
parties shall within ten (10) days thereafter mutually select a retired judge
of the Superior Court for the State of California to whom they shall submit for
resolution the disputed matter(s). If the parties do
<PAGE> 14
not agree upon such selection within such ten (10) day period, then and in such
event, EMPLOYEE, on the one hand, and the COMPANY, on the other, shall each
within ten (10) days thereafter select a retired judge of the Superior Court
for the State of California (the "Appointing Judge"). The Appointing Judges so
selected shall thereafter meet within fifteen (15) days and they in turn shall
within five (5) days thereafter mutually select a retired judge of the Superior
Court for the State of California (the "Deciding Judge") to decide such
dispute; provided that if either EMPLOYEE or the COMPANY fail to so select an
Appointing Judge, then the Appointing Judge selected by the other party shall
be and act as the Deciding Judge. Upon such selection of the Deciding Judge,
the obligations and duties of the Appointing Judges selected by the parties
hereto shall terminate and such Deciding Judge, in a proceeding held in Los
Angeles, California, shall act to resolve the disputed item(s). Such Deciding
Judge may resolve the disputed item(s) in any manner which he or she deems
appropriate and such determination shall be final and binding, may be entered
in any court having jurisdiction and shall not be appealable in any way.
10. APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of California (other than any laws of the State of
California which would require that the laws of any other jurisdiction be the
governing law).
<PAGE> 15
11. BENEFIT.
This Agreement shall be binding upon and shall inure to the benefit of
EMPLOYEE and his respective heirs, executors, administrators and assigns and of
the COMPANY and its successors and assigns.
12. SEPARABILITY.
If any term or provision of this Agreement, or the application thereof
to any person or circumstance, shall to any extent be held invalid or
unenforceable by a court of competent jurisdiction, the remainder of the
Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of the Agreement
shall be valid and enforced to the fullest extent permitted by law.
13. TERMINATION OF SEVERANCE COMPENSATION AGREEMENT.
As of the date of this Agreement, the parties hereto agree that
certain Severance Compensation Agreement between the COMPANY and EMPLOYEE dated
as of October 24, 1991, as amended May 3, 1993, is terminated and of no further
force or effect.
<PAGE> 16
IN WITNESS WHEREOF, the COMPANY has caused this Agreement to be
executed in its corporate name by its corporate officers thereunto duly
authorized and EMPLOYEE has executed this Agreement as of the day and year
first above written.
BELL INDUSTRIES, INC.
By: /s/ Theodore Williams
-------------------------------------
Chairman and Chief Executive
Officer
By: /s/ John J. Cost
-------------------------------------
Secretary
"COMPANY"
/s/ Bruce M. Jaffe
--------------------------------------
BRUCE M. JAFFE
"EMPLOYEE"
<PAGE> 1
EXHIBIT 10(h)
EMPLOYMENT
AND
DEFERRED COMPENSATION AGREEMENT
AGREEMENT made as of February 15, 1995, by and between BELL
INDUSTRIES, INC., a Delaware corporation (hereinafter referred to as
"COMPANY"), and PAUL F. DOUCETTE (hereinafter referred to as "EMPLOYEE").
WHEREAS, EMPLOYEE is employed by the COMPANY as a Senior Vice
President and has managed such office in a capable and efficient manner
resulting in substantial profits to the COMPANY, and
WHEREAS, the COMPANY desires to retain the services of
EMPLOYEE and EMPLOYEE is willing to remain in the employ of the COMPANY in
accordance with the provisions hereinafter set forth.
IT IS THEREFORE AGREED:
1. CONTINUATION OF EMPLOYMENT.
EMPLOYEE shall continue in the employ of the COMPANY, and the Company
shall continue to employ EMPLOYEE, as a Senior Vice President or a more senior
executive officer until EMPLOYEE reaches age sixty-five (65), or such later
date as shall be mutually agreed upon; provided, however, EMPLOYEE may elect
early retirement at age sixty-two (62) pursuant to Section 3 hereof. Without
first obtaining EMPLOYEE's written consent, the COMPANY
1
<PAGE> 2
shall not require EMPLOYEE to undertake responsibilities not commensurate with
his position as a Senior Vice President or any such senior executive officer,as
the case may be, nor shall he be required to perform his duties hereunder if
the performance thereof would require his maintenance of a residence outside of
the Greater Los Angeles area. In the event the COMPANY should violate the
foregoing provisions and by reason thereof EMPLOYEE should terminate his
employment under this Agreement, such termination shall be deemed a termination
of EMPLOYEE'S employment by the COMPANY.
