<PAGE>   1
 
================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
                            ------------------------
 
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
 
                      FOR THE YEAR ENDED DECEMBER 31, 1997
 
                         COMMISSION FILE NUMBER 1-11471
 
                              BELL INDUSTRIES LOGO
                            ------------------------
 
<TABLE>
<S>                                            <C>
                 CALIFORNIA                                     95-2039211
        (STATE OR OTHER JURISDICTION                         (I.R.S. EMPLOYER
      OF INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NO.)
 
         2201 EAST EL SEGUNDO BLVD.                             90245-4608
           EL SEGUNDO, CALIFORNIA                               (ZIP CODE)
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 563-2355
                            ------------------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
<TABLE>
<S>                                            <C>
             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
                COMMON STOCK                              NEW YORK STOCK EXCHANGE
                                                          PACIFIC STOCK EXCHANGE
</TABLE>
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                     None.
 
     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, and (2) has been subject to such filing
requirements for the past 90 days.
                                YES [X]  NO [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein.
                               NOT APPLICABLE [X]
 
     As of March 1, 1998, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was: $122,767,000.
 
     As of March 1, 1998, the number of shares outstanding of the Registrant's
class of common stock was: 9,332,169 .
 
                       DOCUMENT INCORPORATED BY REFERENCE
 
 Proxy Statement for the 1998 Annual
               Meeting
    of Shareholders, May 5, 1998.                        PART III
================================================================================
<PAGE>   2
 
                                     PART I
 
ITEM 1. BUSINESS
 
     Bell Industries, Inc. ("Bell" or "the Company") is primarily a national
distributor of electronic components. In addition, Bell distributes graphics and
electronic imaging and recreational-related products. At December 31, 1997 Bell
employed approximately 1,900 people.
 
  ELECTRONICS
 
     The Electronics Group (77% of 1997 sales) includes one of the nation's
largest electronic components distributors. The Electronics Group sells the
following products to over 20,000 customers nationally: semiconductors (Analog
Devices, Cyrix, Dallas Semiconductor, IBM Microelectronics, Maxim, Microchip,
NEC, Samsung, Sharp, SGS-Thomson); passive components (Aromat, AVX, Bourns,
Murata, Vishay); connectors (Berg); microcomputers and related products (Apple,
Compaq, Hewlett-Packard, IBM); and power supplies and board-level products. The
group provides value-added services including: kitting; turnkey; SMART
(automated replenishment system); assembly of custom cables; harnesses and
connectors; contract purchasing; and direct programming of chips. Group
manufacturing operations produce precision stampings used in the personal
computer industry and electronic components including coils, filters and chokes
marketed under the J.W. Miller name. The group's microcomputer distribution and
services business specializes in the sale and support of computer hardware,
software and peripherals, as well as, in-house and on-site training, help desk
and application development to business and educational markets.
 
     The Electronics Group's distribution business is based in El Segundo,
California and markets electronic components from more than 30 sales facilities
located throughout the United States. The group's microcomputer distribution and
services business is based in Indianapolis, Indiana and provides sales and
services through six facilities located in Indiana, Ohio, Kentucky, Maryland,
Virginia and Wisconsin. Electronic manufacturing facilities are located in
Mountain View and Gardena, California.
 
     The group's electronics distribution business markets electronic components
supplied by over 100 manufacturers and stocks over 50,000 items at a primary
distribution center located in Southern California. During 1997, the group's ten
largest electronic component suppliers accounted for approximately 40% of group
sales.
 
     In January 1997, the Company completed the acquisition of Milgray
Electronics, Inc. ("Milgray"), a publicly-traded distributor of electronic
components. The purchase price for the stock of Milgray was approximately $100
million. Fiscal 1996 revenues for Milgray were $272 million. Since acquiring
Milgray, the Company has integrated its electronics components business through
consolidation of sales offices, conversion of business processes into a single
unified business system, centralization of administrative functions, and
combinations of distribution centers.
 
  GRAPHICS IMAGING
 
     The Graphics Imaging Group (18% of 1997 sales) distributes graphics and
electronic imaging supplies and equipment throughout the upper Midwest and
Western United States to the advertising and printing industries. The group is
based in Los Angeles, California and markets its products through thirteen sales
locations. Major product lines distributed by the group include film, plates,
chemicals and other printing supplies from Agfa, DuPont, Eastman Kodak, Imation,
Konica, and Western Litho as well as prepress and related electronic imaging
equipment from Agfa, Apple, Howtek, Intergraph, and Screen.
 
