Bell Micro: Fiscal 1Q10 Financial Results

Bell Microproducts Inc. 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. 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.