<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarter ended March 31, 1998
Commission file number 1-11471
BELL INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
California 95-2039211
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2201 E. El Segundo Blvd., Los Angeles, California 90245-4608
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 563-2355
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of the Registrant's class of common
stock, as of April 13, 1998: 9,345,395 shares.
<PAGE> 2
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Bell Industries, Inc.
Consolidated Statement of Income
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Net sales $213,415 $218,503
-------- --------
Costs and expenses
Cost of products sold 169,815 170,820
Selling and administrative 32,963 36,807
Depreciation and amortization 2,603 2,567
Interest expense 3,460 2,681
Integration charge 4,100
-------- --------
208,841 216,975
-------- --------
Income before income taxes and
extraordinary loss 4,574 1,528
Income tax provision 2,133 699
-------- --------
Income before extraordinary loss 2,441 829
Loss on early retirement of debt, net of tax 675
-------- --------
Net income $ 2,441 $ 154
======== ========
Share and Per Share Data
BASIC
Income before extraordinary loss $ 0.26 $ 0.09
Loss on early retirement of debt, net of tax 0.07
-------- --------
Net income $ 0.26 $ 0.02
======== ========
Weighted average common shares 9,330 9,069
======== ========
DILUTED
Income before extraordinary loss $ 0.26 $ 0.09
Loss on early retirement of debt, net of tax 0.07
-------- --------
Net income $ 0.26 $ 0.02
======== ========
Weighted average common shares 9,446 9,388
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE> 3
-2-
Bell Industries, Inc.
Consolidated Condensed Balance Sheet
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
--------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,795 $ 5,377
Accounts receivable,
less allowance for doubtful accounts
of $2,746 and $2,673 120,686 120,900
Inventories 164,933 173,801
Prepaid expenses and other 9,450 8,990
-------- --------
Total current assets 307,864 309,068
-------- --------
Properties, net 43,965 42,079
Goodwill 71,936 72,758
Other assets 7,739 7,328
-------- --------
$431,504 $431,233
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 75,898 $ 67,121
Accrued liabilities and payroll 28,589 26,435
Current portion of long-term liabilities 8,125 7,500
-------- --------
Total current liabilities 112,612 101,056
-------- --------
Long-term debt 157,980 172,330
Deferred compensation and other 6,993 6,495
Shareholders' equity:
Preferred stock
Authorized - 1,000,000 shares
Outstanding - none
Common stock
Authorized - 35,000,000 shares
Outstanding - 9,340,226 and 9,326,391 shares 100,535 100,410
Reinvested earnings 53,384 50,942
-------- --------
Total shareholders' equity 153,919 151,352
Commitments and contingencies
-------- --------
$431,504 $431,233
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE> 4
-3-
Bell Industries, Inc.
Consolidated Statement of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three months ended
March 31
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,441 $ 154
Depreciation and amortization 1,639 1,647
Amortization of intangibles 964 920
Provision for losses on accounts receivable 396 579
Integration charge 4,100
Loss on early retirement of debt 675
Changes in assets and liabilities,
net of acquisitions 19,104 4,574
--------- ---------
Net cash provided by operating activities 24,544 12,649
--------- ---------
Cash flows from investing activities:
Purchases of properties (3,526) (2,270)
Purchase of business (100,404)
--------- ---------
Net cash used in investing activities (3,526) (102,674)
--------- ---------
Cash flows from financing activities:
Bank borrowings(payments), net (13,725) 114,662
Employee stock plans and other 125 805
Debt issuance costs (2,770)
Payments on Senior Notes and capital leases (25,162)
--------- ---------
Net cash provided by (used in)
financing activities (13,600) 87,535
--------- ---------
Net increase (decrease) in cash and cash equivalents 7,418 (2,490)
Cash and cash equivalents at beginning of period 5,377 12,097
--------- ---------
Cash and cash equivalents at end of period $ 12,795 $ 9,607
========= =========
Changes in assets and liabilities, net of acquisitions:
Accounts receivable $ (182) $ (2,311)
Inventories 8,868 1,447
Accounts payable 8,777 5,184
Accrued liabilities and deferred compensation 2,652 (2,312)
Other (1,011) 2,566
--------- ---------
Net change $ 19,104 $ 4,574
========= =========
Supplemental cash flow information:
Interest paid $ 2,806 $ 2,656
Income taxes paid $ 68 $ 539
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE> 5
-4-
Bell Industries, Inc.
Notes to Consolidated Financial Statements
Accounting Principles
The financial information included herein has been prepared in conformity with
the accounting principles reflected in the financial statements included in the
Annual Report on Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 1997.
In the opinion of management, all adjustments, consisting of normal recurring
adjustments considered necessary for a fair presentation, have been included.
The operating results for the interim periods presented are not necessarily
indicative of results for the full year.
Per Share Data
Basic earnings per share data is based upon the weighted average number of
common shares outstanding. Diluted earnings per share data is based upon the
weighted average number of common shares outstanding plus the number of common
shares potentially issuable for dilutive securities such as stock options and
warrants.