EMPLOYEE agrees to devote his full business time, attention, and
energies to the performance of the business of the COMPANY, and EMPLOYEE shall
not, directly or indirectly, alone or as a member of any partnership, or as an
officer, director or employee of any other corporation, partnership or other
organization, be engaged in any other duties which interfere with the
performance of his duties hereunder, or which, even if non-interfering, are
contrary to the best interests of the COMPANY. EMPLOYEE agrees that in the
performance of his duties hereunder he will comply with the policies and
directives of the COMPANY's Board of Directors.
2. REGULAR COMPENSATION.
The COMPANY shall pay to EMPLOYEE as compensation for his services
hereunder a salary to be fixed annually by the Board of Directors, but not less
than Two Hundred and Thirty Thousand
2
<PAGE> 3
Dollars ($230,000) per year, payable in equal bi-weekly installments.
Additionally, EMPLOYEE shall be entitled to participate in the COMPANY's bonus
program which, at the time, is made available to its principal corporate
officers.
3. ADDITIONAL COMPENSATION.
(a) Early Termination of Employment.
(i) In the event that the employment is, or is deemed,
terminated by the COMPANY, whether or not such termination was for "cause" (as
hereafter defined), or EMPLOYEE becomes totally disabled (as hereinafter
defined) and such termination is prior to age sixty-two (62) and not pursuant
to clause (v) hereof, EMPLOYEE shall receive an amount, as termination pay,
equivalent to 75% of the amount payable to EMPLOYEE in salary and bonus (if
any) during the twelve (12) month period immediately preceding the month of
termination for a further twelve (12) month period, payable in equal bi-weekly
installments, commencing on the date of termination. Unless employment was
terminated for "cause" after said twelve (12) month period, EMPLOYEE shall be
entitled to receive the same pay and retirement benefits, as hereinafter
provided, as if EMPLOYEE had elected early retirement at age sixty-two (62),
irrespective of EMPLOYEE'S age at the end of said twelve (12) month period,
such payments to commence immediately following the last of the bi-weekly
installments payable pursuant to the immediately preceding sentence.
3
<PAGE> 4
(ii) In the event that the employment is, or is deemed,
terminated, whether or not for "cause", by the COMPANY or EMPLOYEE becomes
totally disabled and if such termination occurs between ages sixty-two (62) and
sixty-five (65), EMPLOYEE shall be entitled to receive the same pay and
retirement benefits, as hereinafter provided, as if EMPLOYEE had elected early
retirement at age sixty-two (62); provided, however, that the pay and
retirement benefits shall be increased upward by adding to 33-1/3% (the
percentage of average annual income EMPLOYEE is entitled to receive pursuant to
subsection (c) hereof) a number (expressed as a percentage) determined by
dividing 16-2/3 by a fraction the numerator of which is 36 and the denominator
of which is the number of months employed after age sixty-two (62).
(iii) In the event that EMPLOYEE voluntarily terminates his
employment under this Agreement or his employment is terminated by the COMPANY
for "cause", before he reaches age sixty-two (62), then EMPLOYEE shall receive
no benefits until such time as he does reach age sixty-two (62); however,
thereafter, he shall receive the same pay and benefits as if he elected early
retirement at age sixty-two (62); provided however, that if employment was
terminated by the COMPANY for "cause", EMPLOYEE shall be entitled to receive
the termination payment described in the first sentence of paragraph (i) of
this subsection (a).
4
<PAGE> 5
(iv) In the event that EMPLOYEE voluntarily terminates his
employment under this Agreement between ages sixty-two (62) and sixty-five
(65), he shall receive the same pay and benefits as if he elected early
retirement at age sixty-two (62).
(v) In the event that following a Change in Control (as
hereafter defined), the COMPANY terminates EMPLOYEE'S employment under this
Agreement other than for "cause" or EMPLOYEE terminates his employment under
this Agreement for Good Reason (as hereafter defined) and EMPLOYEE is under age
sixty-five (65), then EMPLOYEE shall receive the same benefits as if he retired
at age sixty-five (65). Such payments shall commence immediately following the
date of such termination.
(vi) If EMPLOYEE'S employment is terminated under this
Agreement pursuant to clause (i), (ii) or (v), any unvested stock options held
by EMPLOYEE at the time shall become fully vested as of the date of
termination.
