Bell Microproducts Inc. (Nasdaq:BELM), one of the world's largest
value-added distributors of storage and computing technology, today
announced its financial results for the three months ended March
31, 2010.
Net sales in the first fiscal quarter of 2010 were $800.6
million, an increase of 12% compared to the first fiscal quarter of
2009 and a decrease of 4% sequentially. The Company generated a net
loss for the first fiscal quarter of 2010 of $(5.0) million, or
$(0.15) per share, compared to net income of $12.9 million, or
$0.40 per diluted share, in the prior quarter, and a net loss of
$(4.0) million, or $(0.13) per share in the first fiscal quarter of
2009. On a non-GAAP basis, the Company generated net income of $5.3
million, or $0.16 per diluted share in the first fiscal quarter of
2010, as compared to net income of $9.1 million, or $0.28 per
diluted share in the fourth fiscal quarter of 2009, and non-GAAP
net income of $3.8 million, or $0.12 per diluted share, in the
first fiscal quarter of 2009.
Key Financial Highlights for the First Quarter of
2010:
- Net sales were $800.6 million, up 12% compared to the first
fiscal quarter of 2009, and down 4% sequentially.
- Selling, general and administrative expenses (excluding
professional fees) were down 4% and professional fees were down 13%
from the first quarter of 2009.
- Non-GAAP net income was $5.3 million ($0.16 per diluted share),
up from $3.8 million ($0.12 per diluted share) in the first quarter
of 2009.
- On March 29, 2010, the Company announced an agreement to be
acquired by Avnet, Inc. (NYSE:AVT) in an all cash merger for $7.00
per share. Included in professional fees in the most recent
quarter were approximately $1.7 million of fees incurred in
connection with the pending acquisition.
Non-GAAP results reflect the exclusion of various non-cash and
other charges and credits from the Company's reported GAAP results
as detailed in the attached supplemental reconciliation table.
Net Sales and Product Mix by Region
Distribution net sales for the first quarter of 2010 were $716.4
million, an increase of 17% from the first quarter of 2009 and a
sequential quarter increase of less than 1%. Before the
effects of currency rate changes, distribution net sales in the
first quarter of 2010 increased 11% compared to the same quarter of
the prior year and 3% sequentially.
The following is a comparison of the Company's net sales and
product mix for the first quarter of 2010 in each of its three
major geographic regions:
- North American net sales were $330.7 million (41% of total
revenues), a year-over-year increase of 14% and a sequential
decline of 7% due primarily to seasonality. Included in North
American net sales are the following:
- Distribution net sales in North America increased 30% compared
to the first quarter of 2009 and 6% sequentially, due primarily to
market growth and market share growth in storage systems and disk
drives.
- Single-tier sales in North America, primarily from ProSys,
declined 16% compared to the first quarter of 2009 and 31%
sequentially due to seasonality and due to the buying patterns of
certain strategic customers. Single-tier sales are expected to
increase sequentially in the second quarter of 2010.
- European region net sales were $337.8 million (42% of total
revenues), a year-over-year increase of 12% and a sequential
decline of 4% due to currency rate changes. The year-over-year
sales growth was primarily fueled by sales of computer platforms
and disk drives, together with the positive effects of currency
rate changes. These increases were partially offset by a
reduction in sales of software due to the timing of certain vendor
promotions. Before the effects of currency rate changes,
European net sales in the first quarter of 2010 increased 4%
compared to the same quarter of the prior year and 2% sequentially.
- Latin American net sales were $132.1 million (17% of total
revenues), a year-over-year increase of 8% and a sequential
increase of 1%. The year-over-year increase was generated
primarily by growth in sales of semiconductor products and the
positive effects of currency rate changes. Before the effects
of currency rate changes, Latin American net sales in the first
quarter of 2010 increased 3% compared to the same quarter of the
prior year and 1% sequentially.
The following is a net sales breakdown for Bell Micro's major
categories of products and services for the first fiscal
quarter:
- The Components and Peripherals category, which represented 51%
of net sales, increased 6% sequentially and 33% compared to the
comparable quarter of 2009. Disk drive sales decreased 2%
sequentially and increased 26% from the first quarter of 2009,
primarily due primarily to increased market demand. Disk drive
sales represented 27% of total net sales. Also contributing to
the growth in Components and Peripherals was increased sales of
certain semiconductor products.
- The Solutions category decreased 13% sequentially to represent
49% of total net sales in the first quarter of 2010. The
sequential decrease was due to lower single-tier sales and lower
sales of software licenses in Europe, partially offset by higher
storage system sales in North America and Europe. Solutions
sales declined by 4% compared to the first quarter of 2009,
primarily due to lower single-tier sales.
