<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 June 30, 2000
Commission file number 1-11471
BELL INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
California 95-2039211
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1960 E. Grand Avenue, Suite 560, El Segundo, California 90245
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(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 August 11, 2000: 8,748,415 shares.
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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 Six months ended
June 30 June 30
------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 61,064 $ 60,781 $ 115,991 $ 114,932
--------- --------- --------- ---------
Costs and expenses
Cost of sales 51,327 49,460 98,054 94,486
Selling and administrative 8,611 8,179 16,387 16,060
Interest, net (21) (418) (64) (58)
Special items, net (437) (437)
--------- --------- --------- ---------
59,480 57,221 113,940 110,488
--------- --------- --------- ---------
Income before income taxes 1,584 3,560 2,051 4,444
Income tax provision 626 1,423 811 1,777
--------- --------- --------- ---------
Net income $ 958 $ 2,137 $ 1,240 $ 2,667
========= ========= ========= =========
Share and Per Share Data
BASIC
Net income $ 0.11 $ 0.22 $ 0.13 $ 0.28
========= ========= ========= =========
Weighted average common
shares 8,860 9,608 9,195 9,582
========= ========= ========= =========
DILUTED
Net income $ 0.11 $ 0.22 $ 0.13 $ 0.28
========= ========= ========= =========
Weighted average common
shares 8,860 9,624 9,245 9,600
========= ========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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Bell Industries, Inc.
Consolidated Condensed Balance Sheet
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
-------- --------
<S> <C> <C>
ASSETS Unaudited
Current assets:
Cash and cash equivalents $ 11,713 $ 8,550
Accounts receivable,
less allowance for doubtful accounts
of $1,170 and $1,112 32,994 33,980
Inventories 15,168 19,588
Prepaid expenses and other 3,451 4,363
Real estate held for sale 109
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Total current assets 63,326 66,590
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Fixed assets, net 4,216 4,239
Goodwill 1,573 1,394
Other assets 3,336 3,728
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$ 72,451 $ 75,951
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,532 $ 23,444
Accrued liabilities and payroll 15,683 17,660
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Total current liabilities 39,215 41,104
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Deferred compensation and other 3,811 4,051
Shareholders' equity:
Preferred stock
Authorized - 1,000,000 shares
Outstanding - none
Common stock
Authorized - 35,000,000 shares
Outstanding - 8,798,415 and 9,608,315 shares 33,139 35,750
Accumulated deficit (3,714) (4,954)
-------- --------
Total shareholders' equity 29,425 30,796
Commitments and contingencies
-------- --------
$ 72,451 $ 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>
(In thousands)
Six months ended
June 30
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2000 1999
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Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,240 $ 2,667
Depreciation and amortization 773 771
Provision for losses on accounts receivable 84 110
Gain on sale of real estate (2,842)
Changes in assets and liabilities 4,347 (22,297)
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Net cash provided by (used in)
operating activities 3,602 (18,749)
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Cash flows from investing activities:
Net proceeds from sale of business 176,692
Proceeds received on note receivable 307
Net proceeds from sale of real estate 2,951 3,231
Purchases of fixed assets and other (1,087) (995)
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Net cash provided by
investing activities 2,171 178,928
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Cash flows from financing activities:
Repayment of bank borrowings, net (109,000)
Cash distribution to shareholders (54,767)
Purchases of common stock (2,826)
Employee stock plans and other 216 734
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Net cash used in financing activities (2,610) (163,033)
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Net increase (decrease) in cash and cash equivalents 3,163 (2,854)
Cash and cash equivalents at beginning of period 8,550 6,699
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Cash and cash equivalents at end of period $ 11,713 $ 3,845
========= =========
Changes in assets and liabilities:
Accounts receivable $ 928 $ (12,382)
Inventories 4,420 1,063
Accounts payable 88 (1,145)
Accrued liabilities and other (1,089) (9,833)
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Net change $ 4,347 $ (22,297)
========= =========
Supplemental cash flow information:
Interest paid $ 26 $ 1,659
Income taxes paid $ 1,682 $ 431
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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Bell Industries, Inc.
