Bell Microproducts Announces Financial Results for the Fourth
Quarter and Full Fiscal Year 2009
GlobeNewswire
2010-03-04
Sequential Sales Up 9% to $837 Million
Quarterly Earnings Improve to $0.40 per Share and Non-GAAP Earnings to
$0.28 per Share
SAN JOSE, Calif., March 3, 2010 (GLOBE NEWSWIRE) -- 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 and twelve months ended December 31, 2009.
Net sales in the fourth fiscal quarter of 2009 were $837.0 million, an
increase of 9% compared to both the third quarter of 2009 and the
fourth quarter of 2008. Net income for the fourth fiscal quarter of
2009 was $12.9 million, or $0.40 per diluted share, compared to net
income of $1.7 million, or $0.05 per diluted share in the prior
quarter, and a net loss of $(33.5) million, or $(1.04) per share in the
fourth quarter of 2008. On a non-GAAP basis, the Company generated net
income of $9.1 million, or $0.28 per diluted share in the fourth fiscal
quarter of 2009, as compared to non-GAAP net income of $4.2 million, or
$0.13 per diluted share in the prior quarter and a non-GAAP net loss of
$(16.4) million, or $(0.51) per share, in the fourth quarter of 2008.
"We are pleased to report significantly improved profits and
fundamentals in the fourth quarter as we concluded a year full of
accomplishments," said W. Donald Bell, President and CEO. "Sales
increased in each major geography as market conditions improved and we
executed against our goals. We were particularly encouraged by Europe,
where sales increased 14% compared to same quarter last year and 17%
sequentially. With our sales growth, solid margins and lower expenses,
we generated significant sequential increases in our GAAP and non-GAAP
profits. Our 2010 focus is on further improving our execution and
shareholder returns."
Key Financial Highlights for the Fourth Quarter of 2009:
-- Net sales were $837.0 million, up 9% compared to the third fiscal
quarter of 2009.
-- Selling, general and administrative expenses (excluding professional
fees) were down 25% and professional fees were down 76% from the fourth
quarter of 2008.
-- The Company reported operating income of 2.1% of sales and net income of
$12.9 million ($0.40 per diluted share).
-- Non-GAAP net income was $9.1 million ($0.28 per diluted share), up from
$4.2 million ($0.13 per diluted share) in the third quarter of 2009.
-- Working capital, defined as current assets less current liabilities,
increased 14% to $152 million, and the cash conversion cycle declined
from 41 days to 40 days, compared to September 30, 2009.
-- In September 2009, the Company became current with its SEC filing
requirements, and in early 2010:
- the Company's shares became relisted on The NASDAQ Global Market
under the symbol "BELM", and
- the Company announced that the SEC investigation concerning its
accounting and financial reporting matters had been completed and that
no enforcement action was recommended.
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, including
the following recorded in the fourth quarter of 2009:
-- a $3.2 million credit recorded upon a contract settlement, and
-- net tax credits of $8.6 million to reverse a portion of the valuation
allowance previously recorded on certain deferred tax assets.
Net Sales and Product Mix by Region
The following is a comparison of the Company's net sales and product
mix for the fourth quarter of 2009 in each of its three major
geographic regions:
-- North American net sales were $354.0 million (42% of total revenues), a
sequential increase of 4%. The sales growth was primarily fueled by an
improved market for storage components, improved execution of
semiconductor sales and continued growth in value-added products and
services. Compared to the fourth quarter of 2008, North American net
sales increased 1%.
-- European region net sales were $351.7 million (42% of total revenues), a
sequential increase of 17% (16% in constant currency), primarily
attributable to an improved market for storage components, a seasonal
increase in enterprise product sales and a strengthening of foreign
currencies in relation to the US dollar. Compared to the fourth quarter
of 2008, European net sales increased 14% (5% in constant currency).
-- Latin American net sales were $130.8 million (16% of total revenues), a
sequential increase of 6% (5% in constant currency). Compared to the
fourth quarter of 2008, Latin American net sales increased 19% (13% in
constant currency) due to an improved market for semiconductor products
and storage components.
The following is a net sales breakdown for Bell Micro's major
categories of products and services for the fourth fiscal quarter:
-- The Components and Peripherals category, which represented 46% of net
sales, increased 16% sequentially and increased 27% compared to the
comparable quarter of 2008. Disk drive sales increased 16% from both
comparable prior periods, primarily in Europe and North America, and
primarily due to stabilized unit pricing and a favorable product mix.
Disk drive sales represented 26% of total net sales. Also contributing
to the growth in Components and Peripherals was increased sales of
certain semiconductor products, primarily in Latin America.
-- The Solutions category increased 5% sequentially to represent 54% of
total net sales in the fourth quarter of 2009. The sequential increase
was primarily due to higher sales of software licenses in Europe and
higher sales of computer platform products, primarily in North America.