  RECREATIONAL PRODUCTS
 
     The Recreational Products Group (5% of 1997 sales) distributes after-market
products for the recreational vehicle, mobile home, motorcycle, snowmobile, and
marine industries from facilities in St. Paul, Minnesota, Grand Rapids, Michigan
and Milwaukee, Wisconsin. The group supplies more than 9,000 recreational
vehicle-related products, as well as over 9,500 marine items, 10,000 motorcycle
 
                                        1
<PAGE>   3
 
items, and 7,000 snowmobile items. Major product lines distributed by the group
include Bieffe Helmets, Dunlop, Nordyne, NGK, and Whirlpool.
 
  DISTRIBUTION
 
     Bell has distribution agreements with its suppliers that typically are
renewable annually, specify geographic coverage and provide for inventory
pricing, rotation and return privileges. Distribution agreements are
nonexclusive and are generally cancelable by either party at any time or on
short notice. The loss of a major supplier would likely adversely impact the
operating results of the Company for some period. The Company believes that
alternative sources for most, if not all, products would be available through
other suppliers.
 
     In June 1996, the Company announced it had been awarded an all-location
franchise to distribute a broad variety of semiconductors manufactured by
Samsung Semiconductor, Inc. ("Samsung"). Management believed that the addition
of the Samsung line would broaden the Company's product portfolio and complement
existing product lines, thereby increasing the Company's customer base and
creating additional opportunities for growth. In July 1996, National
Semiconductor ("National"), the Company's largest supplier of electronic
components, terminated, without notice or explanation, the Company's franchise
to distribute National products (sales of National products totaled
approximately 8% of consolidated net sales in 1995). In early 1997, after the
acquisition of Milgray, the Company was notified that franchises to distribute
products from two of Milgray's suppliers would be terminated as a result of
marketing conflicts with the Samsung line. Shipments of products from these two
suppliers represented approximately 13% of Milgray's 1996 revenues (or 4% of the
pro forma revenues of Bell and Milgray combined). While the loss of the National
franchise negatively impacted sales and profit levels in 1996 and that loss,
coupled with the loss of the two Milgray suppliers, also negatively impacted
1997, management believes that the loss of these product sales will be mitigated
in the longer-term through the substitution of existing competing product lines
and from sales of Samsung products.
 
ITEM 2. PROPERTIES
 
     At December 31, 1997, the Company leased 82 facilities containing
approximately 766,000 square feet and owned eight facilities containing an
aggregate of approximately 562,000 square feet. The facilities utilized by each
of the Company's business segments are set forth in the following table:
 
<TABLE>
<CAPTION>
                                                  AREA IN SQUARE FEET
                                                 (NUMBER OF LOCATIONS)
                                           ----------------------------------
                                               OWNED               LEASED
                                           --------------      --------------
<S>                                        <C>        <C>      <C>        <C>
Electronics Group........................  381,000     (4)     402,000    (61)
Graphics Imaging Group...................   62,000     (2)     152,000    (14)
Recreational Products Group..............   67,000     (1)     146,000     (3)
Corporate................................   52,000     (1)      31,000     (2)
Discontinued operations..................                       35,000     (2)
                                           -------    ---      -------    ---
                                           562,000     (8)     766,000    (82)
                                           =======    ===      =======    ===
</TABLE>
 
     For the most part, the Company's facilities are fully utilized, although
excess capacity exists from time to time, based on product mix and demand.
Management believes that these properties are in good condition and suitable for
their present use.
 
     The Company has subleased all facilities related to discontinued
operations.
 
     In 1996, the Company acquired a 52,000 square foot building in El Segundo,
California to consolidate national service center and computer operations to a
larger facility. The consolidation and occupancy of the building was completed
in August 1997. The Company currently subleases the previous corporate office
location.
 
                                        2
<PAGE>   4
 
     In February 1997, the Company acquired a 265,000 square foot distribution
center in Ontario, California to increase shipping capacity in view of the
Milgray acquisition and the Electronics Group's anticipated growth. The Company
plans to fully occupy the facility in 1998. A portion of the distribution center
is currently subleased.
 
     In connection with the combination of Bell and Milgray electronics
operations, the Company has terminated or sublet substantially all sales
facilities which were underutilized as a result of the integration.
 
ITEM 3. LEGAL PROCEEDINGS
 
     The Company is not involved in any litigation of a material nature which
might affect its financial condition.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     Not applicable.
 
  EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The Executive Officers of the Registrant are as follows:
 
<TABLE>
<CAPTION>
                                                                                             YEAR FIRST
                                                                                               NAMED
               NAME                   AGE                       POSITION                      OFFICER
               ----                   ---                       --------                     ----------
<S>                                   <C>    <C>                                             <C>
Tracy A. Edwards..................    41     Executive Vice President -- Finance and            1991
                                               Operations, and Chief Financial Officer(1)
Gordon Graham.....................    63     President and Chief Executive Officer(2,3)         1986
D.J. Hough........................    61     Senior Vice President                              1984
                                               and Chief Information Officer(4)

Peter A. Resnick..................    37     Vice President and Corporate Controller(5)         1998
Charles Troy......................    53     Vice President(6)                                  1997
Stephen A. Weeks..................    48     Vice President and Treasurer(7)                    1994
Theodore Williams.................    77     Chairman of the Board                              1969
</TABLE>
 
---------------
 
(1) Mr. Edwards was appointed Executive Vice President -- Finance and
    Operations, and Chief Financial Officer in January 1998. For the five years
    prior to that date, he served as Vice President and Chief Financial Officer.
 
