No. pages 14
index exhibit pg. none
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
( Mark one )
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ____________
Commission file number 0-21528
Bell Microproducts Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-3057566
- ------------------------------------ ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1941 Ringwood Avenue, San Jose, California 95131-1721
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(408) 451-9400
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No initial report, previously not
--------- --------- required to file
Common Stock, $.01 Par Value -- Number of Shares Outstanding at September 30,
1996: 8,390,083
1
<PAGE>
<TABLE>
BELL MICROPRODUCTS INC.
INDEX TO FORM 10-Q
Page
PART I - FINANCIAL INFORMATION Number
------
<S> <C> <C>
Item 1: Financial Statements
Condensed Balance Sheets - September 30, 1996 and December 31, 1995 3
Condensed Statements of Operations - Three months and nine months
ended September 30, 1996 and 1995 4
Condensed Statements of Cash Flows - Nine months ended September
30, 1996 and 1995 5
Notes to Condensed Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports 13
Signature 14
</TABLE>
2
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Bell Microproducts Inc.
Condensed Balance Sheets
(in thousands, except per share data)
(unaudited)
<CAPTION>
September 30, December 31,
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,911 $ 2,489
Accounts receivable, net 70,650 65,266
Inventories 77,547 70,262
Deferred and refundable income taxes 3,035 3,418
Prepaid expenses and other current assets 977 841
-------- --------
Total current assets 155,120 142,276
Property and equipment, net 8,866 7,861
Goodwill 6,763 6,987
Other assets 344 153
======== ========
Total assets $171,093 $157,277
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, current portion $ 147 $ 15
Accounts payable 57,040 31,596
Other accrued liabilities 6,721 2,705
Current portion of capitalized lease
obligations 1,380 1,046
-------- --------
Total current liabilities 65,288 35,362
Line of credit 32,000 54,500
Notes payable, less current portion 147 294
Capitalized lease obligations, less current portion 5,306 4,659
-------- --------
Total liabilities 102,741 94,815
-------- --------
Commitments and contingencies
Shareholders' equity:
Common Stock, $0.01 par value, 20,000 shares
authorized; 8,390 and 8,323 issued and outstanding
51,184 50,841
Retained earnings 17,168 11,621
-------- --------
Total shareholders' equity 68,352 62,462
-------- --------
Total liabilities and shareholders' equity $171,093 $157,277
======== ========
<FN>
See accompanying notes to condensed financial statements.
</FN>
</TABLE>
3
<PAGE>
Bell Microproducts Inc.
Condensed Statements of Operations
(in thousands, except per share data)
(unaudited)
Three months ended Nine months ended
--------------------- --------------------
9/30/96 9/30/95 9/30/96 9/30/95
-------- -------- -------- --------
Sales $118,018 $ 89,213 $347,094 $242,669
Cost of sales 103,855 77,472 304,684 211,405
-------- -------- -------- --------
Gross profit 14,163 11,741 42,410 31,264
Marketing, general and
administrative expenses 9,896 7,177 30,173 20,459
-------- -------- -------- --------
Income from operations 4,267 4,564 12,237 10,805
Interest expense (767) (921) (2,672) (2,343)
-------- -------- -------- --------
Income before income taxes 3,500 3,643 9,565 8,462
Provision for income taxes (1,470) (1,548) (4,018) (3,612)
-------- -------- -------- --------
Net income $ 2,030 $ 2,095 $ 5,547 $ 4,850
======== ======== ======== ========
Earnings per share $ .24 $ .25 $ .65 $ .58
======== ======== ======== ========
Weighted average common
shares and equivalents 8,531 8,499 8,498 8,334
======== ======== ======== ========
See accompanying notes to condensed financial statements.
4
<PAGE>
<TABLE>
Bell Microproducts Inc.
