<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, 2000
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.)
1960 E. Grand Avenue, Suite 560, El Segundo, California 90245
- ------------------------------------------------------- ----------
(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 May 5, 2000: 8,798,415 shares.
<PAGE> 2
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Bell Industries, Inc.
Consolidated Statement of Income
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31
---------------------------
2000 1999
-------- --------
<S> <C> <C>
Net sales $ 54,927 $ 54,151
-------- --------
Costs and expenses
Cost of products sold 46,729 45,026
Selling and administrative 7,774 7,881
Interest, net (43) 360
-------- --------
54,460 53,267
-------- --------
Income before income taxes 467 884
Income tax provision 185 354
-------- --------
Net income $ 282 $ 530
======== ========
Share and Per Share Data
BASIC
Net income $ 0.03 $ 0.06
======== ========
Weighted average common shares 9,529 9,556
======== ========
DILUTED
Net income $ 0.03 $ 0.06
======== ========
Weighted average common shares 9,631 9,576
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE> 3
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Bell Industries, Inc.
Consolidated Condensed Balance Sheet
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
--------- -----------
Unaudited
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,612 $ 8,550
Accounts receivable,
less allowance for doubtful accounts
of $1,201 and $1,112 39,116 33,980
Inventories 16,245 19,588
Prepaid expenses and other 3,879 4,363
Real estate held for sale 109 109
-------- --------
Total current assets 60,961 66,590
-------- --------
Fixed assets, net 4,371 4,239
Goodwill 1,595 1,394
Other assets 3,698 3,728
-------- --------
$ 70,625 $ 75,951
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,535 $ 23,444
Accrued liabilities and payroll 15,089 17,660
-------- --------
Total current liabilities 37,624 41,104
-------- --------
Deferred compensation and other 3,990 4,051
Shareholders' equity:
Preferred stock
Authorized - 1,000,000 shares
Outstanding - none
Common stock
Authorized - 35,000,000 shares
Outstanding - 8,982,715 and 9,608,315 shares 33,683 35,750
Accumulated deficit (4,672) (4,954)
-------- --------
Total shareholders' equity 29,011 30,796
Commitments and contingencies
-------- --------
$ 70,625 $ 75,951
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE> 4
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Bell Industries, Inc.
Consolidated Statement of Cash Flows
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31
-----------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 282 $ 530
Depreciation and amortization 389 371
Provision for losses on accounts receivable 42 49
Changes in assets and liabilities (5,102) (11,058)
--------- ---------
Net cash used in operating activities (4,389) (10,108)
--------- ---------
Cash flows from investing activities:
Proceeds received on note receivable 165
Net proceeds from sale of business 161,799
Net proceeds from sale of real estate 2,220
Purchase of fixed assets (427) (484)
Contingent purchase consideration (220)
--------- ---------
Net cash provided by (used in)
investing activities (482) 163,535
--------- ---------
Cash flows from financing activities:
Repayment of bank borrowings (109,000)
Employee stock plans and other 216 736
Purchases of company's common stock (2,283)
--------- ---------
Net cash used in financing activities (2,067) (108,264)
--------- ---------
Net increase (decrease) in cash and cash equivalents (6,938) 45,163
Cash and cash equivalents at beginning of period 8,550 6,699
--------- ---------
Cash and cash equivalents at end of period $ 1,612 $ 51,862
========= =========
Changes in assets and liabilities:
Accounts receivable $ (5,225) $ (4,332)
Inventories 3,343 1,289
Accounts payable (909) (866)
Accrued liabilities and other (2,311) (7,149)
--------- ---------
Net change $ (5,102) $ (11,058)
========= =========
Supplemental cash flow information:
Interest paid $ 21 $ 1,652
Income taxes paid $ 558 $ 128
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE> 5
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Bell Industries, Inc.
