<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
August 3, 2000
Date of Report (Date of earliest event reported)
BELL MICROPRODUCTS INC.
(Exact name of Registrant as specified in its charter)
California
(State or other jurisdiction of incorporation)
000-21528 94-3057566
(Commission File No.) (IRS Employer Identification Number)
1941 Ringwood Avenue
San Jose, California 95131-1721
(408) 451-9400
(Address of Principal Executive Offices)
Not Applicable
(Former name or former address, if changed since last report)
<PAGE> 2
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Audited Financial Statements of Ideal Hardware Limited,
July 31, 1997, 1998 and 1999, consisting of:
(i) Independent Auditor's Report
(ii) Consolidated Profit and Loss Account
(iii) Consolidated Balance Sheet
(iv) Consolidated Cash Flow Statement
(v) Accounting Policies
(b) Pro Forma Financial Information
Unaudited Pro Forma Financial Information consisting of:
(i) Pro Forma Combined Statement of Operations for the year ended
December 31, 1999
(ii) Pro Forma Combined Statement of Operations for the six months
ended June 30, 2000
(iii) Pro Forma Combined Balance Sheet as of June 30, 2000
(iv) Notes to Pro Forma Consolidated Financial Statements
(c) Exhibits
See Exhibit Index on page following signatures
<PAGE> 3
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF IDEAL HARDWARE LIMITED
We have audited the accounts on pages 2 to 21 which have been prepared under the
historical cost convention and the accounting policies set out on pages 5 to 7.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The company's directors are responsible for the preparation of the accounts in
accordance with applicable United Kingdom law and accounting standards. Our
responsibilities, as independent auditors, are established in the United Kingdom
by statute, the Auditing Practices Board and by our profession's ethical
guidance.
BASIS OF OPINION
We conducted our audit in accordance with United Kingdom Auditing Standards
issued by the Auditing Practices Board, and in accordance with U.S. generally
accepted auditing standards. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the accounts. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the accounts and of whether the accounting
policies are appropriate to the circumstances of the company and of the group,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the accounts are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the accounts.
OPINION
In our opinion the accounts give a true and fair view of the state of affairs of
the group at 31 July 1998 and 30 July 1999 and of the group's profit and cash
flows for the periods ended 2 August 1997, 31 July 1998 and 30 July 1999 and
have been properly prepared in accordance with the Companies Act 1985.
Accounting practices used by the company in preparing the accompanying financial
statements conform with generally accepted accounting principles in the United
Kingdom, but do not conform with accounting principles generally accepted in the
United States. A description of these differences and a complete reconciliation
of consolidated net income and shareholders' equity to U.S. generally accepted
accounting principles is set forth in notes 27 and 28.
ARTHUR ANDERSEN
CHARTERED ACCOUNTANTS AND REGISTERED AUDITORS
20 OLD BAILEY
LONDON EC4M 7AN
29 FEBRUARY 2000
(EXCEPT WITH RESPECT TO NOTES 27 AND 28, AS TO WHICH THE DATE IS 12 OCTOBER
2000)
<PAGE> 4
CONSOLIDATED PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
YEAR
ENDED
30 JULY YEAR ENDED YEAR ENDED
1999 31 JULY 2 AUGUST
TOTAL 1998 1997
NOTES L.000 L.000 L.000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
TURNOVER 2 317,621 230,047 189,519
Cost of sales (288,324) (202,463) (163,309)
------------ ------------ ------------ ------------
GROSS PROFIT 29,297 27,584 26,210
------------ ------------ ------------ ------------
Distribution costs
- Trading (12,088) (10,015) (8,338)
- Ideal restructuring 3 (120) -- --
Administrative expenses
- Trading (10,064) (8,694) (8,138)
- Ideal restructuring 3 (580) -- --
------------ ------------ ------------ ------------
(22,852) (18,709) (16,476)
------------ ------------ ------------ ------------
OPERATING PROFIT 4 6,445 8,875 9,734
Profit on sale of fixed assets 3 -- 1,250 --
Loss on sale of subsidiary undertaking 3 -- (837) --
Loss on termination of subsidiary undertaking -- (405) --
------------ ------------ ------------ ------------
PROFIT ON ORDINARY ACTIVITIES
BEFORE INTEREST 6,445 8,883 9,734
------------ ------------ ------------ ------------
Interest receivable 5 339 379 221
Interest payable 6 (581) (534) (231)
------------ ------------ ------------ ------------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 6,203 8,728 9,724
Tax on profit on ordinary activities 9 (1,999) (2,748) (3,349)
------------ ------------ ------------ ------------
PROFIT FOR THE FINANCIAL PERIOD 21 4,204 5,980 6,375
------------ ------------ ------------ ------------
</TABLE>
There were no recognised gains or losses in any period above other than those in
the group profit and loss account. Turnover and operating profit arose from
continuing operations.
The accompanying notes are an integral part of this profit and loss account.
2
<PAGE> 5
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
30 JULY 31 JULY
1999 1998
NOTES L.000 L.000
------------ ------------ ------------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 10 17,346 15,674
CURRENT ASSETS
Stocks 11 9,280 6,247
Debtors 12 52,405 37,340
Cash at bank and in hand 6,246 12,559
------------ ------------ ------------
67,931 56,146
CREDITORS: amounts falling due within one year 13 (62,038) (53,379)
------------ ------------ ------------
NET CURRENT ASSETS 5,893 2,767
------------ ------------ ------------
TOTAL ASSETS LESS CURRENT LIABILITIES 23,239 18,441
CREDITORS: amounts falling due after more than one year 14 (3,442) (2,871)
PROVISIONS FOR LIABILITIES AND CHARGES 17 (27) (4)
------------ ------------ ------------
NET ASSETS 19,770 15,566
------------ ------------ ------------
CAPITAL AND RESERVES
Called up share capital 19 1,000 1,000
Share premium account 20 9,960 9,960
Profit and loss account 20 8,810 4,606
------------ ------------ ------------
EQUITY SHAREHOLDERS' FUNDS 21 19,770 15,566
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of this balance sheet.