Condensed Statements of Cash Flows
(Increase/(decrease) in cash, in thousands)
(unaudited)
<CAPTION>
Nine months ended September 30,
- -------------------------------------------------------------------------------------------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,547 $ 4,850
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,903 1,127
Change in deferred and refundable income taxes 383 --
Changes in assets and liabilities:
Accounts receivable (5,384) (10,498)
Inventories (7,285) 1,471
Prepaid expenses (136) (456)
Other assets (191) 92
Accounts payable 25,444 (14,410)
Other accrued liabilities 4,016 1,791
-------- --------
Net cash provided by (used in) operating activities 24,297 (16,033)
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment (403) (784)
-------- --------
Net cash used in investing activities (403) (784)
-------- --------
Cash flows from financing activities:
Net borrowings/(repayments) under line of credit agreement (22,500) 22,200
Repayments under term loan -- (5,000)
Proceeds from issuance of common stock 343 757
Principal payments on long term liabilities (1,315) (770)
-------- --------
Net cash provided by (used in) financing activities (23,472) 17,187
-------- --------
Net increase in cash 422 370
Cash at beginning of period 2,489 1,402
-------- --------
Cash at end of period $ 2,911 $ 1,772
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,601 $ 2,161
Income taxes $ 2,146 $ 2,604
Obligations incurred under capital leases $ 2,280 $ 4,224
Common Stock issued on conversion of Note Payable -- $ 772
<FN>
See accompanying notes to condensed financial statements.
</FN>
</TABLE>
5
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Basis of Presentation:
The condensed financial statements presented in this Quarterly Report
are unaudited. It is management's opinion that all adjustments, consisting of
normal recurring items, have been included for a fair basis of presentation.
This Quarterly Report on Form 10-Q should be read in conjunction with the
Company's 1995 Annual Report on Form 10-K. The operating results for the period
ended September 30, 1996 are not necessarily indicative of the results that may
be expected for the fiscal year ending December 31, 1996.
Note 2 - Inventories:
A summary of inventories follows (in thousands):
September 30, December 31,
1996 1995
------------- -------------
Purchased components and materials
$65,668 $64,998
Work-in-process 11,879 5,264
------------- -------------
Total $77,547 $70,262
============= =============
Note 3 - Property and equipment:
A summary of property and equipment follows (in thousands):
September 30, December 31,
1996 1995
------------- -------------
Manufacturing and test
equipment $ 8,959 $ 7,452
Warehouse equipment 176 134
Furniture and fixtures 1,116 941
Computer and other
equipment 2,645 1,695
------------- -------------
12,896 10,222
Accumulated depreciation (4,030) (2,361)
------------- -------------
Total $ 8,866 $ 7,861
============= =============
6
<PAGE>
Note 4 - Line of Credit
On June 25, 1996, the Company entered into an amendment to the Amended
and Restated Syndicated Credit Agreement arranged by Sumitomo Bank of California
("Sumitomo Bank") as Agent. The amendment increased the Company's $70 million
revolving line of credit to $80 million and extended the maturity date to May
31, 1998. The syndicate includes Sumitomo Bank of California, Union Bank, The
First National Bank of Boston, Comerica Bank - California and The Sumitomo Bank,
Limited. At the Company's option, the borrowings under the line of credit will
bear interest at Sumitomo Bank's prime rate or the adjusted LIBOR rate plus
1.625%. The revolving line of credit requires the Company to meet certain
financial tests and to comply with certain other covenants, including
restrictions on incurrence of debt and liens, restrictions on mergers,
acquisitions, asset dispositions, declaration of dividends, repurchases of
stock, making investments and profitability. The Company is in compliance with
its bank covenants, however, there can be no assurance that the Company will be
in compliance in the future. Obligations of the Company under the revolving line
of credit are secured by substantially all of the Company's assets.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Three months ended September 30, 1996 compared to three months ended September
30, 1995
Sales were $118.0 million for the quarter ended September 30, 1996,
which represented an increase of $28.8 million, or 32.3% over the same quarter
in 1995. Substantially all of the increase in sales was attributable to greater
unit sales within existing product lines, and increased sales volume through the
Company's manufacturing division (Quadrus). Semiconductor sales decreased in the
third quarter of 1996 compared to the same quarter in 1995 primarily due to
price declines in memory products and the discontinuation of the distribution
agreement with Hitachi America Ltd. Computer product sales (principally disk
drives) increased substantially in the third quarter of 1996 due to higher unit
sales as a result of an increased demand for mass storage products.
