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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, 1996
Commission file number 1-11471
BELL INDUSTRIES, INC.
(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.)
11812 San Vicente Blvd., Los Angeles, California 90049-5069
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 826-2355
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
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Indicate the number of shares outstanding of the Registrant's class of common
stock, as of July 15, 1996: 7,388,560 shares.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Bell Industries, Inc.
Consolidated Statement of Income
(In thousands, except per share data)
Three months ended Six months ended
June 30 June 30
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1996 1995 1996 1995
---- ---- ---- ----
Net sales $ 156,709 $ 141,575 $ 299,759 $ 268,520
------------ ------------ ------------ ------------
Costs and expenses
Cost of products sold 121,665 108,984 232,176 206,967
Selling, general and
administrative expenses 26,252 24,497 52,291 48,131
Interest expense 885 822 1,844 1,730
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148,802 134,303 286,311 256,828
------------ ------------ ------------ ------------
Income before income taxes 7,907 7,272 13,448 11,692
Income tax provision 3,319 3,051 5,648 4,911
------------ ------------ ------------ ------------
Net income $ 4,588 $ 4,221 $ 7,800 $ 6,781
============ ============ ============ ============
Share and per share data:
- ------------------------
Net income $ 0.60 $ 0.57 $ 1.03 $ 0.91
============ ============ ============ ============
Weighted average
common shares outstanding 7,615 7,409 7,580 7,412
============ ============ ============ ============
See accompanying Notes to Consolidated Condensed Financial Statements.
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Bell Industries, Inc.
Consolidated Condensed Balance Sheet
(Dollars in thousands)
JUNE 30 DEC. 31 JUNE 30
1996 1995 1995
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ASSETS
Current assets:
Cash and cash equivalents $ 3,393 $ 4,819 $ 8,011
Accounts receivable, less
allowance for doubtful accounts
of $1,904, $ 1,472 and $1,450 87,432 78,651 71,812
Inventories 122,800 120,153 93,690
Prepaid expenses and other 6,116 5,427 4,530
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Total current assets 219,741 209,050 178,043
Properties, net 16,266 13,148 14,520
Other assets 12,847 11,684 11,745
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$ 248,854 $ 233,882 $ 204,308
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 55,729 $ 42,957 $ 41,110
Accrued payroll and liabilities 18,332 20,693 15,148
Current portion of long-term
liabilities 8,979 6,918 6,710
Income taxes payable 1,598 2,255 1,554
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Total current liabilities 84,638 72,823 64,522
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Long-term liabilities:
Notes payable 29,068 36,514 23,714
Deferred compensation and other 6,560 6,976 7,127
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Total long-term liabilities 35,628 43,490 30,841
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Shareholders' equity:
Preferred stock
Authorized - 1,000,000 shares
Outstanding - None
Common stock
Authorized - 35,000,000 shares
Outstanding - 7,388,018,
6,898,094 and 6,849,169 73,921 63,056 62,621
Reinvested earnings 54,667 54,513 46,324
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Total shareholders' equity 128,588 117,569 108,945
Commitments and contingencies
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$ 248,854 $ 233,882 $ 204,308
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See accompanying Notes to Consolidated Condensed Financial Statements.
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Bell Industries, Inc.
Consolidated Statement of Cash Flows
(In thousands)
Six months ended
June 30
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1996 1995
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Cash flows from operating activities:
Net income $ 7,800 $ 6,781
Depreciation and amortization 2,727 2,576
Amortization of intangibles 318 279
Provision for losses on accounts receivable 706 761
Changes in assets and liabilities (727) 8,195
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Net cash provided by operating activities 10,824 18,592
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Cash flows from investing activities:
Purchases of properties (5,669) (893)
Purchases of businesses (1,090)
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Net cash used in investing activities (6,759) (893)
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Cash flows from financing activities:
Payments on Senior Notes and capital leases (6,076) (4,143)
Bank payments, net (387) (9,000)
Employee stock plans and other 972 (176)
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Net cash used in financing activities (5,491) (13,319)
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Net increase (decrease) in cash and cash equivalents (1,426) 4,380
Cash and cash equivalents at beginning of period 4,819 3,631
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Cash and cash equivalents at end of period $ 3,393 $ 8,011
============= =============
Changes in assets and liabilities, net of acquisitions:
Accounts receivable $ (6,496) $ (3,660)
Inventories (1,050) 2,220
Accounts payable 10,486 6,405
Accrued liabilities and deferred compensation (2,326) 3,175
Income taxes payable (657) 510
Other (684) (455)
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Net change $ (727) $ 8,195
============= =============
Supplemental cash flow information:
Interest paid $ 2,085 $ 1,901
Income taxes paid $ 6,305 $ 4,401
See accompanying Notes to Consolidated Condensed Financial Statements.