3
<PAGE> 6
CONSOLIDATED CASH FLOW STATEMENT
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
30 JULY 31 JULY 2 AUGUST
1999 1998 1997
NOTES L.000 L.000 L.000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH INFLOW FROM OPERATING ACTIVITIES 23 1,720 9,225 14,435
------------ ------------ ------------ ------------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 339 376 221
Interest paid (581) (506) (182)
Interest element of finance lease rental payments -- -- (5)
------------ ------------ ------------ ------------
NET CASH (OUTFLOW)/INFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (242) (130) 34
------------ ------------ ------------ ------------
TAXATION (2,353) (3,221) (2,835)
------------ ------------ ------------ ------------
CAPITAL EXPENDITURE
Purchase of tangible fixed assets (3,570) (3,814) (8,017)
Sale of tangible fixed assets -- -- 31
Costs incurred in advance of receipt from sale of fixed
assets -- (190) --
------------ ------------ ------------ ------------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (3,570) (4,004) (7,986)
------------ ------------ ------------ ------------
ACQUISITIONS AND DISPOSALS
Net cash (sold)/acquired with subsidiary undertaking 22 -- (150) --
Disposal of subsidiary undertaking 22 -- 204 --
------------ ------------ ------------ ------------
NET CASH INFLOW/(OUTFLOW) FROM ACQUISITIONS AND
DISPOSALS -- 54 --
------------ ------------ ------------ ------------
NET CASH INFLOW/(OUTFLOW) FROM FINANCING (595) (1,376) 3,534
------------ ------------ ------------ ------------
(DECREASE)/INCREASE IN CASH IN THE PERIOD 24 (5,040) 548 7,182
------------ ------------ ------------ ------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
FUNDS
(Decrease)/increase in cash in the period (5,040) 548 7,182
Net cash (inflow)/outflow from (increase)/decrease in debt
and lease financing (595) 1,376 (3,533)
------------ ------------ ------------ ------------
CHANGE IN NET FUNDS RESULTING FROM CASH FLOWS (5,635) 1,924 3,649
Other non-cash movements 24 (1,273) -- (10)
Finance leases sold with subsidiary undertaking -- 12 --
New finance leases -- -- (33)
Arrangement fee amortisation (14) --
------------ ------------ ------------ ------------
MOVEMENT IN NET FUNDS IN THE PERIOD (6,908) 1,922 3,606
NET FUNDS AT START OF PERIOD 24 8,305 6,383 1,873
------------ ------------ ------------ ------------
NET FUNDS AT END OF PERIOD 24 1,397 8,305 5,479
------------ ------------ ------------ ------------
</TABLE>
4
<PAGE> 7
1 ACCOUNTING POLICIES
The principal accounting policies are summarised below. They have all
been applied consistently throughout the year and the previous two
periods, except as noted below in relation to the accounting treatment
of goodwill.
1.1 ACCOUNTING CONVENTION
The financial statements have been prepared under the historical cost
convention.
1.2 BASIS OF COMPLETION
The financial information set out in these accounts comprises the
accounts of the company together with the financial information on the
IT distribution business previously carried out by InterX Media plc,
its parent company. The IT distribution business was hived-down to the
company on 2 June 2000 for a consideration of 999,999 ordinary shares
of L.1 each at a premium of L.9.96 per share. Accordingly these
accounts combine the financial information on the IT distribution
business with that of the company for all periods as the company and IT
distribution business were under common ownership using the principles
of merger accounting. The company and the IT distribution business are
referred to together as the "company" in these accounts.
1.3 BASIS OF CONSOLIDATION
The financial statements consolidate the financial statements of Ideal
Hardware Limited together with the results, assets and liabilities and
cash flows of the IT distribution business and its subsidiary
undertakings drawn up to 31 July, or within one week of that date. The
results of subsidiaries acquired or disposed of are consolidated from
or to the date on which control has passed. Acquisitions of subsidiary
undertakings have been accounted for under the acquisition method with
goodwill, representing any excess of the fair value of the
consideration given over the fair value of the identifiable assets and
liabilities acquired.
Goodwill arising on acquisition in the year ended 31 July 1998 and
earlier periods was written off to reserves in accordance with the
accounting standard then in force. As permitted by the current
accounting standard the goodwill previously written off to reserves has
not been reinstated in the balance sheet. On disposal or closure of a
previously acquired business, the attributable amount of goodwill
previously written off to reserves is included in determining the
profit or loss on disposal. An adjustment was made in the 1999
financial statements between other reserves and profit and loss account
reserves in respect of goodwill written off in respect of acquisitions
in earlier periods.
1.4 TURNOVER
Turnover represents income from sales net of sales taxes.
1.5 TANGIBLE FIXED ASSETS AND DEPRECIATION
Tangible fixed assets are stated at cost less depreciation.
5
<PAGE> 8
Depreciation is provided on all tangible fixed assets, other than
freehold land, at rates calculated to write off the cost or valuation,
less estimated residual value of each asset on a straight-line basis
over its expected useful life as follows:
Land - Not depreciated
Buildings - 2% per annum
Leasehold improvements - 15% to 33% per annum
Computer equipment - 25% to 40% per annum
Plant and machinery - 20% to 40% per annum
1.6 STOCK
Stock is valued at the lower of cost and net realisable value.
1.7 DEFERRED TAXATION
Provision is made for deferred taxation liabilities using the liability
method at the appropriate rate of corporation tax only to the extent
that they are expected to reverse in the future without being replaced.
1.8 LEASING AND HIRE PURCHASE COMMITMENTS
Assets acquired under hire purchase agreements or finance leases are
capitalised at cost value and depreciated over the useful life of the
relevant asset. Interest implicit in the agreement is written off over
the term of the agreement.
Amounts payable under operating leases are written off on a
straight-line basis over the period of the lease.
1.9 FOREIGN CURRENCIES
Transaction in foreign currencies are recorded at the rate of exchange
at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are
reported at the rates of exchange prevailing at that date. Exchange
differences arising during the year and at the balance sheet date are
dealt with in the profit and loss account.
1.10 FINANCE COSTS
The finance costs of debt are recognised in the profit and loss account
over the term of the debt at a constant rate on the carrying amount.
1.11 DEBT
Debt is initially stated at the amount of the net proceeds after
deduction of issue costs. The carrying amount is increased by the
finance cost in respect of the accounting period and reduced by
payments made in the period.
1.12 DERIVATIVE FINANCIAL INSTRUMENTS
The company uses derivative financial instruments to reduce exposure to
foreign exchange risk and interest rate movements. The company does not
hold or issue derivative financial instruments for speculative
purposes.
6
<PAGE> 9
For a forward foreign exchange contract to be treated as a hedge, the
instrument must be related to actual foreign currency assets or
liabilities or to an actual commitment. It must involve the same
currency or similar currencies as the hedged item and must also reduce
the risk of foreign currency exchange movements on the company's
operations.
For an interest rate swap to be treated as a hedge, the instrument must
be related to actual assets or liabilities or a probable commitment and
must change the nature of the interest rate by converting a variable
rate to a fixed rate. Interest differentials under these swaps are
recognised by adjusting net interest payable over the periods of the
contracts.
1.13 PENSION COSTS
In 1997, the company operated the Ideal Hardware plc Group Money
Purchase Pension Scheme. This scheme was wound up on 31 August 1997 and
all members were transferred either to Money Purchase Personal Pension
Schemes or to the InterX plc Executive Pension Scheme, a Money Purchase
Pension Scheme (formerly the Ideal Hardware plc Executive Pension
Scheme). The amount charged to the profit and loss account in respect
of pension costs represents the contributions payable in the period.
Differences between contributions payable in the period and
contributions actually paid are shown as either accruals or prepayments
in the balance sheet.
1.14 COMPLIANCE WITH ACCOUNTING STANDARDS
The financial statements have been prepared in accordance with
applicable accounting standards.
