[BELL MICROPRODUCTS LOGO]
CONTACT: Eli Sayegh
Director of Investor Relations
Bell Microproducts Inc.
(408) 451-1685
ir@bellmicro.com
FOR IMMEDIATE RELEASE
BELL MICROPRODUCTS REPORTS FIRST QUARTER FINANCIAL RESULTS
CONTINUES FOCUS ON COST REDUCTION
SAN JOSE, CA--(April 22, 2003)-- Bell Microproducts Inc. (Nasdaq: BELM) today
announced its financial results for the first quarter ended March 31, 2003.
Revenues for the first quarter of 2003 were $533 million, up 2% from $523
million in the first quarter of 2002, and up slightly from $532 million in the
fourth quarter of 2002. GAAP net losses were $4.9 million or $0.25 per share on
20.1 million shares in the first quarter 2003, compared with net income of
$384,000 or $0.02 per share on 19.2 million diluted shares in the same period of
2002. The pro forma net loss for the first quarter of 2003 was $2.9 million, or
$0.14 per share, compared with net income in the first quarter of 2002 of
$384,000, or $0.02 per share, and versus net income in the fourth quarter of
2002 of $1 million, or $0.05 per share on 20.0 million diluted shares.
Don Bell, President and Chief Executive Officer commented, "The technology
product market environment continues to be very challenging. While revenues were
flat with the fourth quarter of 2002, the combination of a continued soft
economy, an unfavorable shift in product mix during the quarter, and an
imbalance in supply and demand placed significant pressure on pricing and
therefore gross profits in the quarter."
CONTINUING FOCUS ON REDUCING COSTS
Bell Microproducts expanded significantly in recent years with revenues growing
by well over 300% from 1998 to 2002. The Company completed eight acquisitions
from 1999 to 2001 with a resulting increase in overhead expenses. These
companies were significant acquisitions and expanded Bell Microproducts'
geographical coverage, product mix and technical resources. The resultant is a
very resourceful Company with a leadership position in the storage market. With
these acquisitions, however, we acquired additional overhead expenses, and the
need to reduce redundant expenses and increase productivity.
Mr. Bell added, "During the past two years, the Company has been engaged in
ongoing efforts to improve profits, including improving gross profit margins,
the reduction of operating expenses and the improvement of working capital
management. We have the right strategy, and have continued to reduce costs, but
not fast enough to offset the conditions we experienced in the first quarter of
2003. We have continued to evaluate the performance and cost structure of each
of our business units. In light of current market conditions and our commitment
to improving our financial performance, we have implemented additional actions
to further improve the efficiency of our organization, and reduce overhead
expenses across the Company."
The additional initiatives that have been defined and implemented in the first
quarter of 2003 include personnel reductions of 127 positions, which represent
9% of the Company's headcount, as well as reductions in other operating
expenses. These cost reduction measures will reduce annual expenses by
approximately $12.5 million.
Actions taken in conjunction with this restructuring include consolidating the
Enterprise Solutions division in the U.S. back into the core distribution
business, which should improve performance and reduce costs. The Company is also
combining parallel operations in The Netherlands, Belgium, and Germany, where it
will operate with a country manager organization in the future. In order to
achieve better performance and increased efficiency from these changes, several
management and overhead positions are being eliminated. The Company's Trademark
computer division is also being re-positioned to focus on more profitable
business. Additionally, headcount was reduced in several areas through the
streamlining of operational, technical, support, and financial functions
throughout the Company. Facility expenses will also be reduced through lease
renegotiations and the closure of two smaller locations.
During the quarter, the Company recorded $2.0 million in after tax restructuring
and special charges related to personnel severance costs and charges relating to
significant changes to, or discontinuance of certain vendor relationships that
do not meet the profit standards of the Company or contribute to the Company's
strategic positioning.
Commenting on the Company's strategy, Mr. Bell said, "We have significantly
improved our strategic positioning during the past four years, and we have
continued to invest in our strategic initiatives throughout the downturn. As a
result, we believe that the Company is very well positioned for future growth in
sales and profits."
OPERATING TRENDS
GAAP gross profit margins decreased to 7.1% in the first quarter of 2003 from
9.1% in the same period last year. Pro forma gross profit margins decreased to
7.4% in the first quarter of 2003 from 8.6% in the fourth quarter of 2002. The
decline was primarily due to intense price competition in the Company's European
and U.S. Commercial business units as well as an unfavorable shift in product
mix in the quarter.