Manufacturing sales increased in the third quarter of 1996 compared to the same
quarter in 1995 as a result of increased sales to new and existing customers,
enabled by increased manufacturing equipment utilization and capacity. For the
quarter ended September 30, 1996, Quantum, one of the Company's largest
suppliers, provided products which represented 38.4% of the Company's sales, as
compared to 27.8% in the same quarter in 1995. The loss of Quantum or any other
significant supplier would have a material, adverse effect on the Company's
results of operations.
The Company's gross profit for the third quarter of 1996 was $14.1
million, which was $2.4 million, or 20.6% higher than the third quarter of 1995.
As a percentage of sales, gross margin was 12.0% in the third quarter of 1996
compared to 13.2% in the same quarter of 1995. The decrease in gross margin was
primarily attributable to a greater proportion of computer products sales, which
contribute lower margins. Gross margins may fluctuate quarterly due to the mix
of products sold to customers.
Marketing, general and administrative expenses increased to $9.9
million in the third quarter of 1996 from $7.2 million in the third quarter of
1995, which represented a growth of 37.9%. The increase in expenses was
primarily attributable to the Company's continuing effort to expand its sales
and marketing organization and additional operating expenses related to growth
in the manufacturing division. Due to increased sales volume and changing market
conditions, the Company also increased its provision for doubtful accounts
during the third quarter of 1996.
Interest expense was $767,000 in the third quarter of 1996 as compared
to $921,000 in the third quarter of 1995. The decrease in interest expense was
primarily due to decreased bank borrowings.
Net income was $2,030,000 in the third quarter of 1996, compared to
$2,095,000 in the same period last year. The decrease was primarily due to a
lower gross margin percentage of sales, increased operating expenses, partially
offset by sales growth and decreased interest expense.
7
<PAGE>
Nine months ended September 30, 1996 compared to nine months ended September 30,
1995
Sales were $347.0 million for the nine months ended September 30, 1996,
which represented an increase of $104.4 million, or 43.0% over the same period
in 1995. Substantially all of the increase in sales was attributable to greater
unit sales within existing product lines, increased sales volume through the
Company's manufacturing division (Quadrus), and expansion of the customer base.
Semiconductor sales decreased slightly in the first nine months of 1996 compared
to the first nine months of 1995 primarily due to price declines in memory
products and the discontinuation of the distribution agreement with Hitachi
America Ltd. Computer product sales (principally disk drives) increased
substantially in the first nine months of 1996 compared to the first nine months
of 1995. The increased sales were due primarily to higher unit sales as a result
of an increased demand for mass storage products. Manufacturing sales also
increased substantially in the first nine months of 1996 as a result of
increased sales to new and existing customers, enabled by increased
manufacturing equipment capacity.
The Company's gross profit for the first nine months of 1996 was $42.4
million, an increase of $11.1 million, or 35.7% over the first nine months of
1995. Gross margin was 12.2% in the first nine months of 1996 compared to 12.9%
in the first nine months of 1995. The decrease in gross margin was primarily due
to a greater proportion of computer product sales, which contribute lower
margins.
Marketing, general and administrative expenses increased to $30.2
million in the first nine months of 1996 from $20.5 million in the first nine
months of 1995, a 47.5% increase. As a percentage of sales, expenses were 8.7%
in the first nine months of 1996 compared to 8.4% in the same period last year.
The increase in expenses was attributable to the Company's continuing effort to
expand its sales and marketing organizations, and to additional operating
expenses related to growth in the manufacturing division. Due to increased sales
volume and changing market conditions, the Company also increased its provision
for doubtful accounts during the first nine months of 1996.
Interest expense was $2.7 million in the first nine months of 1996 as
compared to $2.3 million in the same period in 1995. The increase in interest
expense is primarily related to the increase in capital leases in the
manufacturing division and increased borrowings on the Company's revolving line
of credit.
Net income grew to $5,547,000 in the first nine months of 1996 compared
to $4,850,000 in the same period of 1995. The increase was due primarily to
sales growth, partially reduced by increased marketing, general and
administrative expenses and interest expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its working capital requirements principally
through borrowings under bank lines of credit and sales of equity securities.
Working capital requirements have included the financing of increases in
inventory and accounts receivable resulting from sales growth.