2 SEGMENTAL INFORMATION
The directors consider that during 1999 and 1998 the company had a
single class of business. The company has no material operations other
than those in the UK. Turnover and gross profit by destination were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 JULY 31 JULY 2 AUGUST
1999 1998 1997
L.000 L.000 L.000
------------ ------------ ------------
<S> <C> <C> <C>
TURNOVER
United Kingdom 274,624 193,502 181,025
Rest of Europe 42,997 36,545 8,494
------------ ------------ ------------
317,621 230,047 189,519
------------ ------------ ------------
GROSS PROFIT
United Kingdom 28,052 26,381 26,025
Rest of Europe 1,245 1,203 185
------------ ------------ ------------
29,297 27,584 26,210
------------ ------------ ------------
% % %
GROSS MARGIN
United Kingdom 10.2 13.6 14.4
Rest of Europe 2.9 3.3 2.2
------------ ------------ ------------
9.2 12.0 13.8
------------ ------------ ------------
</TABLE>
7
<PAGE> 10
3 EXCEPTIONAL ITEMS
Reported before operating profit (all items relate to the year ended 30 July
1999)
The exceptional items are analysed between distribution costs and administrative
expenses as follows:
<TABLE>
<CAPTION>
YEAR ENDED
30 JULY
1999
L.000
------------
<S> <C>
Distribution costs
- Ideal restructuring 120
Administrative expenses
- Ideal restructuring 580
------------
700
------------
</TABLE>
The Ideal restructuring costs arose due to a redundancy programme which was
implemented during the year.
Reported after operating profit (all items relate to the year ended 30 July
1998)
The profit on sale of fixed assets of L.1,250,000 relates to the disposal of
Ideal Hardware plc freehold property at 265 Burlington Road. Proceeds, after
accounting for disposal costs of L.550,000, were L.4,250,000.
The loss on sale of subsidiary undertaking of L.837,000 relates to the disposal
of the Group's interest in the ordinary share capital of PTI Limited, and is
stated after charging L.226,000 of goodwill previously written off to reserves
and provision for legal costs associated with the disposal.
The loss on termination of subsidiary undertaking of L.405,000 arose in respect
of the decision to terminate the business of Kinexus Limited. This decision, and
the termination of the business, took place in the year ended 30 July 1998. The
loss is stated after charging L.262,000 of goodwill previously written off to
reserves and the balance being costs associated with the termination.
There was no tax relief impact on the exceptional items in 1998 as the profit on
sale of L.1.25m on 265 Burlington Road was rolled over and the other items were
disallowable for tax purposes.
8
<PAGE> 11
4 OPERATING PROFIT
The operating profit is stated after charging
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 JULY 31 JULY 2 AUGUST
1999 1998 1997
L.000 L.000 L.000
------------ ------------ ------------
<S> <C> <C> <C>
Depreciation 1,662 1,715 1,376
Staff costs (note 8) 12,984 11,484 9,257
Auditors' remuneration
- audit services 68 40 46
Operating lease rentals
- plant and machinery 78 56 8
- other 621 432 366
------------ ------------ ------------
</TABLE>
The amount charged in respect of depreciation on assets acquired under hire
purchase arrangements amounted to L.nil (1998: L.14,000; 1997: L.29,000).
The remuneration paid to the auditors in respect of non-audit services was
L.19,000 (1998: L.94,000; 1997: L.190,000).
5 INTEREST RECEIVABLE
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 JULY 31 JULY 2 AUGUST
1999 1998 1997
L.000 L.000 L.000
------------ ------------ ------------
<S> <C> <C> <C>
Interest receivable on bank and other deposits 339 379 221
------------ ------------ ------------
</TABLE>
6 INTEREST PAYABLE
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 JULY 31 JULY 2 AUGUST
1999 1998 1997
L.000 L.000 L.000
------------ ------------ ------------
<S> <C> <C> <C>
Interest payable on bank and other borrowings comprises:
Bank borrowings and loans 581 533 292
Hire purchase interest -- 1 5
------------ ------------ ------------
534 297
Interest capitalised -- -- (66)
------------ ------------ ------------
581 534 231
------------ ------------ ------------
</TABLE>
9
<PAGE> 12
7 DIRECTORS' EMOLUMENTS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 JULY 31 JULY 2 AUGUST
1999 1998 1997
L.000 L.000 L.000
------------ ------------ ------------
<S> <C> <C> <C>
Directors' remuneration 305 480 343
Pension contributions 22 17 13
------------ ------------ ------------
327 497 356
------------ ------------ ------------
</TABLE>
At 1 August 1998, four executive directors were members of the Ideal Hardware
plc Executive Pension Scheme (the `Scheme') to which the group made
contributions. On 30 November 1998, the Scheme was renamed as the InterX plc
Executive Pension Scheme, a Money Purchase Pension Scheme, and at 30 July 1999,
three executive directors were members of the Scheme. The company makes pension
contributions, on behalf of two executive directors, to individual Money
Purchase Pension Schemes.
At 2 August 1997, four of the executive directors were members of the Ideal
Hardware plc Group Money Purchase Pension Scheme. The scheme wound up on 31
August 1997. At 31 July 1998, four executive directors were members of the Ideal
Hardware plc Executive Pension Scheme which was a Group money purchase scheme
and to which the Group made contributions. One executive director received
contributions to his Personal Pension Plan.
Four executive directors were members of the Ideal Hardware plc Group Money
Purchase Pension Scheme.
8 EMPLOYEE AND STAFF COSTS (INCLUDING DIRECTORS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 JULY 31 JULY 2 AUGUST
1999 1998 1997
L.000 L.000 L.000
------------ ------------ ------------
<S> <C> <C> <C>
Wages and salaries 11,612 10,383 8,321
Social security costs 1,290 1,009 860
Other pension costs 82 92 76
------------ ------------ ------------
12,984 11,484 9,257
------------ ------------ ------------
</TABLE>
The average number of employees during the period was made up as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 JULY 31 JULY 2 AUGUST
1999 1998 1997
NUMBER NUMBER NUMBER
------------ ------------ ------------
<S> <C> <C> <C>
Sales 167 105 82
Marketing 4 23 14
Technical 11 9 11
Warehouse/Transport 92 107 90
Administration 73 140 156
------------ ------------ ------------
347 384 353
------------ ------------ ------------
</TABLE>
10
<PAGE> 13
9 TAXATION
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 JULY 31 JULY 2 AUGUST
1999 1998 1997
L.000 L.000 L.000
------------ ------------ ------------
<S> <C> <C> <C>
Corporation tax on profit for the period at 31%
(1998: 31%; 1997: 33%) 1,974 3,004 3,227
Corporation tax prior period adjustment (2) (10) --
Transfer to/(from) deferred taxation 27 (246) 122
------------ ------------ ------------
1,999 2,748 3,349
------------ ------------ ------------
</TABLE>
10 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FREEHOLD LEASEHOLD COMPUTER PLANT AND MOTOR
PROPERTY IMPROVEMENTS EQUIPMENT MACHINERY VEHICLES TOTAL
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
At 3 August 1997 11,534 44 2,677 3,671 63 17,989
Additions 4,449 -- 1,099 401 -- 5,949
Disposal of subsidiary -- (44) (112) (304) (63) (523)
Disposals (2,754) -- (31) (732) -- (3,517)
------------ ------------ ------------ ------------ ------------ ------------
At 1 August 1998 13,229 -- 3,633 3,036 -- 19,898
------------ ------------ ------------ ------------ ------------ ------------
Additions 1,234 14 1,327 995 -- 3,570
Transfers -- -- (137) (217) -- (354)
Disposals -- -- (12) -- -- (12)
------------ ------------ ------------ ------------ ------------ ------------
At 30 July 1999 14,463 14 4,811 3,814 -- 23,102
------------ ------------ ------------ ------------ ------------ ------------
At 3 August 1997 140 31 1,650 1,474 35 3,330
Charge for the year 147 6 738 810 14 1,715
Disposal of subsidiary -- (37) (70) (167) (49) (323)
Disposals (86) -- (13) (399) -- (498)
------------ ------------ ------------ ------------ ------------ ------------
At 1 August 1998 201 -- 2,305 1,718 -- 4,224
Charge for the year 261 4 878 519 -- 1,662
Transfers -- -- (34) (91) -- (125)
Disposals -- -- (5) -- -- (5)
------------ ------------ ------------ ------------ ------------ ------------
At 30 July 1999 462 4 3,144 2,146 -- 5,756
------------ ------------ ------------ ------------ ------------ ------------
NET BOOK VALUE
At 30 July 1999 14,001 10 1,667 1,668 -- 17,346
------------ ------------ ------------ ------------ ------------ ------------
At 31 July 1998 13,028 -- 1,328 1,318 -- 15,674
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
At 30 July 1999, capital expenditure authorised and contracted amounted to L.