Solutions sales declined by nearly 3% compared to the fourth quarter of
2008.
Fiscal 2009 Overview
Annual net sales for 2009 were $3.0 billion, a 16% decrease from net
sales for 2008. Net income for 2009 was $7.5 million, or $0.23 per
diluted share, as compared to a net loss of $(82.5) million, or $(2.55)
per share, in 2008. Non-GAAP net income generated in 2009 was $16.4
million, or $0.50 per diluted share, as compared to a non-GAAP net loss
of $(23.0) million, or $(0.71) per diluted share, in 2008.
Balance Sheet
The Company's key balance sheet metrics as of December 31, 2009, as
compared to December 31, 2008, are as follows:
-- Total debt declined 8% to $350 million, and the Company is in compliance
with all financial covenants of its banking agreements;
-- Working capital, defined as current assets less current liabilities,
increased 30% to $152 million and the cash conversion cycle declined
from 46 days to 40 days;
-- Accounts receivable increased 1% to $435 million and days sales
outstanding declined from 50 days to 47 days;
-- Inventory increased 28% to $296 million and accounts payable and cash
overdraft increased 31% to $361 million due to opportunistic purchases
of storage components late in the quarter.
First Quarter 2010 Outlook
Management anticipates first quarter 2010 sales of $780 million to $815
million, an increase of 9% to 14% from the first quarter of 2009.
Further, based upon foreign currency exchange rate changes to date, we
anticipate first quarter currency losses of approximately $3 to $4
million.
Conference Call
A conference call is scheduled for today, March 3, 2010, at 1:30 p.m.
Pacific Time. The Company will broadcast the conference call via a
webcast over the internet. To listen to the webcast, please visit the
investors section of the Bell Micro website at www.bellmicro.com. A
replay will be available following the call on Bell Micro's Investor
Relations web site or for one week at the following numbers:
888-286-8010 or 617-801-6888 with ID#55032448.
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, the
Company is one of the world's largest storage-centric value-added
distributors.
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: our ability to comply with the
financial covenants in our credit agreements; our ability to achieve
cost reductions and other benefits in connection with our strategic
initiatives; the circumstances resulting in the restatement of our
historical financial statements and the material weaknesses in our
internal control over financial reporting and in our disclosure
controls and procedures; our ability to remain current in our SEC
filings; loss or adverse effect on our supplier relationships; our
ability to accurately forecast customer demand and order sufficient
product quantities; competition in the markets in which we operate; the
products we sell may not satisfy shifting customer demand; our reliance
on third parties to manufacture the products we sell; our reliance on
credit provided by our manufacturers to finance our inventory
purchases; risks related to our substantial indebtedness, including the
inability to obtain additional financing for our operations on terms
acceptable to us or at all; limitations on our operating and strategic
flexibility under the terms of our debt agreements; our ability to
attract and retain qualified personnel; risks associated with doing
business abroad, including foreign currency risks; our inability to
identify, acquire and integrate acquired businesses; the outcome of any
pending or future litigation or regulatory proceedings, including the
pending French tax proceeding, the current shareholder lawsuit and any
claims or litigation related to the restatement of our consolidated
financial statements; the effects of a prolonged economic downturn; and
our ability to reduce professional fees for audit, legal, tax and
outside accounting advisor services.
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, 2008.
BELL MICROPRODUCTS INC.
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
December 31,
2009 2008 (1)
--------- ---------
ASSETS
Current assets:
Cash (2) $ 21,132 $ 22,775
Accounts receivable, net 434,858 429,853
Inventories 295,692 230,652
Prepaid expenses and other
current assets 44,088 24,907
--------- ---------
Total current assets 795,770 708,187
Property and equipment, net 15,710 19,042
Goodwill and other
intangibles 27,717 28,526
Other long-term assets 17,779 26,371
--------- ---------
Total assets $ 856,976 $ 782,126
========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable and cash
overdraft $ 360,868 $ 274,745
Borrowings under lines of
credit and current portion
of
long-term debt 190,788 221,691
Other accrued liabilities 91,784 94,658
--------- ---------
Total current liabilities 643,440 591,094
Long-term debt, net of
current portion 159,494 161,063
Other long-term liabilities 22,210 24,269
--------- ---------
Total liabilities 825,144 776,426
Shareholders' equity 31,832 5,700
--------- ---------
Total liabilities and
shareholders' equity $ 856,976 $ 782,126
========= =========
(1) Adjusted for the retrospective adoption of Financial Accounting
Standards Board ("FASB") ASC 470-20, Debt with Conversion and Other
Options ("ASC 470-20").
(2) Includes approximately $2.0 million of compensating balances under
certain of the Company's credit arrangements at December 31, 2009.