On June 25, 1996, the Company increased its revolving line of credit
from $70 million to $80 million to provide working capital for the Company. At
the Company's option, the borrowings under the line of credit will bear interest
at Sumitomo Bank's prime rate or the adjusted LIBOR rate plus 1.625%. The
revolving line of credit has a final payment due date of May 31, 1998. The
revolving line of credit requires the Company to meet certain financial tests
and to comply with certain other covenants, including restrictions on incurrence
of debt and liens, restrictions on mergers, acquisitions, asset dispositions,
declaration of dividends, repurchases of stock, making investments and
profitability. The Company is in compliance with its bank covenants, however,
there can be no assurance that the Company will be in compliance in the future.
Obligations of the Company under the revolving line of credit are secured by
substantially all of the Company's assets. The Company intends to utilize its
revolving line of credit to fund future working capital requirements. The
8
<PAGE>
Company evaluates potential acquisitions from time to time and may utilize its
line of credit to acquire complementary businesses, provided consent from its
banks is obtained.
The Company's inventories as of September 30, 1996 increased to $77.5
million from $70.3 million as of December 31, 1995 primarily as a result of the
company's need to support anticipated future sales requirements and the addition
of new product lines. The Company's accounts payable increased to $57.0 million
as of September 30, 1996 from $31.6 million as of December 31, 1995, primarily
due to the Company's efforts to negotiate more favorable payment terms with
certain suppliers as well as timing issues related to inventory receipts and
payments. The Company's future cash requirements will depend on numerous
factors, including the rate of growth of its sales. The Company believes that
its working capital, including its existing credit facility, will be sufficient
to meet the Company's short term capital requirements. However, the Company may
seek additional debt or equity financing to fund continued growth.
RISK FACTORS
In evaluating the Company's business, prospective investors should
carefully consider the following risk factors in addition to the other
information set forth herein or incorporated herein by reference. This report on
Form 10-Q contains forward-looking statements within the meaning of section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below and
in the documents incorporated by reference herein. Forward looking statements
are indicated by an asterisk immediately following the relevant statement.
Potential Fluctuations in Quarterly Operating Results and Effect on Liquidity
The Company's quarterly operating results have in the past and could in
the future fluctuate substantially. The Company's expense levels are based, in
part, on expectations of future sales. If sales in a particular quarter do not
meet expectations, operating results could be adversely affected. Factors
affecting quarterly operating results include the timing of delivery of products
from suppliers, the product mix sold by the Company, the percent of revenue
derived from distribution versus contract manufacturing, managing Company
inventory in both the contract manufacturing ("Quadrus") division and the
distribution division, availability of products from suppliers, management of
growth, the Company's ability to collect accounts receivable, price decreases on
inventory that is not price protected and price competition for products sold by
the Company, including the Company's ability to sell inventory at anticipated
prices. Due in part to supplier rebate programs and increased sales by the
Company near the end of each quarter, a significant portion of the Company's
gross profit has historically been earned by the Company in the third month of
each quarter. Failure to receive products from its suppliers in a timely manner
or the discontinuance of rebate programs could have a material adverse effect on
the Company's results of operations in a particular quarter. In addition, price
competition for the products sold by the Company is intense and could result in
gross margin declines, which could have an adverse effect on the Company's
results of operations. In various quarters in the past, the Company's operating
results have been affected by these factors. In particular, during the last
quarter of 1995, a sharp decline in DRAM prices and a general softening in the
semiconductor market and an increase in the Company's allowance for doubtful
accounts had a material adverse effect on the Company's results of operations,
causing the Company to report a quarterly net loss of $848,000. As a result of
this quarterly loss, the Company was out of compliance with one of its covenants
in its revolving line of credit agreement. The Company received a waiver from
its banks regarding this noncompliance. However, there can be no assurance that
the Company will be in compliance with its bank covenants in the future. If the
Company does not remain in compliance with the covenants in its revolving line
of credit agreement and is unable to obtain a waiver of noncompliance from its
banks, the Company's business, financial condition and results of operations
would be materially adversely affected. There can be no assurance that any of
the foregoing factors will not materially adversely affect future operating
results.