Nil (1998: L.2,000,000; 97: L.300,000) for the company; the 1998 amount
primarily related to the further development of the company's property at Cox
Lane.
Interest of L.93,000 charged on the loan of L.2,000,000 from 3 June 1996 to the
date of completion (31 December 1996) of construction work at Cox Lane has been
capitalised.
Included within freehold property is land amounting to L.3,855,000 (1998:
L.3,312,000;(1997: L.3,562,000) which has not been depreciated.
Motor vehicles were all secured under hire purchase agreements.
11
<PAGE> 14
11 STOCKS
<TABLE>
<CAPTION>
30 JULY 31 JULY
1999 1998
L.000 L.000
------------ ------------
<S> <C> <C>
Goods held for resale 9,280 6,247
------------ ------------
</TABLE>
12 DEBTORS
<TABLE>
<CAPTION>
30 JULY 31 JULY
1999 1998
L.000 L.000
------------ ------------
<S> <C> <C>
Trade debtors 48,633 31,000
Amounts due from former group companies 2,202 --
Other debtors 1,412 5,524
Advance corporation tax recoverable -- 424
Prepayments and accrued income 158 392
------------ ------------
52,405 37,340
------------ ------------
</TABLE>
Advance corporation tax recoverable after more than one year in respect of the
company was L.nil (1998: L.297,000).
At 31 July 1998, included within other debtors, was L.4,800,000 in respect of
the proceeds due from the sale of a property at 265 Burlington Road. This was
received on 5 October 1998.
13 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
30 JULY 31 JULY
1999 1998
L.000 L.000
------------ ------------
<S> <C> <C>
Bank loans and overdrafts (note 15) 1,407 1,383
Trade creditors 52,674 38,569
Amount owed to former group companies -- 2,187
Corporation tax 403 2,709
Advance corporation tax payable -- 424
Taxation and social security 3,939 2,754
Other creditors 173 1,364
Proposed dividend -- 1,695
Accruals and deferred income 3,442 2,294
------------ ------------
62,038 53,379
------------ ------------
</TABLE>
Bank loans were stated net of arrangement fees of L.14,000 (1998: L.14,000).
12
<PAGE> 15
14 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
30 JULY 31 JULY
1999 1998
L.000 L.000
------------ ------------
<S> <C> <C>
Bank loans (note 15) 1,442 2,871
Amount owed to former group companies 2,000 --
------------ ------------
3,442 2,871
------------ ------------
</TABLE>
Bank loans were stated net of arrangement fees of L.14,000 (1998: L.27,000)
15 LOANS
<TABLE>
<CAPTION>
30 JULY 31 JULY
1999 1998
L.000 L.000
------------ ------------
<S> <C> <C>
Bank loans were repayable as follows:
- within one year 1,407 1,383
------------ ------------
After one year:
- between one and two years 1,442 1,416
- between two and four years -- 1,455
------------ ------------
1,442 2,871
------------ ------------
2,849 4,254
------------ ------------
</TABLE>
During the period ended 2 August 1997 bank loans totalling L.6,500,000 were
taken out; the main terms of which were as follows:
<TABLE>
<CAPTION>
VALUE OF LOAN VALUE OF LOAN ORIGINAL CAPITAL
AT START AT 30 JULY 1999 TERM EXPIRY DATE REPAYMENT INTEREST RATE
---------------------- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
L.2,000,000 L.849,000 5 years 3 June 2001 Quarterly 8.24% p.a. fixed
L.4,500,000 L.2,000,000 5 years 15 July 2001 Quarterly 8.5325% p.a. fixed
---------------------- ------------------ ------------------ ------------------ ------------------ ------------------
</TABLE>
Both loans are secured through a mortgage on the land and buildings at Cox Lane.
The interest rate on the loan of L.2,000,000 is floating rate but an interest
rate swap, maturing on 15 July 2001, was purchased in order to fix the rate at
8.5325 per cent.
16 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
The company's strategy in relation to interest rate and foreign currency
exposure is to adopt a policy of minimising the exposure created by fluctuations
in relevant rates through the use of appropriate financial instruments.
Financial instruments have been used during the period to change the interest
profile of the company's borrowings from floating to fixed. Foreign exchange
exposure within the company is managed through the use of forward exchange
contracts.
13
<PAGE> 16
The numerical disclosures in this note deal with financial assets and
liabilities as defined in Financial Reporting Standard 13: Derivatives and Other
Financial Instruments: Disclosures (`FRS 13'). Certain financial assets such as
investments in subsidiary and associated companies are excluded from the scope
of these disclosures.
As permitted by FRS 13, short-term debtors and creditors have been excluded from
the disclosures, other than the currency disclosures.
Interest rate profile
The company has no financial assets other than the cash deposits detailed below,
which are part of the working capital of the company. The US dollar cash
deposits comprise deposits placed on money market at call.
<TABLE>
<CAPTION>
FLOATING INTEREST
TOTAL RATE FREE
L.000 L.000 L.000
------------ ------------ ------------
<S> <C> <C> <C>
Currency
Sterling 2,974 -- 2,974
US dollar 3,020 3,020 --
Euro 512 -- 512
Other 3 -- 3
------------ ------------ ------------
6,509 3,020 3,489
------------ ------------ ------------
</TABLE>
The company has no financial liabilities other than sterling bank loans of
L.2.8m (1998: L.4.3m) net of arrangement fees, which are part of the financing
arrangements of the company. The fixed or floating nature of these borrowings is
detailed in note 15.
Foreign currency exposure
Exposures are covered as soon as there is a firm commitment. The maturities of
forward contracts are typically two months. The company does not hold forward
foreign exchange contracts for speculative purposes.