Selling, general & administrative costs decreased to $39.3 million versus $40.5
million in the fourth quarter of 2002. S, G & A expenses as a percentage of
sales were 7.4 % as compared to 7.6% in the fourth quarter of 2002.
Interest expense was $4.0 million in the first quarter, and was flat with the
fourth quarter.
The Company continued its focus on asset utilization during the quarter.
Accounts receivable decreased to $265 million at March 31, 2003, compared to
$277 million at December 31, 2002. This resulted in Days Sales Outstanding (DSO)
in accounts receivable of 45 days in the first quarter of 2003, compared with 47
days in the fourth quarter of 2002.
Inventories were $194 million at March 31, 2002, up from $183 million at
December 31, 2002. This resulted in inventory turns of 10.2 times in the first
quarter of 2003, compared with 10.6 turns in the fourth quarter of 2002.
Outstanding debt remained level at $207 million during the quarter.
MANAGEMENT DISCUSSION AND OUTLOOK
Commenting on the Company's overall performance, Don Bell said, "Despite the
industry challenges of the last few years, we have grown our revenues and market
share on a worldwide basis, and continue to strategically position our Company.
We have been successful in improving our line card in all of our businesses by
attracting the industry's leading suppliers. We are continually improving the
structure of the Company to ensure that we are organized to aggressively achieve
our major corporate goals."
Mr. Bell added, "Our business, however, remains affected by the current
technology spending environment. Our primary objective is to return to
consistent and acceptable profitability. We will accomplish this through a
continued focus on reducing our cost structure. In addition, we are taking
actions worldwide to address the improvement of gross profit margins through
programs that focus on strategic, higher margin product categories and
disciplined execution. We are concentrating our efforts on key customers and
suppliers, and will eliminate certain smaller non-profitable and non-strategic
product lines in order to improve our margins and efficiency."
In conclusion, Mr. Bell said, "While the environment does not lead to an
optimistic industry forecast in the short term, the reduction in overhead costs
will contribute to a healthier Company and better results in the future."
ABOUT PRO FORMA PRESENTATION
In addition to our consolidated financial results prepared under generally
accepted accounting principles ("GAAP"), we use a pro forma measure of net
income or loss that is equal to GAAP adjusted to exclude certain costs and
expenses. Our pro forma presentation gives an indication of our performance
before restructuring costs and special charges that are considered by management
to be outside of our core distribution operating results. We compute pro forma
results by adjusting GAAP net income or loss with the impact of cost of sales
adjustments for discontinued product lines, and restructuring costs related to
severance and benefits for involuntary employee terminations and vacated excess
facilities. These measures are not in accordance with, or an alternative for
GAAP and may be materially different from pro forma
measures used by other companies. The presentation of this additional
information should not be considered in isolation or as a substitute for net
income prepared in accordance with GAAP.
ABOUT BELL MICROPRODUCTS
Bell Microproducts is an international, value-added provider of a wide range of
high-technology products, solutions, and services to the industrial and
commercial markets. The Company's offering includes semiconductors, computer
platforms, peripherals, and storage products of various types including desktop,
high-end computer and storage subsystems, fibre channel connectivity products,
RAID, NAS and SAN storage systems and back-up products. Bell Microproducts is an
industry-recognized specialist in storage products and is one of the world's
largest storage-centric value-added distributors.
The Company's products are available at any level of integration, from
components to subsystem assemblies and fully-integrated, tested and certified
system solutions. The Company adds value with a broad range of services
including testing, software loading, kitting, mass storage system integration,
and computer system integration. Trained and certified technical personnel
complete each of these processes at Bell Microproducts' ISO 9002 facilities.
Bell Microproducts markets and distributes more than 150 brand name product
lines, as well as its own Rorke Data storage and Trademark(R) computer brands,
to original equipment manufacturers (OEMs), contract electronic manufacturing
services (CEMS) customers, value-added resellers (VARs) and system integrators
in the Americas and Europe. More information can be found in the Company's SEC
filings, or by visiting the Bell Microproducts Web site at www.bellmicro.com.
SAFE HARBOR STATEMENT
This release may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements, which reflect the Company's current views of our expected growth
rates, profitability and other future events and financial performance, involve
known and unknown risks and uncertainties which could cause actual results or
facts to differ materially from such statements for a variety of reasons
including, but not limited to: changing industry and economic conditions;
changes in product supply, pricing, and customer demand; competition; other
vagaries in the computer and electronic components markets; effects of recent
restructuring initiatives; changes in relationships with key suppliers;
availability of financing; foreign currency fluctuations and the other risks
described from time to time in the Company's reports to the Securities and
Exchange Commission (including the Company's Annual Report on Form 10-K).