9
<PAGE>
Dependence on Suppliers
The Company relies on a limited number of suppliers for products which
represent a significant portion of its sales. For the quarter ended September
30, 1996, sales of Quantum products represented 38.4% of the Company's sales,
and for the quarter ended September 30, 1995, sales of Quantum products
represented 27.8% of the Company's sales. The Company's distribution agreement
with Quantum is cancelable upon 90 days' notice. In the past, distribution
arrangements with significant suppliers have been terminated and there can be no
assurance that, in the future, one or more of the Company's significant
distributor relationships will not be terminated. The loss of Quantum or any
significant supplier could have a material adverse effect on the Company's
results of operations. As the Company enters into distribution relationships
with new suppliers, other competitive suppliers may choose to terminate their
distribution arrangements with the Company with minimal notice. In the first
quarter of 1996, Hitachi America Ltd. did not renew its distribution agreement
with the Company. This supplier accounted for approximately $1.7 million and
$297,000 of the Company's sales and gross profit respectively, for the quarter
ended December 31, 1995. To the extent that the Company is unable to enter into
or maintain distribution arrangements with leading suppliers of components and
computer products, the Company's sales and operating results could be materially
adversely affected.
The Company has entered into agreements with most of its distribution
suppliers which generally provide the Company with price protection and limited
inventory rotation rights. There can be no assurance that such agreements will
not be canceled, or that price protection and inventory rotation policies will
provide complete protection or will not be changed in the future. If the Company
were to purchase significant amounts of products on terms that do not include
effective price protection or inventory rotation rights, it would bear the risk
of obsolescence and price fluctuation for those products. In particular, in
February 1996 the Company reported fourth quarter 1995 charges of $2.5 million,
net of tax, of which approximately $1.6 million related to inventory valuation
issues of certain DRAM products and approximately $900,000 related to an
increase in the allowance for doubtful accounts. These products were not subject
to the price protection and inventory rotation rights normally applicable to
components purchased from the Company's franchised suppliers. There can be no
assurance that the Company will not have to take additional charges to earnings
in the future due to inventory valuation issues, which could have a material
adverse effect on the Company's results of operations.
Dependence on the Personal Computer Industry
Many of the products the Company sells are used in the manufacture or
configuration of personal computers. These products are characterized by rapid
technological change, short product life cycles and intense competition. The
personal computer industry has experienced significant unit volume growth over
the past three years, which has in turn increased demand for many of the
products distributed by the Company. Any slowdown in the growth of the personal
computer industry, or growth at less than expected rates, could adversely affect
the Company's ability to continue its recent revenue growth. In addition, many
of the Company's customers in the personal computer industry are subject to the
risks of significant shifts in demand and severe price pressures, which may
increase the risk that the Company may not be able to collect accounts
receivable owed by some of its customers. In particular, one of the Company's
customers filed for bankruptcy, which was the principal reason for the Company
to increase its allowance for doubtful accounts by approximately $900,000, net
of tax, in the fourth quarter of 1995. To the extent the Company is unable to
collect its accounts receivable, the Company's results of operations will be
adversely affected.
10
<PAGE>
Cyclical Nature of the Semiconductor and Disk Drive Industries
Semiconductors and disk drives have represented a significant portion
of the Company's sales and the Company believes they will continue to do so in
future periods.* Both the semiconductor and the disk drive industries have
historically been characterized by fluctuations in product supply and demand
and, consequently, severe fluctuations in price. In the event of excess supply
of disk drives or semiconductors, the Company's gross margins may be adversely
affected. In the event of a shortage of supply of disk drives or semiconductors,
the Company's results of operations will depend on the amount of product
allocated to the Company by its suppliers and the timely receipt of such
allocations. Additionally, technological change in the semiconductor industry in
the past has caused prices to decrease, sometimes affecting the Company's gross
margins. Other technological changes that affect the demand for and prices of
the products distributed by the Company may further effect the Company's gross
margins.
Management of Growth
The Company has grown rapidly in recent years, with sales increasing
from $34 million in 1991 to $346 million in 1995. The Company intends to
continue to pursue its growth strategy through increasing sales of existing and
new product offerings, as well as through acquisitions. This strategy,
particularly as evidenced by the Vantage acquisition, will require increased
personnel, expanded information systems and additional financial and
administrative control procedures. There can be no assurance that the Company
will be able to attract and retain qualified personnel, further develop
accounting and control systems or successfully manage expanding operations,
including an increasing number of supplier and customer relationships and
geographically dispersed locations. Further, there can be no assurance that the
Company will be able to sustain its recent rate of growth.