The table below shows the company's currency exposure in the form of those
transactional (or non-structural) exposures that give rise to the net currency
gains and losses recognised in the profit and loss account. Such exposures
comprise the monetary assets and liabilities of the company that are not
denominated in the operating (or `functional') currency of the company. As at 30
July 1999 these exposures were as follows:
<TABLE>
<CAPTION>
NET FOREIGN CURRENCY MONETARY ASSETS
1999 1998
---------------------------- ----------------------------
US DOLLAR EURO US DOLLAR EURO
L.000 L.000 L.000 L.000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Functional currency of company
operation
Sterling 3,020 512 2,070 397
------------ ------------ ------------ ------------
</TABLE>
14
<PAGE> 17
Fair values
The estimated fair value of the company's financial instruments are summarised
below:
<TABLE>
<CAPTION>
1999 1998
---------------------------- ----------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
L.000 L.000 L.000 L.000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Forward currency exchange contracts 18,942 18,675 15,890 15,880
------------ ------------ ------------ ------------
</TABLE>
Forward foreign exchange contracts
The carrying value of these contracts is based on the actual forward contract
rates negotiated for each deal. The fair value of the current year contracts is
their estimated worth if revalued using the one and two month forward rates as
at 30 July 1999. The prior year contracts' fair value are calculated using the
July 1998 monthly average spot rate.
17 PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxation has been provided for in the financial statements as follows:
<TABLE>
<CAPTION>
1999 1998
L.000 L.000
------------ ------------
<S> <C> <C>
Capital allowances in advance of depreciation 225 214
Short term timing differences (198) (210)
------------ ------------
27 4
------------ ------------
</TABLE>
The movement in the period was as follows:
<TABLE>
<CAPTION>
GROUP
L.000
------------
<S> <C>
At 3 August 1997 91
Transfer from profit and loss account (246)
Advance corporation tax recoverable 159
------------
At 1 August 1998 4
Transfer to group company (6)
Transfer to profit and loss account 29
------------
At 30 July 1999 27
------------
</TABLE>
Deferred taxation of L.417,000 (1998: L.431,000) being rollover relief on the
disposal of 265 Burlington Road, has not been provided for in the financial
statements.
15
<PAGE> 18
18 OPERATING LEASE COMMITMENTS
The company has annual commitments under operating leases as set out below:
<TABLE>
<CAPTION>
LAND AND BUILDINGS OTHER
---------------------------- ----------------------------
1999 1998 1999 1998
L.000 L.000 L.000 L.000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Expiry:
- within one year -- -- 45 67
- between one and five years 125 171 92 211
- after five years 73 27 -- 5
------------ ------------ ------------ ------------
198 198 137 283
------------ ------------ ------------ ------------
</TABLE>
19 SHARE CAPITAL
<TABLE>
<CAPTION>
NUMBER L.000
------------ ------------
<S> <C> <C>
Ordinary shares of L.1 each
Authorised 1,000,002 1,000
Issued 1,000,002 1,000
------------ ------------
</TABLE>
Under the principles of merger accounting, the share capital has been reflected
in these accounts as if it had been issued throughout the three years.
16
<PAGE> 19
20 SHARE CAPITAL AND RESERVES
Movement in share capital and reserves were as follows:
<TABLE>
<CAPTION>
PROFIT
SHARE SHARE AND LOSS
CAPITAL PREMIUM ACCOUNT TOTAL
L.000 L.000 L.000 L.000
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
At 3 August 1997 1,000 9,960 (1,862) 9,098
---------- ---------- ---------- ----------
Disposal of PTI -- -- 226 226
Termination of Kinexus -- -- 262 262
Retained profit for the year -- -- 5,980 5,980
At 1 August 1998 1,000 9,960 4,606 15,566
---------- ---------- ---------- ----------
Retained profit for the period -- -- 4,204 4,204
At 30 July 1999 1,000 9,960 8,810 19,770
---------- ---------- ---------- ----------
</TABLE>
21 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
30 JULY 31 JULY
1999 1998
L.000 L.000
------------ ------------
<S> <C> <C>
Profit on ordinary activities after taxation 4,204 5,980
------------ ------------
Goodwill previously written off to reserves now
included in retained profit for the year:
- PTI -- 226
- Kinexus -- 262
------------ ------------
Net movement in shareholders' funds 4,204 6,468
------------ ------------
Opening shareholders' funds 15,566 9,098
------------ ------------
Closing shareholders funds 19,770 15,566
------------ ------------
</TABLE>
17
<PAGE> 20
22 DISPOSAL OF SUBSIDIARY UNDERTAKING
On 29 January 1998 the company sold the entire share capital of PTI Limited for
cash consideration of L.204,000 after legal and professional costs of L.11,000.
The inflow of cash arising from the disposal is as follows:
<TABLE>
<CAPTION>
L.000
------------
<S> <C>
Net cash sold with subsidiary 150
Other net assets disposed of 665
Goodwill previously written off through reserves 226
Loss on disposal (837)
------------
Net proceeds 204
------------
</TABLE>
The subsidiary sold during the year ended 31 July 1998 absorbed L.197,000 of the
company's net operating cash flows, utilised L.63,000 in respect of net returns
on investments and servicing of finance, L.61,000 for capital expenditure and a
further L.9,000 in respect of the capital element of finance lease payments.
23 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1999 1998 1997
L.000 L.000 L.000
------------ ------------ ------------
<S> <C> <C> <C>
Operating profit 6,445 8,875 9,734
Depreciation charges 1,662 1,715 1,376
Loss on disposal of fixed assets 96 -- --
Increase in stock (3,033) (1,646) 1,203
Increase in debtors (15,813) (3,084) (6,309)
Increase in creditors 12,363 3,365 8,431
------------ ------------ ------------
Net cash inflow from operating activities 1,720 9,225 14,435
------------ ------------ ------------
</TABLE>
24 ANALYSIS OF NET FUNDS
<TABLE>
<CAPTION>
AT 1 AUGUST NON CASH AT 30 JULY
1998 CASH FLOW MOVEMENTS 1999
L.000 L.000 L.000 L.000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash at bank and in hand 12,559 (5,040) (1,273) 6,246
Debt due within 1 year (1,383) (24) -- (1,407)
Debt due after 1 year (2,871) (571) -- (3,442)
------------ ------------ ------------ ------------
(4,254) (595) -- (4,849)
------------ ------------ ------------ ------------
Total net funds 8,305 (5,635) (1,273) 1,397
------------ ------------ ------------ ------------
</TABLE>
The non-cash movement represents cash balances retained by former group
companies as part of the group reorganisation.
