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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 March 31, 2001
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 May 5, 2001: 8,858,637 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)
Three months ended
March 31
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2001 2000
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Net sales $ 52,986 $ 54,927
Costs and expenses
Cost of sales 44,622 46,729
Selling and administrative 8,350 7,774
Interest, net (164) (43)
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52,808 54,460
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Income before income taxes 178 467
Income tax provision 70 185
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Net income $ 108 $ 282
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Share and Per Share Data
BASIC
Net income $ 0.01 $ 0.03
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Weighted average common shares 8,823 9,529
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DILUTED
Net income $ 0.01 $ 0.03
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Weighted average common shares 8,879 9,631
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See accompanying Notes to Consolidated Condensed Financial Statements.
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Bell Industries, Inc.
Consolidated Condensed Balance Sheet
(Dollars in thousands)
March 31 December 31
2001 2000
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ASSETS Unaudited
Current assets:
Cash and cash equivalents $ 9,365 $ 14,433
Accounts receivable, less allowance for
doubtful accounts of $1,204 and $1,222 29,422 31,701
Inventories 15,505 15,065
Prepaid expenses and other 4,033 4,012
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Total current assets 58,325 65,211
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Fixed assets, net 5,154 4,238
Goodwill 2,206 1,540
Other assets 3,122 3,437
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$ 68,807 $ 74,426
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,114 $ 24,492
Accrued liabilities and payroll 13,775 16,041
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Total current liabilities 34,889 40,533
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Deferred compensation and other 3,182 3,411
Shareholders' equity:
Preferred stock
Authorized - 1,000,000 shares
Outstanding - none
Common stock
Authorized - 35,000,000 shares
Outstanding - 8,838,806 and 8,790,936 shares 33,263 33,117
Accumulated deficit (2,527) (2,635)
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Total shareholders' equity 30,736 30,482
Commitments and contingencies
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$ 68,807 $ 74,426
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See accompanying Notes to Consolidated Condensed Financial Statements.
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Bell Industries, Inc.
Consolidated Statement of Cash Flows
(Unaudited, in thousands)
Three months ended
March 31
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2001 2000
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Cash flows from operating activities:
Net income $ 108 $ 282
Depreciation and amortization 449 389
Provision for losses on accounts receivable 42 42
Changes in assets and liabilities (3,820) (5,102)
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Net cash used in operating activities (3,221) (4,389)
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Cash flows from investing activities:
Proceeds received on note receivable 45 165
Purchases of fixed assets and other (1,638) (647)
Purchase of business (400)
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Net cash used in investing activities (1,993) (482)
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Cash flows from financing activities:
Employee stock plans and other 146 216
Purchases of company's common stock (2,283)
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Net cash provided by (used in)
financing activities 146 (2,067)
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Net decrease in cash and cash equivalents (5,068) (6,938)
Cash and cash equivalents at beginning of period 14,433 8,550
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Cash and cash equivalents at end of period $ 9,365 $ 1,612
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Changes in assets and liabilities:
Accounts receivable $ 2,297 $ (5,225)
Inventories (440) 3,343
Accounts payable (3,378) (909)
Accrued liabilities and other (2,299) (2,311)
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Net change $ (3,820) $ (5,102)
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Supplemental cash flow information:
Interest paid $ 2 $ 21
Income taxes paid $ -- $ 558
See accompanying Notes to Consolidated Condensed Financial Statements.
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Bell Industries, Inc.
Notes to Consolidated Financial Statements
Accounting Principles
The accompanying consolidated financial statements for the three months ended
March 31, 2001 and 2000 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, 2000 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 requirements 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, 2000.
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.
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 the
year 2000. The common stock could be repurchased in the open market at varying
prices depending on market conditions and other factors. During the quarter
ended March 31, 2000, the Company repurchased 625,600 shares at an average price
of $3.65 per share under the repurchase program. During 2000, the Company
repurchased 859,900 shares at an average price of $3.43 per share. The
repurchase program expired on December 31, 2000.
Warrants
At December 31, 2000, warrants to purchase 526,556 shares at an exercise price
of $3.06 per share were outstanding. On February 1, 2001, 47,870 warrants were
exercised, and the remaining 478,686 of unexercised warrants expired.
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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 were as follows (in thousands):
Three months ended
March 31
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2001 2000
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Net sales
Systems Integration $ 39,628 $ 40,704
Recreational Products 10,925 11,888
Electronics Manufacturing 2,433 2,335
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$ 52,986 $ 54,927
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Operating income
Systems Integration $ 101 $ 117
Recreational Products 142 438
Electronics Manufacturing 559 581
Corporate costs (788) (712)
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14 424
Interest, net 164 43
Income tax provision (70) (185)
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Net income $ 108 $ 282
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Net sales for the first quarter decreased 3.5% to $53.0 million from $54.9
million in 2000 and operating income decreased to $14,000 from $424,000 in 2000.
Operating results for 2001 were impacted primarily by softening economic
conditions resulting in diminished customer spending in the Company's core
business markets. Corporate costs increased 10.7% to $788,000 from $712,000 in
the previous year. Corporate costs in 2001 include costs associated with the
Company's strategic change initiatives that commenced during the second quarter
last year. In addition, the Company recorded net interest income of $164,000 in
2001 compared with $43,000 in the first quarter last year based on the Company's
strong cash position throughout the first quarter of 2001.
Systems Integration sales for the first quarter decreased 2.6% to $39.6 million
as operating income was approximately $100,000 for both periods. The operating
results for the first quarter were impacted by the general economic weakness in
the technology sector.
Recreational Products sales decreased 8.1% to $10.9 million during the first
quarter, and operating income decreased to $142,000 from $438,000 in the prior
year. Results were impacted by shifts in gross margin on sales mix, escalating
fuel costs, and reduced consumer spending in this sector.
Electronics Manufacturing sales for the first quarter increased slightly to $2.4
million from $2.3 million, while operating income decreased slightly to $559,000
from $581,000 in the prior year. The decrease in operating income is
attributable to shifts in gross margin on sales mix.
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As a percentage of sales, cost of sales for 2001 decreased to 84.2% from 85.1%
in the comparable quarter of 2000. Selling and administrative expenses, as a
percentage of sales, increased to 15.8% from 14.2% in the prior year primarily
due to increases in information systems, payroll, training, advertising and
other related costs associated with the Company's strategic change initiatives.
The Company's effective tax rate was 39.5% for both years.
Selected financial data is set forth in the following table (dollars in
thousands, except per share amounts):
March 31 December 31
2001 2000
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Cash and cash equivalents $ 9,365 $14,433
Working capital $23,436 $24,678
Current ratio 1.7:1 1.6:1
Shareholders' equity per share $ 3.48 $ 3.47
Days' sales in receivables 56 54
Days' sales in inventories 32 26
Net cash used in operating activities was $3.2 million in the first quarter of
2001 compared with net cash used in operating activities of $4.4 million in
2000. In the first quarter of 2001, cash used in investing activities totaling
$2.0 million included expenditures on information technology, including client
contact center investments, and the purchase of a business. In the first quarter
of 2000, cash was utilized to repurchase stock in the aggregate amount of $2.3
million in connection with the Company's 2000 stock repurchase program.
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
PART II - OTHER INFORMATION
Items 1 through 5.
Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
None
(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: May 14, 2001 /s/ Tracy A. Edwards
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Tracy A. Edwards,
President and
Chief Executive Officer
DATE: May 14, 2001 /s/ Russell A. Doll
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Russell A. Doll,
Senior Vice President and
Chief Financial Officer