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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 September 30, 1996
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.)
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 October 15, 1996: 7,428,917 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 Nine months ended
September 30 September 30
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1996 1995 1996 1995
---- ---- ---- ----
Net sales $164,306 $148,639 $464,065 $417,159
-------- -------- -------- --------
Cost and expenses
Cost of products sold 128,594 115,548 360,770 322,515
Selling, general and
administrative expenses 27,208 24,838 79,499 72,969
Interest expense 952 872 2,796 2,602
-------- -------- -------- --------
156,754 141,258 443,065 398,086
-------- -------- -------- --------
Income before income taxes 7,552 7,381 21,000 19,073
Income tax provision 3,172 3,100 8,820 8,011
-------- -------- -------- --------
Net income $ 4,380 $ 4,281 $ 12,180 $ 11,062
======== ======== ======== ========
Net income per share $ 0.58 $ 0.57 $ 1.61 $ 1.49
======== ======== ======== ========
Weighted average common
shares outstanding 7,542 7,486 7,567 7,437
======== ======== ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements.
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Bell Industries, Inc.
Consolidated Condensed Balance Sheet
(Dollars in thousands)
September 30 December 31 September 30
1996 1995 1995
---- ---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 4,193 $ 4,819 $ 1,102
Accounts receivable,
less allowance for doubtful accounts
of $1,962, $1,472 and $1,337 88,349 78,651 79,492
Inventories 117,967 120,153 108,970
Prepaid expenses and other 6,117 5,427 4,277
-------- -------- --------
Total current assets 216,626 209,050 193,841
Properties, net 20,168 13,148 14,959
Other assets 14,568 11,684 11,469
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$251,362 $233,882 $220,269
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 42,968 $ 42,957 $ 35,587
Accrued payroll and liabilities 21,372 20,693 15,968
Current portion of long-term liabilities 8,531 6,918 13,134
Income taxes payable 1,705 2,255 1,176
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Total current liabilities 74,576 72,823 65,865
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Long-term liabilities:
Notes payable 36,615 36,514 33,714
Deferred compensation and other 6,762 6,976 7,044
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Total long-term liabilities 43,377 43,490 40,758
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Shareholders' equity:
Preferred stock
Authorized - 1,000,000 shares
Outstanding - none
Common stock
Authorized - 35,000,000 shares
Outstanding - 7,426,967, 6,898,094
and 6,878,169 shares 74,361 63,056 63,041
Reinvested earnings 59,048 54,513 50,605
-------- -------- --------
Total shareholders' equity 133,409 117,569 113,646
Commitments and contingencies
-------- -------- --------
$251,362 $233,882 $220,269
======== ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements.
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Bell Industries, Inc.
Consolidated Statement of Cash Flows
(In thousands)
Nine months ended
September 30
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1996 1995
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Cash flows from operating activities:
Net income $ 12,180 $ 11,062
Depreciation and amortization 4,098 3,883
Amortization of intangibles 497 416
Provision for losses on accounts receivable 976 1,321
Changes in assets and liabilities (3,543) (18,479)
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Net cash provided by (used in)
operating activities 14,208 (1,797)
-------- --------
Cash flows from investing activities:
Purchases of businesses (10,737)
Purchases of properties (6,294) (3,796)
-------- --------
Net cash used in investing activities (17,031) (3,796)
-------- --------
Cash flows from financing activities:
Payments on Senior Notes and capital leases (6,463) (5,274)
Bank borrowings, net 7,244 7,400
Employee stock plans and other 1,416 938
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Net cash provided by financing activities 2,197 3,064
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Net decrease in cash and cash equivalents (626) (2,529)
Cash and cash equivalents at beginning of period 4,819 3,631
-------- --------
Cash and cash equivalents at end of period $ 4,193 $ 1,102
======== ========
Changes in assets and liabilities, net of acquisitions:
Accounts receivable $ (2,182) $(11,899)
Inventories 7,983 (13,060)
Accounts payable (5,621) 882
Accrued liabilities and deferred compensation (1,078) 4,266
Income taxes payable (1,053) 195
Other (1,592) 1,137
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Net change $ (3,543) $(18,479)
======== ========
Supplemental cash flow information:
Interest paid $ 3,654 $ 3,464
Income taxes paid $ 9,873 $ 7,816
See accompanying Notes to Consolidated Condensed Financial Statements.
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Bell Industries, Inc.