<PAGE> 6
-5-
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Results of operations by business segment for the three months ended March 31,
1998 and 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended
March 31
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
Net sales
Electronics $ 168,491 $ 170,770
Graphics Imaging 35,131 38,334
Recreational Products 9,793 9,399
--------- ---------
$ 213,415 $ 218,503
========= =========
Operating income
Electronics(1) $ 9,821 $ 5,437
Graphics Imaging 1,011 1,232
Recreational Products 404 210
--------- ---------
11,236 6,879
Corporate costs (3,202) (2,670)
Interest expense (3,460) (2,681)
Income tax provision (2,133) (699)
--------- ---------
Income before extraordinary loss 2,441 829
Loss on early retirement of debt, net of tax 675
--------- ---------
Net income $ 2,441 $ 154
========= =========
</TABLE>
(1) Includes before-tax integration charge of $4.1 million recorded in first
quarter of 1997.
Net sales for the first quarter of 1998 declined slightly when compared to the
same period in 1997, primarily as a result of market softness in the Electronics
and Graphics Imaging Groups. The Company's profitability, excluding special and
extraordinary charges, was positively impacted by operating cost reductions in
the Electronics Group and negatively impacted by higher interest costs
associated with increased investment in working capital, and increased corporate
costs primarily related to information systems.
In the first quarter of 1997, the Company completed the acquisition of Milgray
Electronics, Inc. In connection with the acquisition, the Company recorded a
special before-tax charge totaling $4.1 million for costs associated with the
integration of Milgray, including provisions for severance, lease and related
exit costs, and costs related to supplier terminations. In addition, the Company
recorded an extraordinary loss of $675,000, net of tax, as a result of the early
retirement of senior notes, which were replaced under the Company's new credit
facility.
<PAGE> 7
-6-
Sales of the Electronics Group decreased slightly to $168.5 million as compared
to $170.8 million in the first quarter of 1997 while operating income increased
to $9.8 million from $5.4 million in the comparable prior year period. Sales
were impacted by softness in shipments of certain electronic components,
primarily semiconductors. Excluding the special charge noted above, operating
income increased primarily as a result of operating cost reductions arising
from the Company's integration efforts. These reductions were partially offset
by lower gross profit margins as industry-wide competitive pressures continued.
Graphics Imaging Group sales decreased to $35.1 million from $38.3 million in
the first quarter of 1997 and operating income decreased to $1.0 million from
$1.2 million in the comparable prior year period. Weaker market conditions,
primarily in the central United States, contributed to decreased sales of
consumable products and electronic imaging equipment.
Recreational Products Group sales increased to $9.8 million from $9.4 million in
the first quarter of 1997 and operating income increased to $.4 million from $.2
million in the comparable prior year period. Improved operating results were
primarily attributed to stronger performance from recently expanded operations
in Michigan.
As a percentage of sales, cost of products sold increased to 79.6% from 78.2% in
the first quarter of 1997, and selling and administrative expenses decreased to
15.5% from 16.9% in the first quarter of 1997. The Company's income tax rate was
approximately 46% for both periods.
Selected financial data is set forth in the following table (dollars in
thousands, except per share amounts):
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
-------- -----------
<S> <C> <C>
Cash and cash equivalents $ 12,795 $ 5,377
Working capital $195,252 $208,012
Current ratio 2.7:1 3.1:1
Long-term liabilities
to total capitalization 52% 54%
Shareholders' equity per share $ 16.48 $ 16.23
Days' sales in receivables 53 53
Days' sales in inventories 88 93
</TABLE>
Net cash provided by operating activities was $24.5 million in the first quarter
of 1998, compared to $12.6 million for the comparable period in 1997. Increased
cash flows resulted from increased profits and working capital reductions.
Operating cash flows were used to reduce borrowings under the Company's line of
credit and to fund property additions, including information systems. In 1997,
financing cash flows included bank borrowings to fund the acquisition of Milgray
and the retirement of senior notes.
<PAGE> 8
-7-
The Company believes that sufficient cash resources exist to support short-term
requirements, including debt payments, and longer term objectives, either
through available cash, bank borrowings, or cash generated from operations.
In April 1998, the Company was notified by one supplier that its franchise to
distribute products will be terminated. Shipments of products from this supplier
represented approximately 4% of the Company's revenue for the quarter ended
March 31, 1998 and the year ended December 31, 1997. Management believes that
the loss of future product sales associated with this franchise will be
mitigated in the longer-term through the substitution and increased sales of
existing product lines.
<PAGE> 9
-8-
PART II - OTHER INFORMATION
Items 1 through 5.
Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27. Financial Data Schedule (for the fiscal quarter ended
March 31, 1998).
27.1 Financial Data Schedule (for the fiscal year ended
December 31, 1995, the fiscal quarters ended March 31,
June 30, September 30, 1996 and the fiscal year ended
December 31, 1996).
27.2 Financial Data Schedule (for the fiscal quarters ended
March 31, June 30 and September 30, 1997).