Outstanding Debt
Total debt increased 11% to $389 million due primarily to the
first quarter payment of certain trade liabilities in connection
with year-end inventory purchases. The Company is in
compliance with all covenants of its banking agreements.
About Bell Microproducts Inc.
Bell Microproducts (Nasdaq:BELM) is an international,
value-added distributor of a wide range of high-tech products,
solutions and services, including storage systems, servers,
software, computer components, and peripherals, as well as
maintenance and professional services. An industry-recognized
specialist in storage products, this Fortune 1000 company is one of
the world's largest storage-centric value-added
distributors. In 2010, the company celebrated the sale of its
100 millionth hard disk drive, setting a significant industry
milestone.
Bell Microproducts is uniquely qualified with deep technical and
application expertise to service a broad range of information
technology needs. From design to deployment, its products are
available at any level of integration, from components to subsystem
assemblies and fully-integrated, tested and certified system
solutions. More information can be found in the Company's SEC
filings, or by visiting the Bell Microproducts website at
http://www.bellmicro.com.
Safe Harbor Statement
Some of the statements included in this press release constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. You should not place
undue reliance on these statements. These forward-looking
statements include statements that reflect the current views of our
senior management with respect to our financial performance and
future events with respect to our business and our industry in
general. Statements that include the words "expect," "intend,"
"plan," "believe," "anticipate," "estimate" and similar statements
of a future or forward-looking nature identify forward-looking
statements.
Forward-looking statements address matters that involve risks
and uncertainties. Accordingly, there are or will be important
factors that could cause our actual results to differ materially
from those indicated in these statements. We believe that
these factors include, but are not limited to, the following
: the occurrence of any event, change or other circumstance
that could give rise to the termination of our merger agreement
with Avnet, Inc. ("Avnet") that could require us to reimburse Avnet
up to $2.5 million for fees and expenses and to pay Avnet a
termination fee of up to $10.5 million (less any reimbursement of
fees and expenses already made); the outcome of legal proceedings
instituted against us and others relating to the proposed merger;
the failure to obtain shareholder approval for the proposed merger
or the failure to satisfy other conditions to completion of the
merger; our inability to obtain any required regulatory approvals
related to the merger in a timely manner, or at all; the failure of
the merger to close for any other reason; risks that the proposed
merger disrupts our current plans and operations and the potential
difficulties in employee retention as a result of the merger; the
effect of the announcement of the merger on our business and
customer relationships, operating results and business generally,
including our ability to retain key employees; the costs, fees,
expenses and charges related to the merger, which we will not
recover if we do not complete the merger; the material weaknesses
in our internal control over financial reporting and in our
disclosure controls and procedures; the outcome of any pending or
future litigation or regulatory proceedings, including the current
shareholder lawsuits related to the proposed merger and any claims
or litigation related to the restatement of our consolidated
financial statements; risks related to our substantial
indebtedness, including the inability to obtain additional
financing for our operations on terms acceptable to us or at all;
our ability to comply with the financial covenants in our credit
agreements; limitations on our operating and strategic flexibility
under the terms of our debt agreements; our reliance on credit
provided by our manufacturers to finance our inventory purchases;
the effects of a prolonged economic downturn; our reliance on third
parties to manufacture the products we sell; competition in the
markets in which we operate; risks associated with doing business
abroad, including foreign currency risks; our ability to accurately
forecast customer demand and order sufficient product quantities;
the fact that the products we sell may not satisfy shifting
customer demand or compete successfully with our competitors'
products; loss or adverse effect on our supplier relationships,
including the reduction or elimination of rebates offered by our
manufacturers; our ability to achieve cost reductions and other
benefits in connection with our strategic initiatives; our ability
to attract and retain qualified personnel; and our inability to
identify, acquire and integrate acquired businesses.
For a more detailed discussion of how these and other risks and
uncertainties could cause our actual results to differ materially
from those indicated in our forward-looking statements, see our
reports filed with SEC (available at www.sec.gov), including our
Annual Report on Form 10-K for the year ended December 31,
2009.
