BI Bell Industries,

Bell Industries, Inc. (AMEX:BI) today reported improved net income on lower revenues for the three and six months ended June 30, 2005. For the 2005 second quarter, net income rose 15 percent to $948,000, equal to $0.11 per diluted share, from $827,000, or $0.10 per diluted share, a year ago. Consolidated net revenues for the quarter amounted to $37.4 million, compared with $43.8 million last year. Net income for the year-to-date period more than doubled to $271,000, or $0.03 per diluted share, from $128,000, or $0.02 per diluted share, for the first half of 2004. Consolidated net revenues totaled $66.0 million for the current six-month period, down from $78.2 million a year earlier. "We are encouraged that our efforts to focus on higher margin business while managing operating costs resulted in improved profitability for the company, despite lower revenues," said Russell A. Doll, acting president and chief executive officer. For the 2005 second quarter, Bell's largest operating unit, the Tech.logix Group (BTL), experienced a reduction in product sales, posting revenues of $21.4 million, down from $27.0 million in the year-ago second quarter. While services revenues were slightly lower than the prior-year period, product revenues declined by $5.6 million, principally reflecting one significant product deployment in the prior-year period that was not repeated this quarter. Additionally, product sales continue to experience significant market pressure due to direct sales models, intense price competition and extended technology purchasing cycles. Despite lower overall revenues at BTL, operating income for the division increased more than four-fold to $307,000 for the second quarter of 2005 from $75,000 a year earlier. "BTL's profitability was improved from the prior year as a result of an increase in reverse logistics and depot repair business and stronger margins from our education account base," Doll said. "As one of only a few companies designated as a Microsoft Education Large Account Reseller, BTL continues to experience strength in the academic sector." Most recently, BTL was awarded the renewal of the Maryland Education Enterprise Consortium (MEEC) Microsoft License contract for three years, plus two one-year option terms, extending through July 31, 2010. The MEEC consortium was formed by the State of Maryland to facilitate licensing on a more cost effective basis for all academic institutions statewide, including public library systems, public museums and teaching hospitals. Based on an anticipated full-time faculty and staff count of 200,000, the company said the value of the contract is estimated at approximately $5 million per year. BTL has provided services to MEEC under a Microsoft Enterprise License since 1999. Doll said that following the recent announcement by BTL's largest customer, Phillip Morris USA, that it will be transitioning certain outsourcing services and product sales to another vendor, Bell intends to aggressively realign its cost structure in response to this development, while continuing its focus on depot repair, reverse logistics and wireless support services. He said details have not yet been communicated to the company, but the transition is expected to begin on or before the contract termination date of April 2006. Revenues of Bell's Recreational Products Group (RPG) in the second quarter were impacted by Midwest weather that resulted in a delay to the start of the spring selling season. For the most recent second quarter, RPG posted revenues of $13.9 million, compared with $14.7 million a year ago. Operating income totaled $834,000 for the 2005 second quarter, compared with $1.0 million in the same quarter last year. J.W. Miller, Bell's electronic components operation, recorded a 10 percent increase in operating income during the most recent second quarter to $510,000 from $464,000 a year ago, on approximately the same revenues for both periods, $2.1 million. Although revenues were consistent within both periods, increased sales of custom products and better vendor pricing resulted in a higher overall gross margin during the 2005 period. Bell continues to maintain a strong balance sheet with no bank debt. At June 30, 2005, cash and cash equivalents totaled $8.6 million, and net working capital amounted to $19.3 million, compared with $8.0 million and $18.7 million, respectively, at June 30, 2004. Shareholders' equity totaled $21.1 million, or $2.50 per share, at June 30, 2005. Bell's primary business, the Tech.logix Group, offers a comprehensive portfolio of technology products and managed lifecycle services, including planning, product sourcing, deployment and disposal, and support services. Support services include help desk support, desk side support, technical maintenance services, and reverse logistics and depot services. Bell also distributes after-market parts and accessories to the recreational vehicle market and manufactures and sells standard and custom magnetic components used in electronic applications for computer, medical, lighting and telecommunication equipment. Certain matters discussed in this news release are forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from current trends. These include, but are not limited to, the impact of the announced Philip Morris USA engagement transition and anticipated realignment of the company's cost structure, continued growth in the academic sector, potential opportunities resulting from new engagements and strengthened business development activities by BTL, and other factors described in the company's public filings from time to time. -0- *T Bell Industries, Inc. Consolidated Operating Results (In thousands, except per share data) (Unaudited) Three months ended Six months ended June 30 June 30 2005 2004 2005 2004 ---------------------------------------------------------------------- Net revenues Products $29,896 $36,250 $51,380 $62,345 Services 7,462 7,568 14,666 15,901 ------- ------- ------- ------- 37,358 43,818 66,046 78,246 ------- ------- ------- ------- Costs and expenses Cost of products sold 23,374 29,973 40,248 51,388 Cost of services provided 5,835 6,000 11,847 12,732 Selling and administrative 7,207 7,012 13,723 14,022 Interest, net (36) (38) (88) (68) ------- ------- ------- ------- 36,380 42,947 65,730 78,074 ------- ------- ------- ------- Income before income taxes 978 871 316 172 Income tax expense 30 44 45 44 ------- ------- ------- ------- Net income $ 948 $ 827 $ 271 $ 128 ======= ======= ======= ======= Basic and diluted share data Net income Basic $ .11 $ .10 $ .03 $ .02 ======= ======= ======= ======= Diluted $ .11 $ .10 $ .03 $ .02 ======= ======= ======= ======= Weighted average common stock Basic 8,460 8,375 8,457 8,373 ======= ======= ======= ======= Diluted 8,493 8,475 8,513 8,467 ======= ======= ======= ======= ---------------------------------------------------------------------- OPERATING RESULTS BY BUSINESS SEGMENT Net revenues Technology Solutions Products $13,895 $19,459 $22,123 $31,901 Services 7,462 7,568 14,666 15,901 ------- ------- ------- ------- 21,357 27,027 36,789 47,802 Recreational Products 13,920 14,651 25,311 26,171 Electronic Components 2,081 2,140 3,946 4,273 ------- ------- ------- ------- $37,358 $43,818 $66,046 $78,246 ======= ======= ======= ======= Operating income (loss) Technology Solutions $ 307 $ 75 $ (460) $ (488) Recreational Products 834 1,002 1,052 1,108 Electronic Components 510 464 935 902 Corporate costs (709) (708) (1,299) (1,418) ------- ------- ------- ------- 942 833 228 104 Interest, net 36 38 88 68 Income tax expense (30) (44) (45) (44) ------- ------- ------- ------- Net income $ 948 $ 827 $ 271 $ 128 ======= ======= ======= ======= Bell Industries, Inc. Consolidated Condensed Balance Sheet (In thousands) (Unaudited) June 30, December 2005 31, 2004 ---------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents $ 8,642 $10,801 Accounts receivable, net 19,254 11,455 Inventories 10,920 14,364 Prepaid expenses and other 2,247 1,813 ------- ------- Total current assets 41,063 38,433 ------- ------- Fixed assets, net 3,314 3,139 Other assets 3,438 3,617 ------- ------- $47,815 $45,189 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $13,949 $11,170 Accrued payroll and liabilities 7,794 8,178 ------- ------- Total current liabilities 21,743 19,348 ------- ------- Long-term liabilities 4,930 5,025 Shareholders' equity 21,142 20,816 ------- ------- $47,815 $45,189 ======= ======= *T