18
<PAGE> 21
<TABLE>
<CAPTION>
AT 3 AUGUST NON CASH AT 31 JULY
1997 CASH FLOW MOVEMENTS 1998
L.000 L.000 L.000 L.000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash at bank and in hand 12,011 548 -- 12,559
Debt due within 1 year (1,352) 1,367 (1,398) (1,383)
Debt due after 1 year (4,255) -- 1,384 (2,871)
Finance leases (21) 9 12 --
------------ ------------ ------------ ------------
(5,628) 1,376 (2) (4,254)
------------ ------------ ------------ ------------
Total net funds 6,383 1,924 (2) 8,305
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
AT 3 AUGUST NON CASH AT 2 AUGUST
1996 CASH FLOW MOVEMENTS 1997
L.000 L.000 L.000 L.000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash at bank and in hand 3,925 7,182 -- 11,107
Overdraft -- -- -- --
------------ ------------ ------------ ------------
3,925 7,182 -- 11,107
Debt due within 1 year (422) (927) (3) (1,352)
Debt due after 1 year (1,603) (2,645) (7) (4,255)
Finance leases (27) 39 (33) (21)
------------ ------------ ------------ ------------
(2,052) (3,533) (43) (5,628)
------------ ------------ ------------ ------------
Total net funds 1,873 3,649 (43) 5,479
------------ ------------ ------------ ------------
</TABLE>
Of the balance of L.21,000 due at 2 August 1997 in respect of finance leases,
L.18,000 is due within one year.
25 RELATED PARTY TRANSACTIONS
The company entered into the following transactions with a related party during
the period:
<TABLE>
<CAPTION>
VALUE OF TRANSACTIONS
SALES/(PURCHASES)
NATURE OF 1999 1998 1997
RELATED PARTY RELATIONSHIP TRANSACTION L.000 L.000 L.000
------------------------------ ---------------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Cromwell Media Limited Associated Sale of 192/(1,406) 304/(250) 35/(176)
undertaking of computer
InterX plc peripherals/
(purchase of
internet
software)
Digicorp Communications Limited Controlled by Supplier of (162) -- --
T. Wickes connectivity
(father of J.N. peripherals
Becher-Wickes)
CH Limited Controlled by Marketing (20) -- --
T. Wickes consultancy
IT Network Common Sale of 186 -- --
ownership computer
peripherals
---------------- ------------ ---------- ---------- ---------
</TABLE>
19
<PAGE> 22
26 SHARE OPTIONS
<TABLE>
<CAPTION>
VALUE AT
EXERCISE EXERCISE
NUMBER OUTSTANDING PRICE DATES
------------------ --------------- ------------
<S> <C> <C>
5,600 L.7.575 2000-2007
1,200 L.5.530 2000-2007
8,695 L.3.450 2001-2008
522,080 L.2.500 2001-2008
10,875 L.4.035 2002-2009
400 L.5.530 2000-2004
11,305 L.3.450 2001-2005
47,820 L.2.500 2001-2005
--------------- ------------
</TABLE>
These options were held over the shares of the parent company. The options were
granted at the market value of the share at the time.
27 RESULTS UNDER US ACCOUNTING POLICIES
US ACCOUNTING PRINCIPLES
The consolidated financial statement are prepared in conformity with accounting
principles generally accepted in the UK (UK GAAP) which differ in certain
respects from those generally accepted in the United States (US GAAP). The
significant areas of different affecting the Ideal Hardware consolidated
financial statements are described below:
DEFERRED TAX
In Ideal Hardware's consolidated financial statements, deferred tax is
calculated under the liability method and only provided when it is considered
probable that all liabilities will crystallise. Under US GAAP, deferred tax
assets and liabilities are recognised in respect of all temporary differences
between the carrying amount of an asset or liability and its tax basis which
would have a future tax effect. A valuation allowance is made in respect of
deferred tax assets to the extent that it is more likely than not that they will
not be realised.
GOODWILL
UK Financial Reporting Standard 10 was adopted in Ideal Hardware's consolidated
financial statements for the year ended 31 July 1998. Goodwill arising on
acquisition is now capitalised and amortised through the profit & loss account
over its useful economic life which is usually expected not to exceed 20 years.
Goodwill arising on acquisitions made in accounting periods prior to the year
ended 31 July 1998 was charged directly to reserves. Under US GAAP goodwill must
be capitalised and amortised through the profit and loss account over its
estimated useful life, not to exceed 40 years. For the purpose of the accounts,
a useful life of 10 years has been assumed.
20
<PAGE> 23
LOSS ON DISPOSAL
Under UK GAAP goodwill that was written off directly to reserves in accounting
periods prior to the year ended 31 July 1998 is charged to the profit and loss
account when the relevant business segment is either sold or terminated. Under
US GAAP, goodwill that has been capitalised in these accounting periods would
have been amortised before being written off. Accordingly the charge under US
GAAP will be lower than that under UK GAAP by the level of cumulative
amortisation.
28 RECONCILIATION TO US ACCOUNTING PRINCIPLES
The following is a summary of the estimated adjustments to profit and
shareholders' funds which would be required if US GAAP had been applied instead
of UK GAAP.
<TABLE>
<CAPTION>
1999 1998 1997
L.000 L.000 L.000
------------ ------------ ------------
<S> <C> <C> <C>
PROFIT ATTRIBUTABLE TO SHAREHOLDERS
Profit attributable to shareholders as reported in the
consolidated profit and loss account 4,204 5,980 6,375
Estimated adjustments:
Goodwill amortisation -- (26) (48)
Loss on disposal of investment -- 80 --
Deferred tax 14 (431) --
------------ ------------ ------------
Estimated profit attributable to ordinary shareholders
(net income) as adjusted to accord with US GAAP 4,218 5,603 6,327
------------ ------------ ------------
SHAREHOLDERS' FUNDS
Shareholders' funds as reported in the consolidated
balance sheet 19,770 15,566 9,098
Estimated adjustments:
Deferred income tax (417) (431) --
Goodwill -- -- 488
Cumulative amortisation of goodwill -- -- (54)
------------ ------------ ------------
Estimated ordinary shareholders' funds (shareholders'
equity) as adjusted to accord with US GAAP 19,353 15,135 9,532
------------ ------------ ------------
</TABLE>
21
<PAGE> 24
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements are presented
for illustrative purposes only and are not necessarily indicative of the
combined financial position or results of operations of future periods or the
results that actually would have been realized had Bell Microproducts Inc. and
Ideal Hardware Limited been a combined company during the specified periods. The
pro forma combined financial statements, including the notes thereto, are
qualified in their entirety by reference to, and should be read in conjunction
with, the historical consolidated financial statements of Bell Microproducts
Inc. and Ideal Hardware Limited, including the notes thereto, included herein or
incorporated herein by reference
The following pro forma combined financial statements give effect to:
o the borrowings of $180.0 million under the Retirement Systems
of Alabama in July 2000, proceeds of which were used to
acquire Ideal Hardware Ltd. and to repay existing credit
facilities, and the issuance of a warrant to the Retirement
System of Alabama to purchase 750,000 shares of Bell
Microproducts common stock
o the purchase of Ideal Hardware Limited for a combination of
cash, notes and other payables in the aggregate amount of
$28.9 million on August 3, 2000, accounted for using the
purchase method of accounting
o execution of a $50.0 million revolving credit facility with
California Bank & Trust following the RSA financing and Ideal
Hardware Limited acquisition.
The financial statements of Ideal Hardware Limited represent the financial
statements of the business acquired on August 3, 2000 and have been carved out
of the consolidated financial statements of InterX plc. They exclude the results
of operations and financial position of InterX, which was split off prior to the
closing of the acquisition. The pro forma combined financial statements are
based on the respective historical consolidated financial statements and the
notes thereto of Bell Microproducts Inc. and Ideal Hardware Limited, which are
included or incorporated herein by reference. The pro forma adjustments are
preliminary and based on management's estimates and a preliminary valuation of
the intangible assets acquired. In addition, management is in the process of
assessing and formulating its integration plans. Management does not know the
exact amount of the restructuring costs but does not believe that they will be
material.