(2) Also serves as a member of the Board of Directors.
 
(3) Mr. Graham was appointed Chief Executive Officer in January 1998. He was
    appointed President and Chief Operating Officer in November 1996. For the
    five years prior to that date, he served as Senior Vice President.
 
(4) Mr. Hough was appointed Senior Vice President and Chief Information Officer
    in January 1998. For the five years prior to that date, he served as Vice
    President and Chief Information Officer.
 
(5) Mr. Resnick was appointed Vice President in January 1998. He served as
    Corporate Controller since joining the Company in February 1996. For the
    five years prior to that date, Mr. Resnick was employed as Assistant
    Corporate Controller by Superior Industries International, Inc. a
    publicly-traded manufacturing company.
 
(6) Mr. Troy was employed as President and Chief Executive Officer of E & S Ring
    Management Corporation, a regional property management firm, for the five
    years prior to his appointment as Vice President.
 
(7) Mr. Weeks was appointed Vice President and Treasurer in January 1998. He was
    appointed Treasurer in July 1994. For the five years prior to that date he
    served in several accounting management positions.
 
                                        3
<PAGE>   5
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS
 
     Bell's common stock (ticker symbol BI) is listed on the New York and
Pacific Stock Exchanges. The following table shows the high, low and closing
market prices for the Company's common stock during the eight most recent
quarters.
 
<TABLE>
<CAPTION>
                                                               QUARTER ENDED
                                                  ----------------------------------------
                                                  MAR. 31    JUN. 30    SEP. 30    DEC. 31
                                                  -------    -------    -------    -------
<S>                                               <C>        <C>        <C>        <C>
Year ended December 31, 1997
  High..........................................  $20.00     $16.75     $18.38     $18.75
  Low...........................................   14.58      13.13      15.50      12.00
  Close.........................................   15.00      15.63      16.88      13.75
Year ended December 31, 1996
  High..........................................  $18.45     $18.33     $15.42     $18.13
  Low...........................................   16.07      13.75      12.50      12.71
  Close.........................................   16.97      13.96      12.92      17.82
</TABLE>
 
     Share prices in the table above were adjusted to give effect to a 20% stock
dividend declared in May 1997 and 5% stock dividend declared in May 1996.
 
     Approximate number of record holders of common stock as of March 1, 1998:
1,500.
 
                                        4
<PAGE>   6
 
ITEM 6.SELECTED FINANCIAL DATA
       (Dollars in thousands, except per share data)
 
<TABLE>
<CAPTION>
                                                                    SIX MONTHS
                                     YEAR ENDED DECEMBER 31            ENDED       YEAR ENDED JUNE 30
                                 ------------------------------     DECEMBER 31    -------------------
                                   1997       1996       1995         1994(4)        1994       1993
                                 --------   --------   --------    -------------   --------   --------
<S>                              <C>        <C>        <C>         <C>             <C>        <C>
OPERATING RESULTS
Net sales......................  $890,737   $623,193   $564,325      $255,372      $451,153   $365,323
Income from continuing
  operations, before
  extraordinary loss(1)........  $ 10,081   $ 15,927   $ 14,971      $  5,309      $  9,075   $  5,005
Net income (loss)(3)...........  $  9,406   $ 15,927   $ 14,971      $  5,619      $  9,075   $ (5,025)
Capital expenditures...........  $ 16,195   $  9,573   $  5,019      $  1,375      $  2,562   $  5,744
Depreciation and
  amortization.................  $ 10,000   $  6,228   $  5,940      $  2,891      $  5,574   $  5,735
 
FINANCIAL POSITION
Working capital................  $208,012   $132,856   $136,227      $116,118      $107,455   $ 97,710
Total assets...................  $431,233   $241,310   $233,882      $200,367      $184,713   $175,272
Long-term liabilities..........  $178,825   $ 30,584   $ 43,490      $ 40,936      $ 39,972   $ 47,569
Shareholders' equity...........  $151,352   $138,461   $117,569      $101,770      $ 95,553   $ 86,288
 
SHARE AND PER SHARE DATA(2)
BASIC
Income from continuing
  operations, before
  extraordinary loss(1)........  $   1.10   $   1.80   $   1.74      $    .62      $   1.06   $    .59
Net income (loss)..............  $   1.03   $   1.80   $   1.74      $    .66      $   1.06   $   (.59)
Weighted average common
  shares(000's)................     9,157      8,853      8,626         8,565         8,529      8,507
 