BELL MICROPRODUCTS INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
Three Months Ended
-------------------------------- Twelve Months Ended
Dec. 31, Sep. 30, Dec. 31, December 31,
------------------------
2009 2009 2008(1) 2009 2008(1)
--------- --------- ---------- ----------- -----------
Net sales $ 836,967 $ 765,156 $ 768,806 $ 3,021,167 $ 3,579,499
Cost of sales 758,568 693,431 690,301 2,725,127 3,244,053
--------- --------- ---------- ----------- -----------
Gross profit 78,399 71,725 78,505 296,040 335,446
Selling, general and
administrative expense 54,652 59,040 73,307 226,329 302,416
Professional fees 4,197 2,906 17,220 26,129 56,763
Impairment of goodwill and
other intangibles -- -- 5,864 -- 5,864
Restructuring costs 1,696 -- 1,949 3,795 4,289
--------- --------- ---------- ----------- -----------
Total operating expenses 60,545 61,946 98,340 256,253 369,332
--------- --------- ---------- ----------- -----------
Operating income (loss) 17,854 9,779 (19,835) 39,787 (33,886)
Interest and other expense,
net 8,979 7,517 14,281 30,976 48,053
--------- --------- ---------- ----------- -----------
Income (loss) before income
taxes 8,875 2,262 (34,116) 8,811 (81,939)
Provision for (benefit from)
income taxes (4,073) 597 (637) 1,289 527
--------- --------- ---------- ----------- -----------
Net income (loss) $ 12,948 $ 1,665 $ (33,479) $ 7,522 $ (82,466)
========= ========= ========== =========== ===========
Income (loss) per share:
Basic $ 0.41 $ 0.05 $ (1.04) $ 0.24 $ (2.55)
Diluted $ 0.40 $ 0.05 $ (1.04) $ 0.23 $ (2.55)
Shares used in per share
calculation:
Basic 31,919 31,879 32,070 31,859 32,299
Diluted 32,694 32,575 32,070 32,595 32,299
(1) Adjusted for the retrospective adoption of ASC 470-20.
BELL MICROPRODUCTS INC.
Supplemental Reconciliation of GAAP to Non-GAAP Results
(In thousands, except per share data)
(Unaudited)
Three Months Ended
---------------------------------- Twelve Months Ended
Dec. 31, Sep. 30, Dec. 31, December 31,
-------------------------------------------------
2009 2009 2008 2009 2008
---------------------------------- -------------------------------------------------
Net income (loss):
GAAP net income (loss) $ 12,948 $ 1,665 $ (33,479) $ 7,522 $ (82,466)
Adjustments:
Professional fees (1) 1,997 706 15,020 17,329 47,963
Trade settlements -- (334) (4,461) (15,058) (10,563)
ProSys derivative and
related settlement (3,224) (2,374) 1,217 (6,156) 4,019
Intangible amortization 798 815 793 3,170 3,405
Stock-based compensation 776 477 709 2,518 2,955
Restructuring costs 1,696 -- 1,949 3,795 4,289
Amortization of debt
discount and issuance
costs 3,526 3,386 3,130 13,554 11,614
Income tax credits (8,623) -- -- (8,623) --
Income tax impacts of
non-GAAP items (2) (744) (174) (1,245) (1,665) (4,248)
---------------------------------- -----------------------
Total adjustments to GAAP
net income (loss) (3,798) 2,502 17,112 8,864 59,434
---------------------------------- -----------------------
Non-GAAP net income (loss) $ 9,150 $ 4,167 $ (16,367) $ 16,386 $(23,032)
================================== =======================
Shares used in computing
non-GAAP net income:
Basic 31,919 31,879 32,070 31,859 32,299
================================== =======================
Diluted 32,694 32,575 32,070 32,595 32,299
================================== =======================
Basic net income (loss) per
share:
GAAP $ 0.41 $ 0.05 $ (1.04) $ 0.24 $ (2.55)
Adjustments (0.12) 0.08 0.53 0.27 1.84
---------------------------------- -----------------------
Non-GAAP $ 0.29 $ 0.13 $ (0.51) $ 0.51 $ (0.71)
================================== =======================
Diluted net income (loss) per
share:
GAAP $ 0.40 $ 0.05 $ (1.04) $ 0.23 $ (2.55)
Adjustments (0.12) 0.08 0.53 0.27 1.84
---------------------------------- -----------------------
Non-GAAP $ 0.28 $ 0.13 $ (0.51) $ 0.50 $ (0.71)
================================== =======================
(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 certain costs of auditors,
investigators, lawyers and other outside advisors, through September
30, 2009, these costs were utilized in connection with: 1) independent
accounting investigations, 2) the restatement of certain
previously-filed financial statements, and 3) the preparation of the
delinquent financial statements necessary to regain SEC reporting
compliance. 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 approximately one quarter of the Company's estimated
annual spending for such professional fees on matters other than those
listed above. 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.
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
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