The pro forma combined balance sheet assumes that the merger took place on June
30, 2000 and combines Bell Microproducts' June 30, 2000 consolidated balance
sheet and Ideal Hardware Limited's July 31, 2000 consolidated balance sheet. The
pro forma combined statement of income for the year ended December 31, 1999
combines Bell Microproducts' consolidated statement of income for the year ended
December 31, 1999 with the results of operations of Future Tech International,
Inc. for the approximate seven months prior to acquisition by Bell Microproducts
on July 21, 1999 and the results of operations of Ideal Hardware Ltd. for the
year ended January 31, 2000. The pro forma combined statement of income for the
six months ended June 30, 2000 combines Bell Microproducts' and Ideal Hardware
Limited's consolidated statements of operations for the six months ended June
30, 2000 and July 31, 2000, respectively.
<PAGE> 25
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000
----------------------------------------------------------------------
IDEAL PRO FORMA
BELL HARDWARE ADJUSTMENTS PRO FORMA
MICROPRODUCTS LIMITED (NOTE 2) COMBINED
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 748,677 $ 310,150 $ (2,423) (J) $ 1,056,404
Cost of sales 684,270 290,443 (2,423) (J) 972,290
------------- ------------- ------------- -------------
Gross profit 64,407 19,707 -- 84,114
Selling, general & administrative 46,827 22,059 398 (F) 69,284
------------- ------------- ------------- -------------
Operating income (loss) 17,580 (2,352) (398) 14,830
------------- ------------- ------------- -------------
Other income (expense)
Interest expense (5,326) (849) (322)(A) (6,902)
(380)(B)
(25)(E)
Other 131 85 216
------------- ------------- ------------- -------------
Income before income taxes 12,385 (3,116) (1,125) 8,144
Provision for income taxes 5,201 (711) (389)(G) 3,927
(174)(G)
------------- ------------- ------------- -------------
Net income $ 7,184 $ (2,405) $ (562) $ 4,217
------------- ------------- ------------- -------------
NET INCOME PER SHARE:
Basic 0.51 0.28
Diluted 0.47 0.26
Weighted average shares
outstanding
Basic 14,115 750 14,865
Diluted 15,366 750 16,116
</TABLE>
<PAGE> 26
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
FUTURE IDEAL PRO FORMA
TECH HARDWARE ADJUSTMENTS PRO FORMA
BELL INTERNATIONAL LIMITED (NOTE 2) COMBINED
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 1,058,275 $ 72,729 $ 597,792 $ 1,728,796
Cost of sales 967,491 69,178 551,956 1,588,625
------------- ------------- ------------- ------------- -------------
Gross profit 90,784 3,551 45,836 0 140,171
Selling, general & administrative 69,507 6,660 36,831 796(F) 113,958
164(H)
------------- ------------- ------------- ------------- -------------
Operating income (loss) 21,277 (3,109) 9,005 (960) 26,213
Other income (expense)
Interest expense (6,413) (5) (1,382) (1,331)(A) (10,295)
(761)(B)
(50)(E)
(353)(I)
Other 647 (21) 564 1,190
------------- ------------- ------------- ------------- -------------
Income before income taxes 15,511 (3,135) 8,187 (3,455) 17,108
Provision for income taxes 6,581 0 2,678 (913)(G) 7,998
(348)(G)
------------- ------------- ------------- ------------- -------------
Net income (loss) $ 8,930 $ (3,135) $ 5,509 $ (2,194) $ 9,110
------------- ------------- ------------- ------------- -------------
NET INCOME PER SHARE:
Basic $ 0.66 $ 0.64
Diluted $ 0.65 $ 0.63
Weighted average shares
outstanding
Basic 13,563 750 14,313
Diluted 13,685 750 14,435
</TABLE>
<PAGE> 27
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 2000
--------------------------------------------------------------------
BELL IDEAL PRO FORMA
MICROPRODUCTS HARDWARE ADJUSTMENTS PRO
INC. LTD. (NOTE) FORMA
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Cash $ 696 $ -- $ 33,090 (A) $ 12,136
(200)(B)
(21,400)(C)
(50)(E)
Accounts receivable, net 216,967 115,526 (2,013)(J) 330,480
Inventories 159,220 43,384 (84)(J) 202,520
Deferred income taxes 5,843 0 5,843
Prepaid expenses and other current 1,799 775 2,574
------------ ------------ ------------ ------------
CURRENT ASSETS 384,525 159,685 9,343 553,553
Property & equipment, net 12,778 4,701 17,479
Goodwill and other intangibles 23,946 0 19,159 (C) 43,105
Other assets 968 0 7,800 (B) 8,818
50 (E)
------------ ------------ ------------ ------------
TOTAL ASSETS $ 422,217 $ 164,386 $ 36,352 $ 622,955
------------ ------------ ------------ ------------
CURRENT LIABILITIES
Line of credit borrowings 31,910 0 (31,910)(A) 0
Short term borrowings 15,000 0 80,000 (A) 80,000
(15,000)(A)
Accounts payable 150,307 126,186 (2,013)(J) 274,480
Accrued liabilities 15,139 24,605 3,000 (C) 42,744
Income taxes payable 0 236 4,500 (C) 4,736
------------ ------------ ------------ ------------
CURRENT LIABILITIES 212,356 151,027 38,577 401,960
Line of credit borrowings 100,303 0 (100,000)(A) 303
Long term debt 0 219 100,000 (A) 100,219
Other long term liabilities 2,125 39 3,360 (C) 5,524
------------ ------------ ------------ ------------
TOTAL LIABILITIES 314,784 151,285 41,937 508,006
SHAREHOLDERS EQUITY
Common stock 62,911 16,550 (16,550)(D) 62,911
Warrants 7,600 (B) 7,600
Retained earnings 44,469 (3,449) 3,449 (D) 44,385
(84)(J)
Accumulated other comprehensive
income 53 0 53
------------ ------------ ------------ ------------
Total shareholders' equity 107,433 13,101 (5,585) 114,949
------------ ------------ ------------ ------------
Total liabilities and equity $ 422,217 $ 164,386 $ 36,352 $ 622,955
------------ ------------ ------------ ------------
</TABLE>
<PAGE> 28
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The pro forma combined balance sheet assumes that the acquisition took place on
June 30, 2000 and combines Bell Microproducts Inc.'s June 30, 2000 consolidated
balance sheet and Ideal Hardware Ltd.'s July 31, 2000 consolidated balance
sheet.
The pro forma combined statement of operations assumes the merger took place as
of the beginning of 1999. The pro forma combined statement of operations for the
year ended December 31, 1999 combines Bell Microproducts' consolidated statement
of income for the year ended December 31, 1999 and Ideal Hardware Ltd.'s
consolidated statement of income for the year ended January 31, 2000. The pro
forma combined statements of operations for the six months ended June 30, 2000
combines Bell Microproducts' consolidated statement of income for the six months
ended June 30, 2000 and Ideal Hardware's consolidated statement of income for
the six months ended July 31, 2000.