(b) Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BELL INDUSTRIES, INC.
By:
DATE: April 29, 1998 /s/ GORDON GRAHAM
-----------------------------------------
Gordon Graham,
President and Chief Executive Officer
DATE: April 29, 1998 /s/ TRACY A. EDWARDS
-----------------------------------------
Tracy A. Edwards,
Executive Vice President-Finance
and Operations, and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,795
<SECURITIES> 0
<RECEIVABLES> 123,432
<ALLOWANCES> 2,746
<INVENTORY> 164,933
<CURRENT-ASSETS> 307,864
<PP&E> 68,387
<DEPRECIATION> 24,422
<TOTAL-ASSETS> 431,504
<CURRENT-LIABILITIES> 112,612
<BONDS> 164,973
0
0
<COMMON> 100,535
<OTHER-SE> 53,384
<TOTAL-LIABILITY-AND-EQUITY> 431,504
<SALES> 213,415
<TOTAL-REVENUES> 213,415
<CGS> 169,815
<TOTAL-COSTS> 169,815
<OTHER-EXPENSES> 35,566
<LOSS-PROVISION> 396
<INTEREST-EXPENSE> 3,460
<INCOME-PRETAX> 4,574
<INCOME-TAX> 2,133
<INCOME-CONTINUING> 2,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,441
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 4,819 10,806 3,393 4,193 12,097
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 80,123 84,295 89,336 90,311 84,781
<ALLOWANCES> 1,472 1,812 1,904 1,962 1,626
<INVENTORY> 120,153 115,377 122,800 117,967 104,049
<CURRENT-ASSETS> 209,050 213,754 219,741 216,626 205,121
<PP&E> 35,546 35,495 39,095 44,406 46,807
<DEPRECIATION> 22,398 22,770 22,829 24,238 24,758
<TOTAL-ASSETS> 233,882 238,567 248,854 251,362 241,310
<CURRENT-LIABILITIES> 72,823 75,819 84,638 74,576 72,265
<BONDS> 43,490 39,312 35,628 43,377 24,571
0 0 0 0 0
0 0 0 0 0
<COMMON> 63,056 65,711 73,921 74,361 75,666
<OTHER-SE> 54,513 57,725 54,667 59,048 50,942
<TOTAL-LIABILITY-AND-EQUITY> 233,882 238,567 248,854 251,362 241,310
<SALES> 564,325 143,050 299,759 464,065 623,193
<TOTAL-REVENUES> 564,325 143,050 299,759 464,065 623,193
<CGS> 436,568 110,511 232,176 360,770 485,634
<TOTAL-COSTS> 436,568 110,511 232,176 360,770 485,634
<OTHER-EXPENSES> 98,583 26,039 52,291 79,499 106,425
<LOSS-PROVISION> 1,716 521 706 976 1,235
<INTEREST-EXPENSE> 3,612 959 1,844 2,796 3,673
<INCOME-PRETAX> 25,812 5,541 13,448 21,000 27,461
<INCOME-TAX> 10,841 2,329 5,648 8,820 11,534
<INCOME-CONTINUING> 14,971 3,212 7,800 12,180 15,927
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 14,971 3,212 7,800 12,180 15,927
<EPS-PRIMARY> 1.74 .37 .89 1.38 1.80
<EPS-DILUTED> 1.67 .36 .86 1.34 1.75
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 9,607 7,580 6,259
<SECURITIES> 0 0 0
<RECEIVABLES> 127,036 134,434 135,023
<ALLOWANCES> 4,000 2,132 2,292
<INVENTORY> 154,777 161,213 168,942
<CURRENT-ASSETS> 299,236 313,747 319,557
<PP&E> 61,366 62,232 66,358
<DEPRECIATION> 28,739 27,248 26,134
<TOTAL-ASSETS> 411,859 427,260 437,300
<CURRENT-LIABILITIES> 115,508 121,454 117,024
<BONDS> 156,930 162,440 171,945
0 0 0
0 0 0
<COMMON> 76,473 98,216 99,372
<OTHER-SE> 62,948 45,150 48,959
<TOTAL-LIABILITY-AND-EQUITY> 411,859 427,260 437,300
<SALES> 218,503 452,282 677,730
<TOTAL-REVENUES> 218,503 452,282 677,730
<CGS> 170,820 355,607 533,841
<TOTAL-COSTS> 170,820 355,607 533,841
<OTHER-EXPENSES> 43,474 83,007 119,881
<LOSS-PROVISION> 579 1,137 1,541
<INTEREST-EXPENSE> 2,681 5,589 8,810
<INCOME-PRETAX> 1,528 8,079 15,198
<INCOME-TAX> 699 3,781 7,092
<INCOME-CONTINUING> 829 4,298 8,106
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 675 675 675
<CHANGES> 0 0 0
<NET-INCOME> 154 3,623 7,431
<EPS-PRIMARY> .02 .40 .82
<EPS-DILUTED> .02 .39 .79
</TABLE>
