Bell Industries, Inc. John A. Fellows/Mitchell I. Rosen 310-563-2355
PondelWilkinson Inc. Roger S. Pondel/Angie H. Yang 310-279-5980
BELL INDUSTRIES REPORTS FINANCIAL RESULTS FOR 2006 THIRD QUARTER
El Segundo, California – November 14, 2006 – Bell Industries, Inc. (AMEX:BI) today reported financial results for the three and nine-month periods ended September 30, 2006.
Revenues from continuing operations for the 2006 third quarter amounted to $36.7 million, compared with $37.1 million a year ago. The company sustained a net loss of $2.5 million, equal to $.29 per share, for the most recent quarter, including a loss on sale of discontinued operations of $710,000, versus net income of $423,000, or $.05 per fully diluted share, for the comparable prior year period. The loss on sale of discontinued operations represents income taxes allocated to the company’s J. W. Miller division which was sold during the second quarter.
“Our Technology Solutions division expanded rapidly during the quarter as we added approximately 400 employees to support new long-term services contracts. As anticipated, operating results were adversely impacted principally by start-up and related costs in connection with the contracts,” said John A. Fellows, chief executive officer of Bell Industries. “We expect these start-up costs to be largely completed in the fourth quarter and anticipate this new business will generate approximately $30 million in additional revenues with favorable margins in 2007. During recent months, we have worked diligently to enhance the division’s operations, strengthen the team and identify new areas of revenue growth. I am pleased that these efforts are beginning to provide tangible returns,” Fellows added.
Separately, Bell announced that it has entered into an asset purchase agreement to purchase substantially all of the assets of SkyTel Corp.
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Mark Schwarz, chairman of Bell Industries, commented, “Bell’s acquisition of SkyTel represents a unique opportunity to secure one of the leading wireless brands in North America. With its broad customer base, wide variety of both consumer and business oriented products and its vast array of proprietary technologies, we are confident that SkyTel will function as a strong growth vehicle for Bell in 2007 and beyond. In addition to the unique operating synergies, we believe the significant wireless industry experience of our senior team, and particularly that of our CEO, will further enhance our success.”
Third quarter revenues for Bell’s Technology Solutions business were $24.4 million, compared with $25.0 million in the 2005 third quarter. Product sales amounted to $16.4 million, compared with $17.2 million last year. Services revenues totaled $8.0 million in the current third quarter, compared with $7.8 million a year earlier. The division sustained an operating loss of $2.1 million for the 2006 third quarter, compared with operating income of $418,000 in the comparable 2005 period. This operating loss includes approximately $1.5 million in losses from start-up and related costs associated with a new customer relationship management engagement that commenced in the third quarter of 2006 and continued losses associated with a depot services contract that commenced in the fourth quarter of 2005. Losses from this depot services contract totaled approximately $1.1 million during the first nine months of 2006.
Bell’s Recreational Products Group net revenues totaled $12.3 million for the 2006 third quarter, compared with $12.1 million in the prior year period. Operating income amounted to $438,000, compared with $478,000 for the 2005 third quarter.
For the first nine months of 2006, revenues from continuing operations for Bell Industries were $92.8 million, compared with $99.2 million for the comparable 2005 period. Net income for the 2006 year-to-date period totaled $1.4 million, or $0.16 per diluted share, including a gain on sale of discontinued operations, net of tax, of $4.4 million. Bell Industries posted net income of $694,000, or $0.08 per diluted share, in the 2005 nine-month period.
Bell’s balance sheet at September 30, 2006 remained strong, with net working capital of $20.2 million. At the end of the 2006 third quarter, shareholders’ equity amounted to $22.0 million, or $2.57 per share. The company had no bank debt.
The company expects to generate revenues of over $250 million in 2007, with favorable margins, including the results of SkyTel.
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Fellows concluded, “These truly are exciting times at Bell Industries. In the past 120 days we’ve expanded our employee base by over 30%, launched our first large-scale CRM relationship and announced our entrance into the nationwide wireless business. We look forward to reporting our continued progress in the quarters ahead.”
About Bell Industries, Inc.