Intercompany transactions between Bell Microproducts and Ideal Hardware during
the periods presented have been eliminated.
The pro forma combined provision for income taxes may not represent the amounts
that would have resulted had Bell Microproducts and Ideal Hardware filed
consolidated income tax returns during the periods presented.
NOTE 2. PRO FORMA ADJUSTMENTS
The pro forma information including the allocation of the purchase price is
based on management's estimates and a preliminary valuation of the intangible
assets acquired. In addition, management is in the process of assessing and
formulating its integration plans. Management does not know the exact amount of
the restructuring costs associated with the integration plans but does not
believe that they will be material; no amounts are included in the pro forma
financial statements. The pro forma financial statements have not been adjusted
to reflect any cost savings or operating synergies that may be realized as a
result of the merger.
The purchase price of $28.9 million includes cash paid of $19.9 million, UK tax
liabilities assumed of $4.5 million, deferred purchase price payable of $3.0
million and estimated expenses of the transaction of $1.5 million. The deferred
purchase price is payable on March 31, 2001.
Following is a table of the estimated total purchase price, preliminary purchase
price allocation and annual amortization of the intangible assets acquired (in
thousands):
Estimated purchase price:
<TABLE>
<S> <C>
Cash paid $ 19,900
UK tax liability assumed 4,500
Deferred purchase price, due 3/31/01 3,000
Direct transaction costs and expenses 1,500
---------------
Total estimated purchase price $ 28,900
---------------
</TABLE>
<PAGE> 29
Purchase price allocation:
<TABLE>
<CAPTION>
ANNUAL
AMORTIZATION
--------------
<S> <C> <C>
Tangible net assets acquired:
Net working capital $ 8,658
Net fixed assets (excluding real property) 4,701
Long term liabilities (258)
--------
Total tangible assets 13,101
--------
Intangible assets:
Assembled work force 4,230 423
Trademarks 3,770 94
--------
8,000
--------
Deferred income taxes -- intangibles (3,360) (207)
Goodwill 11,159 279
-------- --------
Total net assets $ 28,900 $ 589
-------- --------
</TABLE>
<PAGE> 30
The value of the assembled workforce was derived by estimating the costs to
replace the existing employees, including recruiting, hiring and training costs
for each category of employee. The value of the assembled workforce is being
amortized on a straight-line basis over its estimated useful life of ten years.
In estimating the value of the trademark and tradename, the relief from royalty
method was employed. The relief from royalty method is based on the assumption
that in lieu of ownership, a firm would be willing to pay a royalty in order to
exploit the related benefits of the assets. Therefore, a portion of the
company's earnings, equal to the after-tax royalty that would have been paid for
the use of the trademark and tradename, can be attributed to the company's
possession of the trademark and tradename. The trademark and tradename are being
amortized on a straight-line basis over its estimated useful life of 40 years.
Based on the finalization of the valuation, finalization of the integration
plans and other factors, the pro forma adjustments may differ materially from
those present in these pro forma combined financial statements. A change in the
value assigned to long-term tangible and intangible assets and liabilities could
result in a reallocation of the purchase price and a change in the pro forma
adjustments. The statement of operations effect of these changes will depend on
the nature and amount of the assets or liabilities adjusted.
(A) Adjustments to reflect the borrowings of $100.0 million under the
senior subordinated long-term loan agreement and borrowings of $80.0
million under a bridge loan agreement with the Retirement System of
Alabama in July 2000 and application of the proceeds to repay
borrowings outstanding under existing line of credit agreements. The
senior subordinated long-term loan agreement bears interest at 9% per
annum and is due in installments through June 2010; borrowings under
the bridge loan agreement bear interest at 9.125% and are due July
2001. The pro forma income statement adjustments reflect the
incremental interest expense assuming the transaction occurred on
January 1, 1999 and are based on the combined average balance
outstanding during the respective periods.
(B) Adjustment to reflect debt issuance costs comprised of the issuance to
the Retirement System of Alabama of a warrant to purchase 750,000
shares of Bell Microproducts' common stock at an exercise price of
$12.00 per share, at estimated aggregate fair value of $7.6 million, in
connection with the senior subordinated long-term loan agreement, and
payment of direct expenses of $200.
(C) Adjustments reflect the components of the purchase price paid for Ideal
Hardware Limited - a cash payment of $19.9 million, assumption of a U.
K. tax obligation of $4.5 million, deferred purchase price payable in
March 2001 of $3.0 million and estimated direct expenses of the
transaction of $1.5 million.
(D) Adjustment reflects the elimination of Ideal Hardware Ltd.'s
shareholder's equity.
(E) Adjustment reflects the execution of a $50.0 million revolving line of
credit due in [September 2002] and related debt issuance costs of
[$.075] million.
(F) Adjustments include the recording of $19.2 million in intangible assets
which are comprised of $8.0 million of non-goodwill intangibles (see
table in Note 2) and $11.2 million in goodwill and related
amortization.
The estimated useful life of non-goodwill intangible assets and
goodwill range from ten to forty years.
<PAGE> 31
(G) Adjustment reflects the recording of deferred tax liabilities
associated with the step up to fair value of non-goodwill intangible
assets recorded as part of this transaction and the provision for
income taxes to reflect results of operations following the
acquisition. These liabilities were recorded using statutory tax rates
of 42%. The deferred tax liability will be recognized in the statement
of income as the underlying assets giving rise to the deferred taxes
are amortized.
(H) Adjustment reflects the assumed amortization of goodwill in the amount
of $4.2 million for the seven months ended July 28, 1999, arising from
the acquisition of Future Tech International, Inc. on July 28, 1999,
which was accounted for using the purchase method of accounting.
Results of operations of Future Tech are included in Bell
Microproducts' results of operations from the acquisition date; the
adjustment assumes the acquisition was effective January 1, 1999.
(I) Adjustment reflects the assumed incremental interest expense for the
seven months ended July 31, 1999 arising from borrowings to acquire
Future Tech International, Inc. and to finance working capital
requirements, at 9.125% per annum.
(J) Adjustment to eliminate intercompany transactions between Bell
Microproducts Inc. and Ideal Hardware Limited.
NOTE 3 - SUBSEQUENT EVENT
In accordance with the terms of the acquisition agreement, on October 16, 2000,
Bell Microproducts exercised the option to purchase the building occupied by
Ideal Hardware Ltd. for approximately $22.4 million. The Company expects to
finance the purchase using existing cash resources of approximately $4.5 million
and a ten-year mortgage of approximately $17.9 million bearing interest at
approximately 8.25% interest.
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Bell Microproducts Inc.
By:
Its: /s/ Remo E. Canessa
---------------------------------
Remo E. Canessa
Vice President of Finance
and Chief Financial Officer
Dated: October 17, 2000
<PAGE> 33
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10-1 Stock Purchase Agreement dated July 17, 2000 among the Registrant,
Interx PLC and Interx Media PLC. (Previously Filed.)
99 Press Release dated August 3, 2000 relating to acquisition of
Ideal Hardware. (Previously Filed.)
</TABLE>