Notes to Consolidated Financial Statements
Accounting Principles
The accompanying consolidated financial statements for the three and six month
periods ended June 30, 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 guidelines 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.
Special Items
During the quarter ended June 30, 2000, the Company recorded special pre-tax
charges totaling $2.4 million. The charges consisted of $1.8 million of costs
associated with the realignment of the Company's Midwest operations of its
Systems Integration business and $600,000 of costs incurred to date associated
with a corporate identity program which includes new marketing initiatives for
branding and sales development. Components of the Midwest realignment charge
included separation costs, asset write-downs and other exit costs related to the
consolidation of facilities, logistics, and sales and service operations.
Additionally, the Company recorded a pre-tax gain of approximately $2.8 million
from the disposition of a real estate asset related to a previously disposed
business. This sale represents the final property disposition in connection with
a formal plan approved by the Company's Board of Directors in 1998. Under the
plan, the Company disposed of six properties with an aggregate book value of
$12.0 million. Total net proceeds from these sales were approximately $16.3
million.
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 six months ended
June 30, 2000, the Company repurchased 809,900 shares at an average price of
$3.49 per share.
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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.
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 for the three months and six months
ended June 30, 2000 and 1999 were as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales
Systems Integration $ 43,226 $ 40,535 $ 83,930 $ 79,240
Recreational Products 15,088 15,201 26,976 26,305
Electronics Manufacturing 2,750 5,045 5,085 9,387
--------- --------- --------- ---------
$ 61,064 $ 60,781 $ 115,991 $ 114,932
========= ========= ========= =========
Operating income
Systems Integration $ (1,365) $ 1,406 $ (1,248) $ 2,653
Recreational Products 835 1,518 1,273 2,063
Electronic Manufacturing 683 892 1,264 1,268
Special items, net 2,242 2,242
Corporate costs (832) (674) (1,544) (1,598)
--------- --------- --------- ---------
1,563 3,142 1,987 4,386
Interest, net 21 418 64 58
Income tax provision (626) (1,423) (811) (1,777)
--------- --------- --------- ---------
Net income $ 958 $ 2,137 $ 1,240 $ 2,667
========= ========= ========= =========
</TABLE>
Net sales for the six months ended June 30, 2000 increased 0.9% to $116.0
million from $114.9 million in 1999, while operating income decreased to $2.0
million from $4.4 million in the comparable 1999 period. For the three months
ended June 30, 2000, the Company's net sales increased slightly to $61.1 million
from $60.8 million in 1999. Operating income, for the three months ended June
30, 2000, declined to $1.6 million from $3.1 million in the comparable 1999
period.
The operating results for the three and six month periods ended June 30, 2000
include pre-tax charges totaling $2.4 million. The charges consisted of $1.8
million of costs associated with the realignment of the Company's Midwest
operations of its Systems Integration business and $600,000 of costs incurred to
date for a corporate identity program. The Midwest realignment charge included
separation costs, asset write-downs and other exit costs related to the
consolidation of facilities, logistics, and sales and service operations. The
$1.8 million realignment charge has been included in the operating results of
Systems Integration. Additionally, the 2000 operating results include a pre-tax
gain of $2.8 million from the disposition of a real estate asset related to a
previously disposed business.
Corporate costs for the six months ended June 30, 2000 were relatively unchanged
from the previous year. However, corporate costs increased to $832,000 for the
three months ended June 30, 2000 compared with $674,000 for the comparable 1999
period. This increase is attributable to generally
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higher payroll and costs attributable to strategic repositioning and marketing
programs.