Notes to Consolidated 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 of shares 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 nine months of 1996, the Company acquired four 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 nine months ended
September 30, 1996 and 1995 were as follows (in thousands):
Three months ended Nine months ended
September 30 September 30
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1996 1995 1996 1995
---- ---- ---- ----
Net sales
Electronics $116,113 $118,469 $351,060 $331,424
Graphics and
Electronic Imaging 35,087 17,713 79,292 52,575
Recreational Products 13,106 12,457 33,713 33,160
-------- -------- -------- --------
$164,306 $148,639 $464,065 $417,159
======== ======== ======== ========
Operating income
Electronics $ 8,694 $ 9,104 $ 25,556 $ 24,253
Graphics and
Electronic Imaging 1,017 355 2,480 1,341
Recreational Products 924 917 2,427 2,579
-------- -------- -------- --------
Operating income 10,635 10,376 30,463 28,173
Corporate costs (2,131) (2,123) (6,667) (6,498)
Interest expense (952) (872) (2,796) (2,602)
Income tax provision (3,172) (3,100) (8,820) (8,011)
-------- -------- -------- --------
Net income $ 4,380 $ 4,281 $ 12,180 $ 11,062
======== ======== ======== ========
For the nine months ended September 30, 1996, the Company's net sales increased
11.2% to $464.1 million and operating income increased 8.1% to $30.5 million
over the comparable period in the prior year. Net income increased 10.1% to
$12.2 million, or $1.61 per share, compared to $11.1 million, or $1.49 per
share, in 1995.
For the three months ended September 30, 1996, the Company's net sales
increased 10.5% to $164.3 million and operating income increased 2.5% to $10.6
million over the corresponding quarter in the prior year. Net income increased
to $4.4 million, or $.58 per share, compared to $4.3 million, or $.57 per
share, in the prior year quarter.
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Sales of the Electronics Group for the nine months ended September 30, 1996
increased 5.9% to $351.1 million and operating income increased 5.4% to $25.6
million. For the quarter, sales decreased 2.0% to $116.1 million and operating
income decreased 4.5% to $8.7 million over the comparable prior year quarter.
Results for the nine months reflected stronger shipments of components during
the first few months of 1996 and increased sales of microcomputer systems and
services. Results for the quarter were impacted by protracted weakness in the
electronics market and the recent termination of the Company's National
Semiconductor franchise. During the quarter, the Company began receiving
inventories and shipping initial orders relating to the new Samsung
Semiconductor franchise.
Graphics and Electronic Imaging Group sales for the nine months ended September
30, 1996 increased 50.8% to $79.3 million and operating income increased 84.9%
to $2.5 million. Group sales for the quarter increased 98.1% to $35.1 million
and operating income increased 186.5% to $1.0 million. These results reflected
contributions from recent acquisitions, new facilities, and improved market
conditions, particularly in California.
Recreational Products Group sales for the nine months increased 1.7% to $33.7
million while operating income decreased 5.9% to $2.4 million. For the
quarter, sales increased 5.2% to $13.1 million while operating income remained
consistent with prior year results. Year-to-date operating results were
impacted by severe winter weather conditions in the upper Midwest which
continued throughout the first half of the year as well as costs related to
expanding into Michigan.
Cost of products sold as a percentage of sales for the nine months increased to
77.7% from 77.3%, while selling, general and administrative expenses decreased
to 17.1% of sales from 17.5%. 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 September 30, 1996 as set
forth in the table below (dollars in thousands, except per share amounts):
September 30 December 31 September 30
1996 1995 1995
---- ---- ----
Cash and cash equivalents $ 4,193 $ 4,819 $ 1,102
Working capital $142,050 $136,227 $127,976
Current ratio 2.9:1 2.9:1 2.9:1
Long-term liabilities
to total capitalization 24.5% 27.0% 26.4%
Shareholders' equity per share $ 17.96 $ 16.23 $ 15.74
Days' sales in receivables 50 50 49
Days' sales in inventories 83 96 86
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Net cash provided by operating activities was $14.2 million for the nine months
ended September 30, 1996 compared to net cash used in operating activities of
$1.8 million for the comparable period in 1995. Cash flows from operating
activities in 1996 reflected increased profits and the impact of working
capital reductions related to softer market conditions. Operating cash flows in
1995 were impacted by increased investment in receivables and inventories. Cash
flows were utilized for scheduled payments on the Company's Senior Notes and
capital lease obligations. In addition, cash flows were used to fund property
acquisitions, including the Company's newly acquired corporate office in El
Segundo, California, as well as, continued investment in information systems.
Additionally, during the first nine months of 1996, the Company acquired four
Graphics and Electronic Imaging businesses for cash and the issuance of
approximately 106,000 shares of Bell common stock. 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.
PART II - OTHER INFORMATION
Items 1 through 5.
Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
4. The Third Amendment Agreement dated July 31,
1996, among Registrant and Insurance Companies
named therein providing for certain amendments
to the Note Purchase Agreement dated February
1, 1991.
27. Financial Data Schedule.
(b) Reports on Form 8-K:
None
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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: October 24, 1996 /s/ THEODORE WILLIAMS
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Theodore Williams,
Chairman and
Chief Executive Officer
DATE: October 24, 1996 /s/ BRUCE M. JAFFE
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Bruce M. Jaffe,
President and
Chief Operating Officer
DATE: October 24, 1996 /s/ TRACY A. EDWARDS
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Tracy A. Edwards,
Vice President and
Chief Financial Officer