(b) Regular Retirement. If EMPLOYEE elects to retire at age
sixty-five (65) or at any time thereafter, the COMPANY shall pay to EMPLOYEE an
amount equivalent to fifty percent (50%) of the average of the highest three
(3) years of salary and bonus paid to EMPLOYEE during the last ten (10) years
of his employment, for the balance of EMPLOYEE'S lifetime, in equal bi-weekly
installments. A termination of EMPLOYEE'S employment by the COMPANY at any time
whether or not for "cause" after EMPLOYEE has reached age sixty-five (65) shall
be deemed an election by
5
<PAGE> 6
EMPLOYEE to retire. For all purposes of calculating payments to EMPLOYEE under
this Agreement, only years during which he was employed will be used to
determine the ten (10) year period.
(c) Early Retirement. If EMPLOYEE elects to retire at age sixty-two
(62), then the COMPANY shall pay EMPLOYEE 33-1/3% of the average of the highest
three (3) years of salary and bonus paid to EMPLOYEE during the last ten (10)
years of his employment for the balance of EMPLOYEE'S lifetime in bi-weekly
installments.
(d) Change of Control. For purposes of this Agreement, a Change of
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 stockholders 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
6
<PAGE> 7
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 stockholders, of each new directors 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.
(e) Cause. For purposes of this Agreement, "cause" shall exist if
any one or more of the following should occur: EMPLOYEE'S (A) failure to
perform his duties under, or breach of, this Agreement after first having
received a written notice of such failure or breach signed by at least a
majority of the COMPANY'S Board of Directors and EMPLOYEE having not taken
reasonable steps to cure such failure or breach within thirty (30) days of his
receipt of such notice, (B) willful and knowing of his breach fiduciary duty to
the Company, or (C) conviction by a court of competent jurisdiction of a felony
or other serious crime.
(f) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean any of the following (done without EMPLOYEE'S express written consent):
(i) the assignment to EMPLOYEE of duties inconsistent with
EMPLOYEE'S duties, responsibilities and status with the COMPANY immediately
prior to the Change in Control, or a change
7
<PAGE> 8
in EMPLOYEE'S title or office as in effect immediately prior to the Change in
Control; or
(ii) a change in EMPLOYEE'S base salary, bonus participation,
benefit plans and other compensation, taken as a whole, with the result that
such compensation package is less favorable to EMPLOYEE, on an after tax basis,
than that provided to EMPLOYEE immediately prior to the Change in Control.
Following a Change in Control, at any time after the occurrence of an event
which EMPLOYEE believes, in good faith, constitutes Good Reason, EMPLOYEE may
(but is not obligated to) give written notice to the COMPANY setting forth in
reasonable detail the facts and circumstances claimed to be a basis for
termination for Good Reason. If the COMPANY disagrees that such facts and
circumstances exist and/or do not constitute Good Reason, the COMPANY shall so
notify EMPLOYEE within thirty (30) days of the giving of such notice of Good
Reason. The COMPANY'S response shall be in writing and shall set forth in
reasonable detail the reasons why it denies EMPLOYEE'S Good Reason claim.
Failure by the COMPANY to give EMPLOYEE a responsive notice within such thirty
(30) day period shall constitute an irrevocable admission by the COMPANY that
Good Reason does exist. If the COMPANY gives a responsive notice within such
thirty (30) day period, then the parties disagreement shall be determined by
legal proceedings, or, at the election of either party, by using the procedure
set forth in Section 9 hereof.
8
<PAGE> 9
(a) Other Definitions and Assumptions. For purposes of this
Agreement, the term "years" upon which EMPLOYEE'S retirement benefits will be
based shall mean a calendar year running from January 1 through December 31.
For purposes of this Agreement, the term "total disability" shall mean the
inability of EMPLOYEE, due to illness, accident or other physical or mental
incapacity, to perform his duties in a normal manner for a period of six (6)
consecutive months or for a total of twelve (12) months (whether or not
consecutive) in any twenty-four (24) month period.
4. TERM.
The term of employment shall be for the period beginning January 1,
1995 and ending upon EMPLOYEE attaining age sixty-five (65), or until such
later date as shall be mutually agreed upon. Either party may terminate
EMPLOYEE'S employment under this Agreement upon thirty (30) days' written
notice. Notwithstanding the foregoing, nothing shall prevent EMPLOYEE from
electing early retirement and being entitled to receive the benefits set forth
in Section 3 hereof.