BELL MICROPRODUCTS INC. |
Condensed Consolidated Balance
Sheets |
(In thousands) |
|
|
|
|
Mar. 31, 2010 |
Dec. 31, 2009 |
ASSETS |
(unaudited) |
|
Current assets: |
|
|
Cash |
$ 20,976 |
$ 21,132 |
Accounts receivable, net |
434,982 |
434,858 |
Inventories |
281,454 |
295,692 |
Prepaid expenses and other current
assets |
48,653 |
44,088 |
Total current assets |
786,065 |
795,770 |
|
|
|
Property and equipment, net |
14,603 |
15,710 |
Goodwill and other intangibles |
26,744 |
27,717 |
Other long-term assets |
16,787 |
17,779 |
Total assets |
$ 844,199 |
$ 856,976 |
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable and cash overdraft |
$ 330,059 |
$ 360,868 |
Borrowings under lines of credit and
current portion of long-term debt |
328,772 |
190,788 |
Other accrued liabilities |
83,915 |
91,784 |
Total current liabilities |
742,746 |
643,440 |
|
|
|
Long-term debt, net of current portion |
60,511 |
159,494 |
Other long-term liabilities |
21,174 |
22,210 |
Total liabilities |
824,431 |
825,144 |
|
|
|
Shareholders' equity |
19,768 |
31,832 |
Total liabilities and shareholders'
equity |
$ 844,199 |
$ 856,976 |
|
|
|
BELL MICROPRODUCTS INC. |
Condensed Consolidated
Statements Of Operations |
(In thousands, except per share
data) |
(unaudited) |
|
|
|
|
|
Three Months Ended |
|
Mar. 31, 2010 |
Dec. 31, 2009 |
Mar. 31, 2009 |
Net sales |
$ 800,560 |
$ 836,967 |
$ 715,316 |
Cost of sales |
730,946 |
758,568 |
643,464 |
Gross profit |
69,614 |
78,399 |
71,852 |
|
|
|
|
Selling, general and administrative
expense |
54,972 |
54,652 |
57,331 |
Professional fees |
7,502 |
4,197 |
8,574 |
Restructuring costs |
337 |
1,696 |
1,188 |
Total operating expenses |
62,811 |
60,545 |
67,093 |
|
|
|
|
Operating income |
6,803 |
17,854 |
4,759 |
Interest and other expense, net |
8,391 |
8,527 |
7,792 |
Foreign currency (gains) and losses |
1,991 |
452 |
(1,664) |
Income (loss) before income taxes |
(3,579) |
8,875 |
(1,369) |
Provision for (benefit from) income
taxes |
1,374 |
(4,073) |
2,674 |
Net income (loss) |
$ (4,953) |
$ 12,948 |
$ (4,043) |
|
|
|
|
Income (loss) per share: |
|
|
|
Basic |
$ (0.15) |
$ 0.41 |
$ (0.13) |
Diluted |
$ (0.15) |
$ 0.40 |
$ (0.13) |
|
|
|
|
Shares used in per share calculation: |
|
|
|
Basic |
32,122 |
31,919 |
31,790 |
Diluted |
32,122 |
32,694 |
31,790 |
|
BELL MICROPRODUCTS INC. |
Supplemental Reconciliation of
GAAP to Non-GAAP Results |
(In thousands, except per share
data) |
(Unaudited) |
|
|
|
|
|
Three Months Ended |
|
Mar. 31, 2010 |
Dec. 31, 2009 |
Mar. 31, 2009 |
Net income (loss): |
|
|
|
GAAP net income (loss) |
$ (4,953) |
$ 12,948 |
$ (4,043) |
Adjustments: |
|
|
|
Professional fees (1) |
5,302 |
1,997 |
6,374 |
Trade settlements |
-- |
-- |
(4,216) |
ProSys derivative and related
settlement |
-- |
(3,224) |
132 |
Intangible amortization |
792 |
798 |
784 |
Stock-based compensation |
926 |
776 |
561 |
Restructuring costs |
337 |
1,696 |
1,188 |
Amortization of debt discount and
issuance costs |
3,633 |
3,526 |
3,416 |
Income tax credits |
-- |
(8,623) |
-- |
Income tax impacts of non-GAAP items
(2) |
(725) |
(744) |
(433) |
Total adjustments to GAAP net income
(loss) |
10,264 |
(3,798) |
7,806 |
Non-GAAP net income |
$ 5,311 |
$ 9,150 |
$ 3,763 |
|
|
|
|
Shares used in computing non-GAAP net income
(loss) per share: |
|
|
|
Basic |
32,122 |
31,919 |
31,790 |
Diluted |
33,429 |
32,694 |
32,201 |
|
|
|
|
Basic net income (loss) per share: |
|
|
|
GAAP |
$ (0.15) |
$ 0.41 |
$ (0.13) |
Adjustments |
0.32 |
(0.12) |
0.25 |
Non-GAAP |
$ 0.17 |
$ 0.29 |
$ 0.12 |
|
|
|
|
Diluted net income (loss) per share: |
|
|
|
GAAP |
$ (0.15) |
$ 0.40 |
$ (0.13) |
Adjustments |
0.31 |
(0.12) |
0.25 |
Non-GAAP |
$ 0.16 |
$ 0.28 |
$ 0.12 |
(1) Excluded from non-GAAP net income is
professional fees for auditors, investigators, lawyers and other
outside advisors incurred in excess of $2.2 million for each
three-month period presented, as management believes $2.2 million
represents approximately one quarter of the Company's expected
annual spending on such professional fees. The actual
professional fees incurred may be significantly different than this
estimate, and such costs will likely fluctuate significantly from
quarter-to-quarter and year-to-year. |
(2) Amount represents the income tax effect
of the adjustments to GAAP net income (loss). |
ABOUT NON-GAAP FINANCIAL MEASURES
In addition to the Company's condensed consolidated financial
statements prepared in accordance with accounting principles
generally accepted in the United States of America, or GAAP, the
Company is providing in this release supplemental non-GAAP net
income (loss) and non-GAAP net income (loss) per share as compared
to the corresponding financial measures prepared in accordance with
GAAP.