DILUTED
Income from continuing
  operations, before
  extraordinary loss(1)........  $   1.07   $   1.75   $   1.67      $    .60      $   1.04   $    .58
Net income (loss)..............  $   1.00   $   1.75   $   1.67      $    .64      $   1.04   $   (.59)
Weighted average common
  shares(000's)................     9,430      9,109      8,940         8,790         8,700      8,580
 
Shareholders' equity...........  $  16.23   $  15.35   $  13.53      $  11.83      $  11.19   $   9.69
Market price -- high...........  $  20.00   $  18.45   $  20.34      $  17.29      $  14.22   $  10.18
Market price -- low............  $  12.00   $  12.50   $  14.08      $  11.91      $   9.63   $   6.40
 
FINANCIAL RATIOS
Current ratio..................       3.1        2.8        2.9           3.0           3.2        3.4
Return on average shareholders'
  equity.......................       6.5%      12.4%      13.7%         11.3%         10.0%      (5.6)%
Long-term liabilities to total
  capitalization...............      54.2%      18.1%      27.0%         28.7%         29.5%      35.5%
</TABLE>
 
---------------
 
(1) Includes before-tax integration charge ($4,100) in 1997, and before-tax gain
    on sale of division ($3,050) and before-tax provision for lease commitment
    ($2,800) in 1995.
 
(2) Share and per share data has been adjusted to give effect to a 20% stock
    dividend declared in May 1997, 5% stock dividends declared in May 1996 and
    1995, and October 1994, and 4% stock dividend declared in July 1993.
 
(3) Includes loss on early retirement of debt ($675) in 1997.
 
(4) During the six months ended December 31, 1994, the Company changed its year
    end from June 30 to December 31.
 
                                        5
<PAGE>   7
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
        FINANCIAL CONDITION
 
                             RESULTS OF OPERATIONS
 
     This analysis contains forward looking comments which are based on current
trends. Actual results may differ materially.
 
     In January 1997, Bell completed the acquisition of Milgray Electronics,
Inc., a publicly traded distributor of electronic components. The results of the
Company for 1997 include the results of the acquired business of Milgray. Pro
forma operating results for 1996, assuming Milgray was acquired on January 1,
1996, were as follows: net sales -- $895 million; operating income -- $51.5
million; income before extraordinary loss -- $17.1 million; and net
income -- $16.4 million.
 
     Results of operations by business segment were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31
                                             --------------------------------
                                               1997        1996        1995
                                             --------    --------    --------
<S>                                          <C>         <C>         <C>
Net sales
  Electronics..............................  $688,215    $462,358    $448,390
  Graphics Imaging.........................   156,288     117,131      73,359
  Recreational Products....................    46,234      43,704      42,576
                                             --------    --------    --------
                                             $890,737    $623,193    $564,325
                                             ========    ========    ========
Operating income
  Electronics (1)..........................  $ 35,307    $ 33,045    $ 35,450
  Graphics Imaging.........................     4,424       3,608       1,994
  Recreational Products....................     2,880       3,380       3,536
                                             --------    --------    --------
                                               42,611      40,033      40,980
Corporate costs............................   (11,536)     (8,899)     (8,756)
Interest expense...........................   (12,309)     (3,673)     (3,612)
Lease commitment provision.................                            (2,800)
Income tax provision.......................    (8,685)    (11,534)    (10,841)
                                             --------    --------    --------
Income before extraordinary loss...........    10,081      15,927      14,971
Extraordinary loss, net of tax.............       675
                                             --------    --------    --------
Net income.................................  $  9,406    $ 15,927    $ 14,971
                                             ========    ========    ========
</TABLE>
 
     A summary of comparative operating results data follows:
 
<TABLE>
<S>                                          <C>         <C>         <C>
Net sales..................................     100.0%      100.0%      100.0%
  Cost of products sold....................     (78.9)      (77.9)      (77.4)
  Selling and administrative...............     (16.0)      (16.1)      (16.4)
  Depreciation and amortization............      (1.1)       (1.0)       (1.1)
  Interest.................................      (1.4)       (0.6)       (0.6)
  Integration charge.......................       (.5)
  Lease commitment provision...............                              (0.5)
  Gain on sale of division.................                               0.5
                                             --------    --------    --------
Income before income taxes and
  extraordinary loss.......................       2.1         4.4         4.5
Income tax provision.......................      (1.0)       (1.9)       (1.9)
                                             --------    --------    --------
Income before extraordinary loss...........       1.1%        2.5%        2.6%
                                             ========    ========    ========
</TABLE>
 
---------------
 
(1) Includes before-tax special charge of $4.1 million for costs associated with
    the integration of Bell and Milgray in 1997, and gain on sale of division of
    $3.1 million in 1995.
 