5. RESTRICTIVE COVENANTS.
During the term of this Agreement and thereafter so long as EMPLOYEE
is receiving the retirement benefits provided for hereunder, EMPLOYEE will not,
except as a shareholder, officer, employee or representative of the COMPANY or
any subsidiary thereof, directly or indirectly, own, manage, operate, join,
control or participate in the ownership, management, operation or
9
<PAGE> 10
control of any business (either as a proprietor, partner, shareholder, officer,
director, agent, employee, consultant, trustee, affiliate or otherwise), which
business shall be engaged in the manufacture, distribution and/or sale of any
products that are competitive with products presently manufactured or sold or
offered for sale by the COMPANY; provided, however, nothing contained herein
shall be construed to prohibit EMPLOYEE from owning, as a passive investment,
up to five percent (5%) of the outstanding stock of a publicly held company
engaged in any of the above-mentioned activities.
Additionally, EMPLOYEE acknowledges that his employment by the COMPANY
has brought and shall continue to bring him into close contact with many
confidential affairs of the COMPANY, including information about costs,
profits, markets, sales, products, key personnel, pricing policies, operational
methods, technical processes, and other business affairs and methods and other
information not readily available to the public, as well as plans for future
development. EMPLOYEE further acknowledges that the services to be performed
under this Agreement are of a special, unique, unusual, extraordinary and
intellectual character. In recognition of the foregoing, EMPLOYEE hereby
agrees: (i) that he will keep secret all material confidential matters of the
COMPANY which are not otherwise in the public domain, and will not
intentionally disclose them to anyone outside of the COMPANY, either during or
after the term of this
10
<PAGE> 11
Agreement, except with the COMPANY'S prior written consent; and (ii) that he
will deliver promptly to the COMPANY upon termination of this Agreement or at
any other time as the COMPANY may so request, at its expense, all memoranda,
notes, records, reports, and other documents (and all copies thereof) relating
to the COMPANY'S business, however or whenever obtained, which he may then
possess or have under his control.
If it is determined judicially or pursuant to Section 9 hereof that
EMPLOYEE has breached any provision of this Section 5 and such breach has
caused, or will likely cause, material monetary harm to the COMPANY, the
COMPANY shall have no further obligations to provide EMPLOYEE any pay or other
benefits then or thereafter due him under this Agreement, effective as of the
date of any such breach and all monies paid to EMPLOYEE pursuant to this
Agreement between the date of such breach and the date of determination shall
be returned to the COMPANY within thirty (30) days of the date of
determination.
6. INSURANCE AND HEALTH BENEFITS.
The COMPANY shall maintain during the term of employment and for the
period in which EMPLOYEE is entitled to receive pay and benefits pursuant to
this Agreement the life insurance and health benefits currently provided to
EMPLOYEE at a cost to EMPLOYEE not exceeding such cost as of the date of
termination of his employment.
7. REIMBURSEMENT FOR EXPENSES.
11
<PAGE> 12
During the employment term of this Agreement, EMPLOYEE shall be
allowed reasonable traveling expenses and shall be furnished with an office and
accommodations suitable to the character of his position and adequate for the
performance of his duties.
8. LEGAL FEES.
Promptly upon demand by EMPLOYEE, the COMPANY shall pay all legal fees
(including any reasonable retainer), costs of litigation and other expenses
incurred in good faith by EMPLOYEE as a result of the COMPANY's refusal to make
any payment to which EMPLOYEE becomes entitled under this Agreement, or as a
result of the COMPANY's contesting the validity, enforceability or
interpretation of this Agreement or of EMPLOYEE's right to benefits hereunder;
provided, however, that if the COMPANY is the prevailing party, it shall be
obligated to pay only its own attorneys' fees and costs, witness expenses and
related costs.
9. ALTERNATIVE DISPUTE RESOLUTION.
Either party shall have the right and option to elect (in lieu of
litigation) to have any dispute or controversy arising under or in connection
with this Agreement settled by utilizing the procedure hereafter set forth:
(a) the parties shall have discussions designed to reconcile their
dispute and any resolution by them shall be final, binding and conclusive on
the parties, and
(b) if the parties are unable to reach a mutually satisfactory
resolution within ten (10) days following written
12
<PAGE> 13
notice by one party to the other asserting the existence of a dispute hereunder
("Notice of Dispute"), the parties shall within ten (10) days thereafter
mutually select a retired judge of the Superior Court for the State of
California to whom they shall submit for resolution the disputed matter(s).