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Bell Industries, Inc.
Notes to Consolidated Condensed 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, 1995.
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
Operating results data per share is based upon the weighted average number of
common and common equivalent shares outstanding. Common equivalent shares
represent the net number which would be issued assuming the exercise of
dilutive stock options and stock warrants, reduced by the number of shares
which could be repurchased from the proceeds of such exercises.
Stock Dividend
In May 1996, the Board of Directors declared a 5% stock dividend payable to
shareholders of record on May 24, 1996. Share and per share amounts were
adjusted to give effect to the stock dividend.
Authorized Shares
At the Company's 1996 Annual Meeting, shareholders approved a proposal to
increase the number of authorized shares of common stock from 10 million to 35
million.
Acquisitions
During the first six months of 1996, the Company acquired three graphics and
electronic imaging businesses for cash and the issuance of approximately
106,000 shares of Bell common stock. Operating results and net assets of the
acquired businesses were not material.
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Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition.
Results of operations by business segment for the three and six months ended
June 30, 1996 and 1995 were as follows (in thousands):
Three months ended Six months ended
June 30 June 30
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1996 1995 1996 1995
---- ---- ---- ----
Net sales
Electronics $ 121,199 $ 110,471 $ 234,947 $ 212,955
Graphics and
Electronic Imaging 23,428 19,267 44,205 34,862
Recreational Products 12,082 11,837 20,607 20,703
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$ 156,709 $ 141,575 $ 299,759 $ 268,520
============ ============ ============ ============
Operating income
Electronics $ 9,302 $ 8,475 $ 16,862 $ 15,149
Graphics and
Electronic Imaging 535 574 1,463 986
Recreational Products 1,189 1,168 1,503 1,662
------------ ------------ ------------ ------------
Operating income 11,026 10,217 19,828 17,797
Corporate costs (2,234) (2,123) (4,536) (4,375)
Interest expense (885) (822) (1,844) (1,730)
Income tax provision (3,319) (3,051) (5,648) (4,911)
------------ ------------ ------------ ------------
Net income $ 4,588 $ 4,221 $ 7,800 $ 6,781
============ ============ ============ ============
For the six months ended June 30, 1996, the Company's net sales increased 12%
to $299.8 million and operating income increased 11% to $19.8 million over the
comparable prior year period. Net income increased 15% to $7.8 million, or
$1.03 per share, compared to $6.8 million, or $.91 per share, in 1995.
For the three months ended June 30, 1996, the Company's net sales increased 11%
to $156.7 million and operating income increased 8% to $11.0 million over the
corresponding quarter in the prior year. The Company recorded net income of
$4.6 million, or $.60 per share, compared to $4.2 million, or $.57 per share,
in the prior year quarter.
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Sales of the Electronics Group for the six months ended June 30, 1996 increased
10% to $234.9 million and operating income increased 11% to $16.9 million. For
the quarter, sales increased 10% to $121.2 million and operating income
increased 10% to $9.3 million over the comparable prior year quarter. Improved
performance was achieved despite continuing softness in the electronics market.
The group also recorded increased sales of microcomputer systems and services.
In June 1996 the Company announced it had been awarded an all-location
franchise to distribute a broad variety of semiconductors manufactured by
Samsung Semiconductor, Inc. Management believes the addition of the Samsung
line will broaden the Company's product portfolio and complement existing
product lines, thereby increasing the Company's customer base and creating
additional opportunities for growth. In July 1996, National Semiconductor, the
Company's largest supplier of electronic components, terminated, without notice
or explanation, the Company's franchise to distribute National products,(sales
of National products totaled approximately 8% of consolidated net sales in
1995). While the short-term impact of the loss of the National franchise may
reduce sales and profit levels later this year and the early months of 1997,
management believes that the reduction, if any, will be more than offset
through the substitution of existing competing product lines and from sales of
Samsung products, once fully integrated.
Graphics and Electronic Imaging Group sales for the six months ended June 30,
1996 increased 27% to $44.2 million while operating income increased 48% to
$1.5 million. Group sales for the quarter increased 22% to $23.4 million while
operating income decreased slightly. The group's continued sales growth
reflected stronger markets in California, geographic expansion through
acquisitions, and the opening of new sales facilities. The Company's investment
in expansion programs, including the integration of newer divisions, resulted
in marginally lower operating income for the quarter.