                                        6
<PAGE>   8
 
  1997 COMPARED WITH 1996
 
     Overall, the Company's net sales in 1997 declined slightly when compared to
pro forma sales in 1996, as a result of weakness in certain segments of the
Electronics Group partially offset by sales growth arising from recent
acquisitions in the Graphics Imaging Group. The Company's profitability declined
as a result of the sales performance, increased competitive pressures on gross
margins, transition costs associated with the integration of Milgray, increased
goodwill amortization, and higher interest costs.
 
     Electronics Group sales increased 49% to $688.2 million as compared to 1996
and decreased 6% when compared to the pro forma sales of Bell-Milgray combined
for 1996. Operating income, before the integration charge, increased 19% to
$39.4 million. When compared to the pro forma combined amounts for the prior
year, operating income decreased 11%. Increased sales and operating income over
historical amounts reflected the Milgray acquisition, partially offset by lower
sales of electronic components. When compared to pro forma amounts, sales and
operating income were impacted by softness in sales in certain electronic
components, primarily memory based products, and transition costs associated
with the combination of the Bell-Milgray operations. Lower sales of electronic
components were partially offset by stronger performance in the Company's
microcomputer business.
 
     Graphics Imaging Group sales increased 33% to $156.3 million and operating
income increased 23% to $4.4 million. Operating results were positively impacted
by the contribution from recently acquired business operations, partially offset
by transition costs associated with certain acquisitions.
 
     Recreational Products Group sales increased 6% to $46.2 million as
operating income decreased 15% to $2.9 million. Growth in sales and the
reduction to operating income reflected the Group's expansion in Michigan and
associated start-up costs.
 
     Cost of products sold as a percentage of sales increased to 78.9% compared
to 77.9% in 1996, reflecting increased competitive market pressures on gross
margins in certain segments, primarily in the Electronics Group. Selling and
administrative expenses as a percentage of sales decreased slightly to 16.0% as
compared with the prior year of 16.1%. Lower expenses, as a percentage of sales
reflected the Company's efforts to reduce costs. The Company's income tax rate
increased to 46% in 1997 from 42% in 1996 primarily as a result of increased
non-deductible goodwill for income tax purposes.
 
     Since acquiring Milgray in January 1997, the Company has devoted
considerable effort into integrating the electronics distribution operations to
establish a unified selling organization. In July 1997, the Company successfully
completed the installation of the Bell computer business system for the former
Milgray operations. The Company is in the process of consolidating distribution
centers to its new distribution center in Southern California.
 
  1996 COMPARED WITH 1995
 
     For the year ended December 31, 1996, the Company's net sales increased 10%
to $623.2 million and operating income decreased 2% to $40 million compared with
the prior year. Operating income in 1995 totaled $41 million and included a
before-tax gain on sale of division of $3.1 million. Net income increased 6% to
$15.9 million compared to $15 million in 1995. Net income for 1995 included the
gain on division sale and a before-tax charge of $2.8 million relating to a
lease commitment provision.
 
     Sales of the Electronics Group increased 3% to $462.4 million and operating
income decreased 7% to $33 million. Excluding the $3.1 million gain on division
sale in 1995, operating income increased 2% in 1996. Sales and income
performance reflected increased sales of microcomputer systems and services,
partially offset by reduced shipments of electronic components. Protracted
weakness in the electronics market and the termination of the Company's National
Semiconductor franchise impacted shipments of components, particularly during
the second half of 1996.
 
     Graphics Imaging Group sales increased 60% to $117.1 million and operating
income increased 81% to $3.6 million. Sales and operating income growth resulted
from the group's planned expansion program through
 
                                        7
<PAGE>   9
 
strategic business acquisitions and new sales facilities as well as improved
market conditions, particularly in California.
 
     Recreational Products Group sales for the year increased 3% to $43.7
million while operating income decreased 4% to $3.4 million. Operating results
were affected by severe winter weather conditions in the upper Midwest which
continued throughout the first half of the year, as well as costs related to
expanding into Michigan.
 
     Cost of products sold as a percentage of sales increased slightly (77.9%
from 77.4%) as a result of product mix changes. Selling and administrative
expenses as a percentage of sales decreased to 16.1% from 16.4% due to ongoing
cost control efforts. The Company's income tax rate was approximately 42% in
1996 and 1995.
 