If the parties do not agree upon such selection within such ten (10) day
period, then and in such event, EMPLOYEE, on the one hand, and the COMPANY, on
the other, shall each within ten (10) days thereafter select a retired judge of
the Superior Court for the State of California (the "Appointing Judge"). The
Appointing Judges so selected shall thereafter meet within fifteen (15) days
and they in turn shall within five (5) days thereafter mutually select a
retired judge of the Superior Court for the State of California (the "Deciding
Judge") to decide such dispute; provided that if either EMPLOYEE or the COMPANY
fail to so select an Appointing Judge, then the Appointing Judge selected by
the other party shall be and act as the Deciding Judge. Upon such selection of
the Deciding Judge, the obligations and duties of the Appointing Judges
selected by the parties hereto shall terminate and such Deciding Judge, in a
proceeding held in Los Angeles, California, shall act to resolve the disputed
item(s). Such Deciding Judge may resolve the disputed item(s) in any manner
which he or she deems appropriate and such determination shall be final and
binding, may be entered in any court having jurisdiction and shall not be
appealable in any way.
13
<PAGE> 14
10. APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of California (other than any laws of the State of
California which would require that the laws of any other jurisdiction be the
governing law).
11. BENEFIT.
This Agreement shall be binding upon and shall inure to the benefit of
EMPLOYEE and his respective heirs, executors, administrators and assigns and of
the COMPANY and its successors and assigns.
12. SEPARABILITY.
If any term or provision of this Agreement, or the application thereof
to any person or circumstance, shall to any extent be held invalid or
unenforceable by a court of competent jurisdiction, the remainder of the
Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of the Agreement
shall be valid and enforced to the fullest extent permitted by law.
13. TERMINATION OF SEVERANCE COMPENSATION AGREEMENT.
As of the date of this Agreement, the parties hereto agree that
certain Severance Compensation Agreement between the COMPANY and EMPLOYEE dated
as of October 24, 1991, as amended May 3, 1993, is terminated and of no further
force or effect.
14
<PAGE> 15
IN WITNESS WHEREOF, the COMPANY has caused this Agreement to be
executed in its corporate name by its corporate officers thereunto duly
authorized and EMPLOYEE has executed this Agreement as of the day and year
first above written.
BELL INDUSTRIES, INC.
By: /s/ Theodore Williams
-------------------------------------
Chairman and Chief Executive
Officer
By: /s/ John J. Cost
-------------------------------------
Secretary
"COMPANY"
/s/ Paul F. Doucette
-------------------------------------
PAUL F. DOUCETTE
"EMPLOYEE"
15
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant:
<TABLE>
<S> <C>
Bell Electronics Corp. (California) (*)
Bell Industries, Inc. (Minnesota)
J. W. Miller Company (California) (*)
</TABLE>
All companies listed are considered wholly owned by the Registrant (Bell
Industries, Inc. of Delaware) and are included in the consolidated financial
statements.
(*) Inactive.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 2-74896, No. 33-38737 and No. 33-73044) and in the
Prospectus constituting part of the Registration Statement on Form S-3 (No.
33-71030) of Bell Industries, Inc. of our report dated February 1, 1995
appearing on page 10 of this Form 10-K.
PRICE WATERHOUSE LLP
Los Angeles, California
February 20, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 3,631
<SECURITIES> 0
<RECEIVABLES> 69,955
<ALLOWANCES> 1,041
<INVENTORY> 95,910
<CURRENT-ASSETS> 173,779
<PP&E> 40,662
<DEPRECIATION> 25,722
<TOTAL-ASSETS> 200,367
<CURRENT-LIABILITIES> 57,661
<BONDS> 40,936
<COMMON> 1,624
0
0
<OTHER-SE> 100,146
<TOTAL-LIABILITY-AND-EQUITY> 200,367
<SALES> 255,372
<TOTAL-REVENUES> 255,372
<CGS> 198,731
<TOTAL-COSTS> 198,731
<OTHER-EXPENSES> 45,601
<LOSS-PROVISION> 606
<INTEREST-EXPENSE> 1,886
<INCOME-PRETAX> 9,154
<INCOME-TAX> 3,845
<INCOME-CONTINUING> 5,309
<DISCONTINUED> 310
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,619
<EPS-PRIMARY> .85
<EPS-DILUTED> .85
</TABLE>