Investors should take such risks into account when making investment decisions.
Shareholders and other readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date on which they
are made. The Company undertakes no obligation to update publicly or revise any
forward-looking statements.
BELL MICROPRODUCTS INC.
Balance Sheets
(in thousands)
(unaudited)
March 31, 2003 December 31, 2002
------------------------ ------------------------
ASSETS
Current assets:
Cash $ 4,829 $ 12,025
Accounts receivable, net 265,488 277,305
Inventories 194,239 182,775
Prepaid expenses and other current assets 26,049 23,786
------------------------ ------------------------
Total current assets 490,605 495,891
------------------------ ------------------------
Property and equipment, net 45,397 50,761
Goodwill and other intangibles 59,333 59,809
Other assets 7,509 7,730
------------------------ ------------------------
Total assets $ 602,844 $ 614,191
======================== ========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 210,547 $ 211,881
Borrowings under lines of credit 3,277 7,919
Short-term note payable and current portion of
long-term notes payable 16,654 23,458
Other accrued liabilities 41,242 45,847
------------------------ ------------------------
Total current liabilities 271,720 289,105
Borrowings under lines of credit 112,111 100,555
Long-term notes payable 75,500 75,500
Other long-term liabilities 3,086 3,182
------------------------ ------------------------
Total liabilities 462,417 468,342
------------------------ ------------------------
Shareholders' equity:
Common Stock 116,220 115,888
Retained earnings 20,376 25,311
Cumulative translation adjustment 3,831 4,650
------------------------ ------------------------
Total shareholders' equity 140,427 145,849
------------------------ ------------------------
------------------------ ------------------------
Total liabilities and shareholders' equity $ 602,844 $ 614,191
======================== ========================
BELL MICROPRODUCTS INC.
Statements of Operations
(INCLUDING RESTRUCTURING COSTS)
(in thousands, except per share data)
(unaudited)
--------------------------------------
Three months ended March 31,
2003 2002
------------------ ------------------
Net sales $ 532,653 $ 522,928
Cost of sales 495,027 475,507
------------------ ------------------
Gross profit 37,626 47,421
Operating expenses:
Selling, general and administrative expenses 39,274 42,696
Restructuring costs 1,383 -
------------------ ------------------
Total operating expenses 40,657 42,696
Income (loss) from operations (3,031) 4,725
Interest expense (4,019) (4,063)
------------------ ------------------
Income (loss) before income taxes (7,050) 662
Provision for (benefit from) income taxes (2,115) 278
------------------ ------------------
Net income (loss) $ (4,935) $ 384
================== ==================
Earnings (loss) per share
Basic $ (0.25) $ 0.02
================== ==================
Diluted $ (0.25) $ 0.02
================== ==================
Shares used in per share calculation
Basic 20,131 18,099
================== ==================
Diluted 20,131 19,160
================== ==================
BELL MICROPRODUCTS INC.
Statements of Operations
(EXCLUDING RESTRUCTURING COSTS)
(in thousands, except per share data)
(unaudited)
Pro Forma Excluding
Restructuring and Special Charges
--------------------------------------
Three months ended March 31,
2003 2002
------------------ ------------------
Net sales $ 532,653 $ 522,928
Cost of sales 493,484 475,507
------------------ ------------------
Gross profit 39,169 47,421
Operating expenses:
Selling, general and administrative expenses 39,274 42,696
Restructuring costs - -
------------------ ------------------
Total operating expenses 39,274 42,696
Income (loss) from operations (105) 4,725
Interest expense (4,019) (4,063)
------------------ ------------------
Income (loss) before income taxes (4,124) 662
Provision for (benefit from) income taxes (1,237) 278
------------------ ------------------
Net income (loss) $ (2,887) $ 384
================== ==================
Earnings (loss) per share
Basic $ (0.14) $ 0.02
================== ==================
Diluted $ (0.14) $ 0.02
================== ==================
Shares used in per share calculation
Basic 20,131 18,099
================== ==================
Diluted 20,131 19,160
================== ==================
Pro forma presentation for the three months ended March 31, 2003, does not
include Cost of Sales of $1,543 relating to significant changes to, or the
discontinuance of certain vendor relationships, restructuring costs of
$1,383 related to personnel severance costs and excess facilities, and the
related tax benefit of $878.