                              FINANCIAL CONDITION
 
     Selected financial position data is set forth in the following table
(dollars in thousands except per share amounts):
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31
                                                         --------------------
                                                           1997        1996
                                                         --------    --------
<S>                                                      <C>         <C>
Cash and cash equivalents..............................  $  5,377    $ 12,097
Working capital........................................  $208,012    $132,856
Current ratio..........................................     3.1:1       2.8:1
Long-term liabilities to total capitalization..........       54%         18%
Shareholders' equity per share.........................  $  16.23    $  15.35
Days' sales in receivables.............................        53          48
Days' sales in inventories.............................        93          76
</TABLE>
 
     Cash used in operating activities was $3.1 million in 1997 while operating
activities generated cash of $37.5 million in 1996. Operating cash flows in 1997
were impacted by reduced earnings and increased investment in working capital.
Financing cash flows included bank borrowings used primarily to fund the
acquisition of Milgray and retirement of the Company's outstanding 9.7% Senior
Notes, including approximately $1 million in make-whole premiums. Property
additions included investment in the Company's information systems, completion
of its new national service center in El Segundo, California as well as
improvements to a new electronics distribution center. The acquisition of the
265,000 square foot distribution center, located in Ontario, California, was
financed through the assumption of Industrial Revenue Bonds due in 2015. The
distribution center and related bonds were recorded at estimated fair market
value of $6.2 million.
 
     Concurrent with the acquisition of Milgray, the Company entered into a
five-year $250 million secured revolving credit facility with a syndicate of
banks. The new facility, which replaced the Company's $50 million line of
credit, includes a $50 million term loan, payable quarterly over five years, and
a revolving credit line.
 
     The Company believes that sufficient cash resources exist to support
short-term requirements, including debt and lease payments, and longer term
objectives, through available cash, bank borrowings and cash generated from
operations.
 
     In 1997, the Company initiated a program to ensure all its business systems
are Year 2000 compliant. The Company anticipates achieving this objective over
the next two years by converting certain of its business systems to Year 2000
hardware and software platforms and by reprogramming other business systems for
Year 2000 compliance. The estimated cost of the Year 2000 project has not been
and is not expected to be material to the Company's financial position or
results of operations.
 
                                        8
<PAGE>   10
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                      PAGE
        Financial Statements:                                         ----
        <S>                                                           <C>
          Report of Independent Accountants.........................   10
          Consolidated Statement of Income for the three years ended
             December 31, 1997......................................   11
          Consolidated Balance Sheet at December 31, 1997 and
             1996...................................................   12
          Consolidated Statement of Shareholders' Equity for the
             three years ended December 31, 1997....................   13
          Consolidated Statement of Cash Flows for the three years
             ended December 31, 1997................................   14
          Notes to Consolidated Financial Statements................   15
          Financial Statement Schedule:
             Schedule II -- Valuation and Qualifying Accounts for
              the three years ended December 31, 1997...............   24
</TABLE>
 
     The financial data included in the financial statement schedule should be
read in conjunction with the consolidated financial statements. All other
schedules have been omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.
The individual financial statements of the Company have been omitted since the
Company is primarily an operating company and the subsidiaries included in the
consolidated financial statements are wholly owned and deemed to be totally held
and do not have indebtedness to any person other than the Company or its
consolidated subsidiaries in amounts which together exceed five percent of total
consolidated assets as of December 31, 1997.
 
                                        9
<PAGE>   11
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and
Shareholders of Bell Industries, Inc.
 
     In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Bell Industries, Inc. and its subsidiaries at December 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
 
PRICE WATERHOUSE LLP
 
Los Angeles, California
January 28, 1998
 
                                       10
<PAGE>   12
 
                        CONSOLIDATED STATEMENT OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31
                                                             --------------------------------
                                                               1997        1996        1995
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Net sales..................................................  $890,737    $623,193    $564,325
                                                             --------    --------    --------
Costs and expenses
  Cost of products sold....................................   703,068     485,634     436,568
  Selling and administrative...............................   142,494     100,197      92,643
  Depreciation and amortization............................    10,000       6,228       5,940
  Interest.................................................    12,309       3,673       3,612
  Integration charge.......................................     4,100
  Lease commitment provision...............................                             2,800
  Gain on sale of division.................................                            (3,050)
                                                             --------    --------    --------
                                                              871,971     595,732     538,513
                                                             --------    --------    --------
Income before income taxes and extraordinary loss..........    18,766      27,461      25,812
Income tax provision.......................................     8,685      11,534      10,841
                                                             --------    --------    --------
Income before extraordinary loss...........................    10,081      15,927      14,971
Loss on early retirement of debt...........................       675
                                                             --------    --------    --------
Net income.................................................  $  9,406    $ 15,927    $ 14,971
                                                             ========    ========    ========
 
SHARE AND PER SHARE DATA
 
BASIC
  Income before extraordinary loss.........................  $   1.10    $   1.80    $   1.74
  Loss on early retirement of debt.........................      0.07
                                                             --------    --------    --------
  Net income...............................................  $   1.03    $   1.80    $   1.74
                                                             ========    ========    ========
  Weighted average common shares...........................     9,157       8,852       8,626
                                                             ========    ========    ========
 
DILUTED
  Income before extraordinary loss.........................  $   1.07    $   1.75    $   1.67
  Loss on early retirement of debt.........................      0.07
                                                             --------    --------    --------
  Net income...............................................  $   1.00    $   1.75    $   1.67
                                                             ========    ========    ========
  Weighted average common shares...........................     9,430       9,109       8,940
                                                             ========    ========    ========
</TABLE>
 
          See accompanying Notes to Consolidated Financial Statements.
 