Recreational Products Group sales for the six months were consistent with prior
year results at $20.6 million while operating income decreased 10% to $1.5
million. For the quarter, sales and operating income increased 2% to $12.1
million and $1.2 million, respectively, compared to the same quarter in 1995.
Operating results, were impacted by severe winter weather conditions in the
upper Midwest which continued into the second quarter as well as costs related
to expanding into Michigan.
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Cost of products sold as a percentage of sales for the six months increased to
77.5% from 77.1%, while selling, general and administrative expenses decreased
to 17.4% of sales from 17.9%. Lower selling, general and administrative costs,
expressed as a percentage of sales, reflected ongoing cost control efforts. The
Company's income tax rate was approximately 42% for all periods presented.
The Company's financial position remained strong at June 30, 1996 as set forth
in the table below (dollars in thousands, except per share amounts):
June 30, December 31, June 30,
1996 1995 1995
---- ---- ----
Cash and cash equivalents $ 3,393 $ 4,819 $ 8,011
Working capital $ 135,103 $ 136,227 $ 113,521
Current ratio 2.6:1 2.9:1 2.8:1
Long-term liabilities
to total capitalization 22% 27% 22%
Shareholders' equity per share $ 17.40 $ 16.23 $ 15.15
Days' sales in receivables 52 50 47
Days' sales in inventories 92 96 78
Net cash provided by operating activities was $10.8 million for the six months
ended June 30, 1996 compared to $18.6 million for the comparable period in
1995. Cash flows from operating activities were impacted by increased profits
and increased working capital investment to support the growth in the Company's
business. Cash flows were utilized for scheduled payments on the Company's
Senior Notes and capital lease obligations. Additionally, cash flows were used
to fund property acquisitions, including the Company's newly acquired corporate
office in El Segundo, California, as well as, the Company's investment in new
information systems. During the first six months of 1996, the Company acquired
three Graphics and Electronic Imaging businesses for cash and the issuance of
approximately 106,000 shares of Bell common stock.
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Subsequent to the close of the quarter, Bell announced an agreement to acquire
Olson Graphic Products, Inc., a privately-owned distributor headquartered in
St. Paul, Minnesota, with branches in Omaha, Nebraska and Des Moines, Iowa.
Olson distributes equipment and graphic supplies to the printing and
photographic industries and has annual sales in excess of $40 million.
Completion of the transaction, expected in early August, will extend the
geographic reach of the Graphics and Electronic Imaging Group into the Midwest
market. Bell will continue to seek acquisition opportunities that enhance
growth.
The Company believes that sufficient cash resources exist to support short-term
requirements, including debt and lease payments, and longer term objectives,
either through available cash, bank borrowings, or cash generated from
operations.
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PART II - OTHER INFORMATION
Items 1 through 3.
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders of Bell Industries was held on
May 7, 1996 to act on the following matters.
1. Election of Directors.
The seven incumbent directors - John J. Cost, Anthony L. Craig, Gordon
M. Graham, Bruce M. Jaffe, Charles S. Troy, Milton Rosenberg and
Theodore Williams - were re-elected. Directors elected will serve
until the next Annual Meeting of Shareholders and until their
successors are elected and have qualified. The vote was as follows:
Votes Withhold
Directors Votes for against authority
--------- --------- ------- ---------
John J. Cost 5,357,966 -0- 393,753
Anthony L. Craig 5,357,822 -0- 393,897
Gordon M. Graham 5,358,366 -0- 393,353
Bruce M. Jaffe 5,358,947 -0- 392,772
Charles S. Troy 5,358,197 -0- 393,522
Milton Rosenberg 5,358,631 -0- 393,088
Theodore Williams 5,357,293 -0- 394,426
2. Proposal to Increase Authorized Common Stock.
The proposal to increase the authorized common stock to 35 million
shares was approved. The vote was as follows:
Votes Withhold
Votes for against authority
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3,634,977 1,750,380 366,361
3. Non-Employee Directors' Stock Option Plan.
The proposal to adopt the Non-Employee Directors' Stock Option Plan
was approved. The vote was as follows:
Votes Withhold
Votes for against authority
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4,566,023 805,036 380,658
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Item 5. Other Information.
Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27. Financial Data Schedule.
99. Press Release: Statement on National Semiconductor
Termination Notice.
(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: July 23, 1996 /s/ THEODORE WILLIAMS
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Theodore Williams,
Chairman and Chief Executive
Officer
DATE: July 23, 1996 /s/ BRUCE M. JAFFE
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Bruce M. Jaffe,
President and Chief Operating
Officer
DATE: July 23, 1996 /s/ TRACY A. EDWARDS
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Tracy A. Edwards,
Vice President and Chief
Financial Officer