The presentation of supplemental non-GAAP financial information,
which is not prepared under any comprehensive set of accounting
rules or principles, is not intended to be considered in isolation
or as a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP. In addition, these
measures may be materially different from non-GAAP financial
measures used by other companies.
The Company is providing these non-GAAP financial measures
because it believes that such measures provide important
supplemental information to management and investors about its core
operating results, primarily because the non-GAAP measures exclude
certain charges and credits that management believes that investors
benefit by being provided with such information. Company management
uses these non-GAAP financial measures, in addition to the
corresponding GAAP financial measures, in evaluating the Company's
operating performance, in planning and forecasting future periods,
in making decisions regarding business operations and the
allocation of resources, and in comparing the Company's performance
against its historical performance. The Company excludes the
following items from its non-GAAP financial measures:
Professional fees. These amounts include the costs of auditors,
lawyers and other outside advisors, which were in excess of typical
costs due to the extensive work in connection with regaining SEC
reporting compliance in 2009, the Company's material weaknesses in
internal controls through the first quarter of 2010, and a fairness
opinion fee in connection with the pending Avnet acquisition
incurred in the first quarter of 2010. Management has excluded
such costs incurred in excess of $2.2 million for each three-month
period presented, as it believes $2.2 million represents one
quarter of the Company's estimated annual professional fee spending
that will be incurred subsequent to the remediation of all material
control weaknesses. The actual professional fees incurred in
future periods may be significantly different than this estimate,
and such costs will likely fluctuate significantly from
quarter-to-quarter and year-to-year.
Trade settlements. These credits were recorded upon the
settlement of certain disputed trade receivable credits (recorded
as an increase in net sales) and trade payable credits (recorded as
a reduction of cost of goods sold) received in prior periods, but
settled in the period recorded. Although the resolution of
disputed trade credits is an ongoing part of the Company's
business, these credits are typically identified and a resolution
initiated and completed within a normal operating
cycle. During the process of restating its consolidated
financial statements and the filing of its December 2006 10-K, the
Company identified a significant number of historical credits that
lacked sufficient documentation. The Company obtained
additional documentation and recorded a higher than typical amount
of credits to income in 2009 associated with those historical
credits.
ProSys derivative and related settlement. These charges and
credits represent amounts recorded under agreements with the former
shareholders of ProSys, under which the Company has granted those
shareholders rights to put certain shares to the Company and rights
to receive cash from the Company upon open market sales under
certain conditions. Also included in the fourth quarter of
2009 was a credit recorded upon settlement of a related
dispute.
Intangible amortization. These charges reflect the non-cash
amortization of certain intangible assets.
Stock-based compensation. These non-cash charges reflect
amounts recorded pertaining to stock options and restricted stock
units granted under stock-based compensation plans.
Restructuring costs. At various times in the past, we have
implemented restructuring plans to improve operating
performance. Restructuring costs consist of estimated expenses
associated with workforce reductions, the consolidation of excess
facilities and the impairment of leasehold improvements and other
equipment associated with abandoned facilities. While we
believe it is important to understand these charges, we do not
believe that these charges are indicative of our future operating
results.
Amortization of debt discount and issuance costs. These charges
represent the non-cash amortization related to the retrospective
adoption of ASC 470-20 and certain issuance costs that are being
amortized over the term of the underlying debt.
Income tax credits. The Company recorded credits in the
fourth quarter of 2009 related to the reversal of a portion of the
valuation allowance previously recorded on certain deferred tax
assets. Of the $8.6 million recorded, $2.4 million was
pertaining to prior periods, which is considered immaterial.
Income tax impacts of non-GAAP items. The Company adjusts its
provision for income taxes to reflect the tax effects of excluding
the non-GAAP items noted above.
All supplemental non-GAAP financial measures are unaudited, and
should be read in conjunction with the comparable information
presented in accordance with GAAP.
CONTACT: Bell Microproducts Inc.
Investor Relations
Nicole Noutsios
(510) 451-2952
ir@bellmicro.com
Bell Microproducts (NASDAQ:BELM)
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