Competition
The semiconductor and computer products distribution industry is highly
competitive. The Company generally competes for both supplier and customer
relationships with numerous local, regional and national authorized and
unauthorized distributors, and for customer relationships with semiconductor and
computer product manufacturers, including some of its own suppliers. Many such
competitors are larger, more established and have greater name recognition and
financial and other resources than the Company. Price is a substantial
competitive factor in both the semiconductor and disk drive industries. There
can be no assurance that the Company will be able to compete successfully with
existing or new competitors and failure to do so would have a material adverse
effect on the Company's results of operations.
The contract manufacturing industry is highly competitive. The Company
competes against numerous domestic and offshore manufacturers. Many of such
competitors are larger, more established and have greater name recognition and
financial and other resources than the Company. The Company's manufacturing
operations have achieved profitability, however there can be no assurance that
such operations will continue to be profitable. Further, although manufacturing
sales levels increased in 1995 and in the first nine months of 1996 as compared
to prior years, due to the highly competitive nature of the contract
manufacturing industry there can be no assurance that this trend will continue
or that higher sales levels will in fact result in increased profitability.
Additionally, the Company's contract manufacturing division is dependent on a
relatively limited customer base. Any significant rescheduling or cancellation
of orders from these customers, or loss of customers, could have a material
adverse effect on the results of operations of such division and on the
profitability of the Company.
11
<PAGE>
Dependence on Key Personnel
The Company's success depends to a significant extent upon the
continued contributions of its key employees, particularly, W. Donald Bell,
President, Chief Executive Officer and Chairman of the Board. The loss of other
key employees could also have a material adverse impact on the Company. The
Company's future success will depend in part upon its continuing ability to
attract and retain highly qualified personnel. Competition for such employees is
intense and there can be no assurance that the Company will be successful in
attracting and retaining such personnel. Failure to attract and retain highly
qualified personnel could have a material adverse effect on the Company's
results of operations.
Possible Volatility of Stock Price
The market price of the Company's Common Stock is likely to be highly
volatile and could be subject to wide fluctuations in response to such factors
as, among others, variations in the Company's anticipated or actual results of
operations and market conditions (which may be unrelated to the Company's
operating performance).
12
<PAGE>
Item 6. Exhibits and Reports
(a) Exhibits:
27. Financial Data Schedule for the quarter ended September 30, 1996.
99. Second Amendment to Second Amended and Restated Credit Agreement.
(b) Reports on Form 8-K:
None
13
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 14, 1996
BELL MICROPRODUCTS INC.
By: Remo E. Canessa
--------------------------------------
Remo E. Canessa, Vice President,
Chief Financial Officer, Corporate Controller and Secretary
(Principal Financial Officer and Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,911
<SECURITIES> 0
<RECEIVABLES> 74,773
<ALLOWANCES> 4,123
<INVENTORY> 77,547
<CURRENT-ASSETS> 155,120
<PP&E> 12,896
<DEPRECIATION> 4,030
<TOTAL-ASSETS> 171,093
<CURRENT-LIABILITIES> 65,288
<BONDS> 37,453
<COMMON> 84
0
0
<OTHER-SE> 68,268
<TOTAL-LIABILITY-AND-EQUITY> 171,093
<SALES> 118,018
<TOTAL-REVENUES> 118,018
<CGS> 103,855
<TOTAL-COSTS> 103,855
<OTHER-EXPENSES> 8,787
<LOSS-PROVISION> 1,109
<INTEREST-EXPENSE> 767
<INCOME-PRETAX> 3,500
<INCOME-TAX> 1,470
<INCOME-CONTINUING> 2,030
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,030
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
EXECUTION COPY
SECOND AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment"), dated as of September 30, 1996, is entered into by and
among:
(1) BELL MICROPRODUCTS INC., a California corporation
("Borrower");
(2) Each of the financial institutions listed in Schedule I to
the Credit Agreement referred to in Recital A below (collectively, the
"Banks"); and
(3) SUMITOMO BANK OF CALIFORNIA, a California banking
corporation, as agent for the Banks (in such capacity, "Agent").