                                       11
<PAGE>   13
 
                           CONSOLIDATED BALANCE SHEET
                             (DOLLARS IN THOUSANDS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              --------------------
                                                                1997        1996
                                                              --------    --------
<S>                                                           <C>         <C>
Current assets
  Cash and cash equivalents.................................  $  5,377    $ 12,097
  Accounts receivable, less allowance for doubtful accounts
     of $2,673 and $1,626...................................   120,900      83,155
  Inventories...............................................   173,801     104,049
  Prepaid expenses and other................................     8,990       5,820
                                                              --------    --------
          Total current assets..............................   309,068     205,121
                                                              --------    --------
 
Properties, at cost
  Land......................................................     3,419       1,397
  Buildings and improvements................................    21,283      11,049
  Equipment.................................................    41,642      34,361
                                                              --------    --------
                                                                66,344      46,807
  Less accumulated depreciation.............................   (24,265)    (24,758)
                                                              --------    --------
          Total properties..................................    42,079      22,049
                                                              --------    --------
 
Goodwill, less accumulated amortization of $9,344 and
  $6,199....................................................    72,758       8,795
 
Other assets................................................     7,328       5,345
                                                              --------    --------
                                                              $431,233    $241,310
                                                              ========    ========
 
                       LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Accounts payable..........................................  $ 67,121    $ 43,839
  Accrued payroll...........................................     9,265       7,663
  Accrued liabilities.......................................    17,170      12,687
  Current portion of long-term liabilities..................     7,500       8,076
                                                              --------    --------
          Total current liabilities.........................   101,056      72,265
                                                              --------    --------
 
Long-term debt..............................................   172,330      24,571
 
Deferred compensation and other.............................     6,495       6,013
 
Shareholders' equity
  Preferred stock
     Authorized -- 1,000,000 shares
     Outstanding -- none
  Common stock
     Authorized -- 35,000,000 shares
     Outstanding -- 9,326,391 and 7,518,277 shares..........   100,410      75,666
  Reinvested earnings.......................................    50,942      62,795
                                                              --------    --------
          Total shareholders' equity........................   151,352     138,461
 
Commitments and contingencies
                                                              --------    --------
                                                              $431,233    $241,310
                                                              ========    ========
</TABLE>
 
          See accompanying Notes to Consolidated Financial Statements.
                                       12
<PAGE>   14
 
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                      COMMON STOCK          OTHER
                                                  ---------------------    PAID-IN    REINVESTED
                                                   SHARES       AMOUNT     CAPITAL     EARNINGS
                                                  ---------    --------    -------    ----------
<S>                                               <C>          <C>         <C>        <C>
Balance at December 31, 1994....................  6,497,557    $  1,624    $54,080     $46,066
  Employee stock plans..........................     74,415         441        388
  Net income....................................                                        14,971
  5% stock dividend.............................    326,122          82      6,441      (6,524)
  Change in par value of common stock...........                 60,909    (60,909)
                                                  ---------    --------    -------     -------
Balance at December 31, 1995....................  6,898,094      63,056         --      54,513
  Employee stock plans..........................    115,525       1,933
  Net income....................................                                        15,927
  5% stock dividend.............................    351,510       7,645                 (7,645)
  Purchases of businesses.......................    153,148       3,032
                                                  ---------    --------    -------     -------
Balance at December 31, 1996....................  7,518,277      75,666         --      62,795
  Employee stock plans..........................    274,061       3,361
  Net income....................................                                         9,406
  20% stock dividend............................  1,522,821      21,259                (21,259)
  Exercise of warrants and other................     11,232         124
                                                  ---------    --------    -------     -------
Balance at December 31, 1997....................  9,326,391    $100,410    $    --     $50,942
                                                  =========    ========    =======     =======
</TABLE>
 
          See accompanying Notes to Consolidated Financial Statements.
 