Bell is comprised of two diversified business units, Bell’s Technology Solutions business and Recreational Products Group. Bell’s Technology Solutions business offers a comprehensive portfolio of technology products and managed lifecycle services, including planning, product sourcing, deployment and disposal, and support services. Bell’s Recreational Products Group distributes after-market parts and accessories primarily to the recreational vehicle and boating markets.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements, including, but not limited to the anticipation of new engagements adding approximately $30 million in incremental revenues with favorable margins during 2007, timely completion of the transaction to acquire SkyTel and its growth and margin potential, and the expectation of 2007 revenues of over $250 million, are based upon current expectations and speak only as of the date hereof. Actual results may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, including uncertainties as to the nature of the company’s industry, including changing customer demand, the impact of competitive products and pricing, dependence on existing management and general economic conditions. Bell Industries’ Annual Report onForm 10-K, recent and forthcoming Quarterly Reports onForm 10-Q, recent Current Reports onForm 8-K, and other SEC filings discuss some of the important risk factors that may affect the business, results of operations and financial condition. The company undertakes no obligation to revise or update publicly any forward-looking statements for any reason.
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(Tables Follow)
Bell Industries, Inc. Consolidated Operating Results (In thousands, except per share data) (Unaudited)
Three months ended
Nine months ended
September 30
September 30
2006
2005
2006
2005
Net revenues
Products
$
28,654
$
29,304
$
70,049
$
76,738
Services
8,025
7,772
22,754
22,438
36,679
37,076
92,803
99,176
Costs and expenses
Cost of products sold
23,867
24,277
57,023
62,445
Cost of services provided
6,695
6,185
18,572
18,032
Selling and administrative
8,826
6,412
22,841
19,204
Interest, net
(166
)
(93
)
(375
)
(181
)
Special item(1)
-
325
—
325
39,222
37,106
98,061
99,825
Loss from continuing operations before income tax
(2,543
)
(30
)
(5,258
)
(649
)
Income tax expense (benefit)
(843
)
15
(1,720
)
60
Loss from continuing operations
(1,700
)
(45
)
(3,538
)
(709
)
Income (loss) from discontinued operations, net of tax
(85
)
468
492
1,403
Gain (loss) on sale of discontinued operations, net of tax
(710
)
—
4,443
—
Net income (loss)
$
(2,495
)
$
423
$
1,397
$
694
Basic and diluted share data
Loss from continuing operations
Basic
$
(.20
)
$
(.01
)
$
(.41
)
$
(.08
)
Diluted
$
(.20
)
$
(.01
)
$
(.41
)
$
(.08
)
Net income (loss)
Basic
$
(.29
)
$
.05
$
.16
$
.08
Diluted
$
(.29
)
$
.05
$
.16
$
.08
Weighted average common stock
Basic
8,568
8,460
8,565
8,458
Diluted
8,568
8,479
8,603
8,502
OPERATING RESULTS BY BUSINESS SEGMENT
Net revenues
Technology Solutions
Products
$
16,403
$
17,182
$
32,642
$
39,305
Services
8,025
7,772
22,754
22,438
24,428
24,954
55,396
61,743
Recreational Products
12,251
12,122
37,407
37,433
$
36,679
$
37,076
$
92,803
$
99,176
Operating income (loss)
Technology Solutions
$
(2,124
)
$
418
$
(4,282
)
$
(42
)
Recreational Products
438
478
1,550
1,530
Corporate costs
(1,023
)
(694
)
(2,901
)
(1,993
)
Special item(1)
-
(325
)
—
(325
)
(2,709
)
(123
)
(5,633
)
(830
)
Interest, net
166
93
375
181
Income tax benefit (expense)
843
(15
)
1,720
(60
)
Loss from continuing operations
$
(1,700
)
$
(45
)
$
(3,538
)
$
(709
)
(1)
Special item represents costs associated with a severance agreement for a former executive.
Bell Industries, Inc. Consolidated Condensed Balance Sheet (In thousands) (Unaudited)
September 30,
December 31,
2006
2005
ASSETS
Current assets:
Cash and cash equivalents
$
12,468
$
7,331
Accounts receivable
17,483
15,306
Inventories
9,333
12,764
Prepaid expenses and other
3,295
2,701
Total current assets
42,579
38,102
Fixed assets, net
3,734
3,143
Other assets
2,258
3,108
$
48,571
$
44,353
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Floor plan payables
$
120
$
68
Accounts payable
13,419
11,023
Accrued payroll and liabilities
8,835
8,440
Total current liabilities
22,374
19,531
Long-term liabilities
4,183
4,518
Shareholders’ equity
22,014
20,304
$
48,571
$
44,353
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