RECITALS
A. Borrower, the Banks and Agent are parties to a Second Amended and
Restated Credit Agreement dated as of May 23, 1995, as amended by that certain
First Amendment to Second Amended and Restated Credit Agreement dated as of June
25, 1996 (the "Credit Agreement").
B. Borrower has requested the Banks and Agent to amend the Credit
Agreement in certain respects.
C. The Banks and Agent are willing so to amend the Credit Agreement
upon the terms and subject to the conditions set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower, the Banks and Agent hereby agree as follows:
1. Definitions, Interpretation. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless
otherwise defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in the Credit Agreement, as amended by
this Amendment. The rules of construction set forth in Section I of the Credit
Aqreement shall, to the extent not inconsistent with
<PAGE>
the terms of this Amendment, apply to this Amendment and are hereby incorporated
by reference.
2. Amendments to Credit Agreement. Subject to the conditions set forth
in paragraph 4 below, the Credit Agreement is hereby amended as follows:
(a) Clause (i) of Subparagraph 5.02 (m) is amended to read in
its entirety as follows:
(i) Its Quick Ratio to be less than 0.50 to 1.00 at
any time;
(b) Clause (iv) of Subparagraph 5.02.(m) is amended to read
in its entirety as follows:
(iv) Its Leverage Ratio to be greater than 2.50 to
1.00 at any time;
3. Representations and Warranties. Borrower hereby represents and
warrants to Agent and the Banks that, on the date of this Amendment and after
giving effect to the amendments set forth in paragraph 2 above on the Amendment
Effective Date (as defined below), the following are and shall be true and
correct on each such date:
(a) The representations and warranties set forth in Paragraph
4.01 of the Credit Agreement are true and correct in all material
respects;
(b) No Event of Default or Default has occurred and is
continuing; and
(c) Each of the Credit Documents is in full force and effect.
4. Amendment Effective Date. The amendments effected by paragraph 2
above shall become effective on September 30, 1996 (the "Amendment Effective
Date"), subject to receipt by the Banks and Agent on or prior to the Amendment
Effective Date of the following, each in form and substance satisfactory to the
Banks, Agent and their respective counsel:
(a) This Amendment duly executed by Borrower, each Bank and
Agent;
(b) A Certificate of the Secretary of Borrower, dated the
Amendment Effective Date, certifying that (i) the Certificate of
Incorporation and Bylaws of Borrower, in the form delivered to Agent on
the Effective Date, are in full force and effect and have not been
amended, supplemented, revoked or repealed since such date and (ii)
that attached thereto are true and correct copies of resolutions duly
2
<PAGE>
adopted by the Board of Directors of Borrower and continuing in effect,
which authorize the execution, delivery and performance by Borrower of
this Amendment and the consummation of the transactions contemplated
hereby; and
(c) Such other evidence as Agent or any Bank may reasonably
request to establish the accuracy and completeness of the
representations and warranties and the compliance with the terms and
conditions contained in this Amendment and the other Credit Documents.
5. Effect of this Amendment. On and after the Amendment Effective
Date, each reference in the Credit Agreement and the other Credit Documents to
the Credit Agreement shall mean the Credit Agreement as amended hereby. Except
as specifically amended above, (a) the Credit Agreement and the other Credit
Documents shall remain in full force and effect and are hereby ratified and
confirmed and (b) the execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power, or remedy of the Banks or Agent, nor constitute a waiver of any
provision of the Credit Agreement or any other Credit Document.
6. Miscellaneous.
(a) Counterparts. This Amendment may be executed in any number
of identical counterparts, any set of which signed by all the parties
hereto shall be deemed to constitute a complete, executed original for
all purposes.
(b) Headings. Headings in this Amendment are for convenience
of reference only and are not part of the substance hereof.
(c) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California
without reference to conflicts of law rules.
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<PAGE>
IN WITNESS WHEREOF, Borrower, the Agent and the Banks have caused this
Amendment to be executed as of the day and year first above written.
BORROWER: BELL MICROPRODUCTS INC.