Notes to Consolidated Financial Statements
Accounting Principles
The accompanying consolidated financial statements for the three months ended
March 31, 2000 and 1999 have been prepared in accordance with generally accepted
accounting principles ("GAAP") and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. These financial statements have not been audited
by independent public accountants, but include all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of the financial condition, results of operations and
cash flows for such periods. However, these results are not necessarily
indicative of results for any other interim period or for the full year. The
accompanying consolidated balance sheet as of December 31, 1999 has been derived
from the audited financial statements, but does not include all disclosures
required by GAAP.
Certain information and footnote disclosures normally included in financial
statements in accordance with GAAP have been omitted pursuant to requirements of
the Securities and Exchange Commission (the "SEC"). Management believes that the
disclosures included in the accompanying interim financial statements and
footnotes are adequate to make the information not misleading, but should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year ended December
31, 1999.
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.
Stock Repurchase Program
In February 2000, the Board of Directors authorized a stock repurchase program
of up to 1,000,000 shares of the Company's outstanding common stock during 2000.
The common stock may be repurchased in the open market at varying prices
depending on market conditions and other factors. During the quarter ended March
31, 2000, the Company repurchased 625,600 shares at an average price of $3.65
per share.
Sale of Electronics Distribution Group
On January 29, 1999, the Company sold substantially all of the assets of its
Electronics Distribution Group ("EDG") for approximately $177 million in cash
and the assumption of substantially all of the liabilities of EDG.
<PAGE> 6
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Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
This analysis contains forward looking comments which are based on current
trends. Actual results in the future may differ materially.
Results of operations by business segment were as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended
March 31
---------------------------
2000 1999
-------- --------
<S> <C> <C>
Net sales
Systems Integration $ 40,704 $ 38,705
Recreational Products 11,888 11,104
Electronics Manufacturing 2,335 4,342
-------- --------
$ 54,927 $ 54,151
======== ========
Operating income
Systems Integration $ 117 $ 1,247
Recreational Products 438 545
Electronics Manufacturing 581 376
Corporate costs (712) (924)
-------- --------
424 1,244
Interest, net 43 (360)
Income tax provision (185) (354)
-------- --------
Net income $ 282 $ 530
======== ========
</TABLE>
Net sales for the first quarter increased 1.4% to $54.9 million from $54.2
million in 1999 as operating income decreased to $424,000 from $1.2 million in
1999. Operating results for 2000 were impacted principally by client procurement
delays associated with the Y2K transitional issue as well as continued pressure
on product margins in the Company's Systems Integration Group ("SIG"). Corporate
costs declined 23% to $712,000 from $924,000 in the previous year. Corporate
costs in 1999 reflected only the initial effects of the Company's resizing
program following the sale of its electronics distribution business in January
1999. In addition, the Company recorded net interest income of $43,000 in 2000
compared with net interest expense of $360,000 in the first quarter last year as
the Company retired its outstanding debt during January 1999 with the proceeds
from the sale of that business.
Sales of the Systems Integration Group increased 5.2% to $40.7 million as
operating income decreased to $117,000 from $1.2 million in the prior year.
These results were impacted by the continuing effects of the Y2K issue and
downward pressure on product margins.
Recreational Product Group sales for the first quarter increased 7% to $11.9
million as operating income decreased 20% to $438,000. Warmer winter weather
conditions adversely impacted snowmobile product sales and overall profitability
during the quarter.
Electronics manufacturing sales were $2.3 million compared with $4.3 million in
the 1999 period, which included approximately $2.4 million of sales from a
business that was sold in the third quarter of 1999. Operating income increased
to $581,000 from $376,000 in the prior year, which included operating income of
$57,000 from the sold business. The results in this business group reflect
generally strong demand for electronic components throughout the current year
period.
<PAGE> 7
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As a percentage of sales, cost of products sold for 2000 increased to 85.1% from
83.1% in the comparable quarter of 1999. Higher cost of products sold, as a
percentage of sales, reflects competitive product pricing pressures particularly
within the Company's Systems Integration Group. Selling and administrative
expenses, as a percentage of sales, decreased to 14.2% from 14.6% in the prior
year primarily due to the benefits of the Company's Corporate resizing programs
and general sales increases in each business segment. In 2000, the Company's
income tax rate was 39.5% compared with 40.0% in the prior year period.