Systems Integration sales for the six months ended June 30, 2000 increased 5.9%
to $83.9 million compared with $79.2 million in 1999. Excluding the $1.8 million
special charge that was allocated to this business unit for facilities
consolidation and staff relocation costs, operating income for the group was
$557,000 for the 2000 period compared with operating income of $2.7 million in
1999. Including the charge, the Group recorded an operating loss of $1.2
million. For the three months ended June 30, 2000, Systems Integration sales
increased 6.6% to $43.2 million from $40.5 million in the prior year period.
Operating income for the 2000 period, excluding the $1.8 million special charge,
was $440,000 compared with operating income of $1.4 million in 1999. Including
the $1.8 million charge, Systems Integration recorded an operating loss of $1.4
million for the three months ended June 30, 2000. In addition to the $1.8
million special charge, Systems Integration operating results for 2000 have been
affected by softness in demand for certain technology services, as well as
sustained pressure on product margins.
Recreational Product Group sales for the six months ended June 30, 2000
increased 2.6% to $27.0 million as operating income decreased 38.2% to $1.3
million. For the three months ended June 30, 2000, Recreational Product Group
sales decreased slightly to $15.1 million from $15.2 million in 1999 while
operating income declined to $835,000 from $1.5 million in the previous year.
The 2000 results have been adversely impacted by warmer winter weather
conditions, a shift in the sales mix toward lower margin product lines, and
generally higher selling and administrative expenses.
The operating results of the Electronics Manufacturing business for the three
and six month periods ended June 30, 1999 include the results of a business sold
in July 1999. Sales of the sold business for these periods were $2.9 million and
$5.4 million while operating income was $430,000 and $300,000, respectively.
Excluding the results of the sold business, sales of the Electronics
Manufacturing business for the six months ended June 30, 2000 increased to $5.1
million from $4.0 million in 1999, while operating income increased to $1.3
million from $1.0 million in the prior year. For the three months ended June 30,
2000, sales increased to $2.8 million from $2.1 million in 1999. Operating
income for the second quarter of 2000 was $683,000 compared with $462,000 in the
1999 period. The Electronics Manufacturing business has been favorably impacted
by generally strong demand for electronics components throughout the current
year period.
As a percentage of sales, cost of sales for the six months ended June 30, 2000
increased to 84.5% from 82.2% in 1999. Higher cost of sales, as a percentage of
sales, reflects competitive product pricing pressures particularly within the
Company's Systems Integration business, and a shift in the sales mix toward
lower margin product lines in the Recreational Product business. Selling and
administrative expenses, as a percentage of sales, was 14.1% compared with 14.0%
the prior year. In the 2000 period, the Company's income tax rate was 39.5%
compared with 40.0% in the prior year.
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Selected financial data is set forth in the following table (dollars in
thousands, except per share amounts):
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
---- ----
<S> <C> <C>
Cash and cash equivalents $ 11,713 $ 8,550
Working capital $ 24,111 $ 25,486
Current ratio 1.6:1 1.6:1
Shareholders' equity per share $ 3.34 $ 3.20
Days' sales in receivables 52 64
Days' sales in inventories 28 30
</TABLE>
Net cash provided by operating activities was $3.6 million for the six months
ended June 30, 2000, compared to cash used in operating activities of $18.7
million for the comparable period in 1999. Cash flows from investing activities
included approximately $3.0 million of net proceeds from the sale of a real
estate asset. During the six months ended June 30, 2000, cash was utilized to
repurchase $2.8 million of company stock and fund certain capital additions. The
improvement in operating cash flows reflects changes in working capital
including the reduction in accounts receivable and inventories. Cash flows in
1999 included the net proceeds from the sale of EDG of $176.7 million which were
partially utilized to payoff the Company's then outstanding line of credit of
$109 million. Also impacting 1999 cash flows were $3.2 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 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.
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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: August 11, 2000 /s/Tracy A. Edwards
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Tracy A. Edwards,
President and
Chief Executive Officer
DATE: August 11, 2000 /s/ Russell A. Doll
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Russell A. Doll,
Senior Vice President and
Chief Financial Officer