By: /s/ W. DONALD BELL
-------------------------------------------
Name: W. Donald Bell
Title: President, CEO and Chairman of the
Board
AGENT: . SUMITOMO BANK OF CALIFORNIA,
As Agent
By:
-------------------------------------------
Name:
Title:
By:
-------------------------------------------
Name:
Title:
BANKS: SUMITOMO BANK OF CALIFORNIA,
As a Bank
By:
-------------------------------------------
Name:
Title:
By:
-------------------------------------------
Name:
Title:
4
<PAGE>
IN WITNESS WHEREOF, Borrower, the Agent and the Banks have caused this
Amendment to be executed as of the day and year first above written.
BORROWER: BELL MICROPRODUCTS INC.
By: /s/ REMO CANESSA
-------------------------------------------
Name: Remo Caness
Title: Vice President of Finance
AGENT: . SUMITOMO BANK OF CALIFORNIA,
As Agent
By:
-------------------------------------------
Name:
Title:
By:
-------------------------------------------
Name:
Title:
BANKS: SUMITOMO BANK OF CALIFORNIA,
As a Bank
By:
-------------------------------------------
Name:
Title:
By:
-------------------------------------------
Name:
Title:
4
<PAGE>
IN WITNESS WHEREOF, Borrower, the Agent and the Banks have caused this
Amendment to be executed as of the day and year first above written.
BORROWER: BELL MICROPRODUCTS INC.
By:
-------------------------------------------
Name:
Title:
AGENT: . SUMITOMO BANK OF CALIFORNIA,
As Agent
By: /s/ S.C. BELLICINI
-------------------------------------------
Name: S.C. Bellicini
Title: Vice President
By: /s/ F. CLARK WARDEN
-------------------------------------------
Name: F. Clark Warden
Title: Sr. Vice President
BANKS: SUMITOMO BANK OF .CALIFORNIA,
As a Bank
By: /s/ S.C. BELLICINI
-------------------------------------------
Name: S.C. Bellicini
Title: Vice President
By: /s/ F. CLARK WARDEN
-------------------------------------------
Name: F. Clark Warden
Title: Sr. Vice President
4
<PAGE>
UNION BANK OF CALIFORNIA, N.A.,
As a Bank
By: /s/ FRANK B. GWYNN
---------------------------------------------------
Name: Frank B. Gwynn
Title: Regional Manager
By: /s/ KELLY D. TAKAHASHI
---------------------------------------------------
Name: Kelly D. Takahashi
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
By:
---------------------------------------------------
Name:
Title:
COMERICA BANK CALIFORNIA,
As a Bank
By:
---------------------------------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED,
As a Bank
By:
---------------------------------------------------
Name:
Title:
By:
---------------------------------------------------
Name:
Title:
5
<PAGE>
UNION BANK OF CALIFORNIA, N.A.,
As a Bank
By:
---------------------------------------------------
Name:
Title:
By:
---------------------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
By: /s/ LEE A MERKLE
---------------------------------------------------
Name: Lee A. Merkle
Title: Vice President
COMERICA BANK CALIFORNIA,
As a Bank
By:
---------------------------------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED,
As a Bank
By:
---------------------------------------------------
Name:
Title:
By:
---------------------------------------------------
Name:
Title:
5
<PAGE>
UNION BANK OF CALIFORNIA, N.A.,
As a Bank
By:
---------------------------------------------------
Name:
Title:
By:
---------------------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
By:
---------------------------------------------------
Name:
Title:
COMERICA BANK CALIFORNIA,
As a Bank
By: /s/ SCOTT T. SMITH
---------------------------------------------------
Name: Scott T. Smith
Title: Assistant Vice President
THE SUMITOMO BANK, LIMITED,
As a Bank
By:
---------------------------------------------------
Name:
Title:
By:
---------------------------------------------------
Name:
Title:
5
<PAGE>
UNION BANK OF CALIFORNIA, N.A.,
As a Bank
By:
---------------------------------------------------
Name:
Title:
By:
---------------------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
By:
---------------------------------------------------
Name:
Title:
COMERICA BANK CALIFORNIA,
As a Bank
By:
---------------------------------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED,
As a Bank
By: /s/ J. WILLIAM BLOORE
---------------------------------------------------
Name: J. William Bloore
Title: Assistant Vice President
By: /s/ CAROLE A. DALEY
---------------------------------------------------
Name: Carole A. Daley
Title: Vice President
5