Selected financial data is set forth in the following table (dollars in
thousands, except per share amounts):
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
-------- -----------
<S> <C> <C>
Cash and cash equivalents $ 1,612 $ 8,550
Working capital $23,337 $25,486
Current ratio 1.6:1 1.6:1
Shareholders' equity per share $ 3.23 $ 3.20
Days' sales in receivables 65 64
Days' sales in inventories 32 30
</TABLE>
Net cash used in operating activities was $4.4 million in the first quarter of
2000, compared to cash used in operating activities of $10.1 million for the
comparable period in 1999. In 2000, operating cash flows were utilized to pay
certain costs associated with discontinued operations and to provide for
increased working capital investment. Additionally, the Company repurchased
stock in the aggregate amount of $2.3 million and funded capital additions of
$427,000 during the quarter. Cash flows in 1999 included the net proceeds from
the sale of EDG of $161.8 million which were partially utilized to payoff the
Company's outstanding line of credit of $109 million. Also impacting 1999 cash
flows were $2.2 million of net proceeds from the sale of real estate.
The Company believes that sufficient cash resources exist to support
requirements for its operations and commitments through available cash, bank
borrowings and cash generated from operations. The Company has a line of credit
in the amount of $20 million to finance its working capital needs to operate and
grow its businesses. Management believes that it has access to additional
financing as required.
In 1997, the Company initiated a project to ensure all its business systems as
well as non-informational systems, such as HVAC systems, building security,
elevators, phone systems and other related systems were Year 2000 compliant. The
Year 2000 project encompassed three major phases: Inventory - taking stock of
the various applications and systems in use by the Company; Assessment -
analyzing the exposure of Year 2000 issues in the various applications and
systems; and Renovation - taking action to correct Year 2000 deficiencies noted
in the assessment phases. The Company achieved Year 2000 compliance by
converting certain of its business systems to Year 2000 hardware and software
platforms and by reprogramming other business systems. As a contingency plan,
the company completed the reprogramming of significant existing business systems
for Year 2000 compliance in the event that new business systems were not
operational by
<PAGE> 8
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2000. In addition, the Company identified, prioritized and communicated, to the
extent practicable, with its material suppliers and third party providers
("Material Third Parties") to determine their Year 2000 status and any probable
impact on Bell. Following the Year 2000 transition, the Company has not
experienced any known disruption to its business as a result of Year 2000
non-compliance by it or its Material Third Parties. Bell will continue to
evaluate the nature of these risks throughout Year 2000. The estimated cost of
Bell's Year 2000 programs have not been material to the Company's financial
position or results of operations. Although Bell's business systems were Year
2000 compliant by December 31, 1999, the Company makes no assurances regarding
the Year 2000 compliance of third party systems.
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
(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: May 12, 2000 /s/ Tracy A. Edwards
- ----- ------------ --------------------------------------------
Tracy A. Edwards,
President and
Chief Executive Officer
DATE: May 12, 2000 /s/ Russell A. Doll
- ----- ------------ --------------------------------------------
Russell A. Doll,
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,612
<SECURITIES> 0
<RECEIVABLES> 39,116
<ALLOWANCES> 1,201
<INVENTORY> 16,245
<CURRENT-ASSETS> 60,961
<PP&E> 10,246
<DEPRECIATION> 5,875
<TOTAL-ASSETS> 70,625
<CURRENT-LIABILITIES> 37,624
<BONDS> 0
0
0
<COMMON> 33,683
<OTHER-SE> (4,672)
<TOTAL-LIABILITY-AND-EQUITY> 29,011
<SALES> 54,927
<TOTAL-REVENUES> 54,927
<CGS> 46,729
<TOTAL-COSTS> 46,729
<OTHER-EXPENSES> 7,774
<LOSS-PROVISION> 42
<INTEREST-EXPENSE> (43)
<INCOME-PRETAX> 467
<INCOME-TAX> 185
<INCOME-CONTINUING> 282
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 282
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