                                       13
<PAGE>   15
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31
                                                          -----------------------------------
                                                            1997         1996         1995
                                                          ---------    ---------    ---------
<S>                                                       <C>          <C>          <C>
Cash flows from operating activities:
  Net income............................................  $   9,406    $  15,927    $  14,971
  Depreciation and amortization.........................      6,294        5,541        5,342
  Amortization of intangibles...........................      3,706          687          598
  Provision for losses on accounts receivable...........      2,138        1,235        1,716
  Integration charge....................................      4,100
  Loss on early retirement of debt......................        675
  Gain on sale of division..............................                               (3,050)
  Lease commitment provision............................                                2,800
 
  Changes in assets and liabilities, net of
     acquisitions.......................................    (29,374)      14,061      (19,459)
                                                          ---------    ---------    ---------
          Net cash provided by (used in) operating
            activities..................................     (3,055)      37,451        2,918
                                                          ---------    ---------    ---------
Cash flows from investing activities:
  Purchases of businesses...............................   (100,404)     (10,815)      (3,419)
  Purchases of properties...............................    (16,195)      (9,573)      (5,019)
  Proceeds from sale of division........................                                7,754
                                                          ---------    ---------    ---------
          Net cash used in investing activities.........   (116,599)     (20,388)        (684)
                                                          ---------    ---------    ---------
Cash flows from financing activities:
  Payments on Senior Notes and capital leases...........    (25,633)      (6,918)      (5,675)
  Bank borrowings (payments), net.......................    137,852       (4,800)       3,800
  Debt issuance costs...................................     (2,770)
  Employee stock plans and other........................      3,485        1,933          829
                                                          ---------    ---------    ---------
          Net cash provided by (used in) financing
            activities..................................    112,934       (9,785)      (1,046)
                                                          ---------    ---------    ---------
Net increase (decrease) in cash and cash equivalents....     (6,720)       7,278        1,188
Cash and cash equivalents at beginning of year..........     12,097        4,819        3,631
                                                          ---------    ---------    ---------
Cash and cash equivalents at end of year................  $   5,377    $  12,097    $   4,819
                                                          =========    =========    =========
 
Changes in assets and liabilities, net of acquisitions:
  Accounts receivable...................................  $  (1,734)   $   2,634    $  (9,288)
  Inventories...........................................    (19,577)      22,917      (24,341)
  Accounts payable......................................     (3,173)      (5,259)       7,011
  Accrued liabilities and other.........................     (4,890)      (6,231)       7,159
                                                          ---------    ---------    ---------
          Net change....................................  $ (29,374)   $  14,061    $ (19,459)
                                                          =========    =========    =========
 
Supplemental cash flow information:
  Interest paid.........................................  $  12,023    $   3,863    $   3,759
  Income taxes paid.....................................  $   3,762    $  12,624    $  11,190
</TABLE>
 
          See accompanying Notes to Consolidated Financial Statements.
 
                                       14
<PAGE>   16
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
SUMMARY OF ACCOUNTING POLICIES
 
     Principles of consolidation -- The consolidated financial statements
include the accounts of the Company and its subsidiaries, all of which are
wholly-owned. All significant intercompany transactions have been eliminated.
 
     Statement of cash flows -- The Company considers all highly liquid
investments purchased with an original maturity date of three months or less to
be cash equivalents.
 
     Revenue recognition and receivables -- The Company is primarily a national
distributor of electronic components. In addition, the Company distributes
graphics and electronic imaging products throughout the western and central
United States and recreational-related products in the north central United
States. Sales are recognized and trade receivables are recorded when products
are shipped. Concentrations of credit risk with respect to trade receivables are
limited due to the large number and general dispersion of trade accounts which
constitute the Company's customer base. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral. The
Company estimates reserves for potential credit losses and such losses have been
within these estimates.
 
     Inventories -- Inventories are stated at the lower of cost (determined
using weighted average and first-in, first-out methods) or market (net
realizable value).
 
     Properties, depreciation and amortization -- All properties are depreciated
using the straight-line method based upon estimated useful lives which range
from 25 to 40 years for buildings and 2 to 10 years for equipment. Leasehold
improvements and assets recorded under capital leases are amortized over the
shorter of their estimated service lives or the term of the lease.
 
     Goodwill -- Cost in excess of the fair value of net assets of purchased
businesses (goodwill) is amortized using the straight-line method over 25 years.
The Company periodically evaluates the recorded value of its operating assets,
including goodwill, and recognizes impairments when the estimated future
undiscounted cash flows from the use of the assets are less than the recorded
value.
 
     Income taxes -- Provision is made for the tax effects of temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities. In estimating deferred tax balances, the
Company considers all expected future events other than enactments of changes in
the tax law or rates.
 
     Stock option plans -- The Company measures and records compensation expense
relating to stock options as the excess, if any, between the market value of
shares on the date of option grant and the expected proceeds upon exercise. Such
expense is accrued ratably over the period to be benefited. The Company has
adopted the provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123") to disclose the
impact of compensation cost on earnings as determined under the fair value
method prescribed by SFAS No. 123.
 
     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.
 
     Use of estimates -- Certain amounts and disclosures included in the
consolidated financial statements required the use of management estimates which
could differ from actual results.
 
ACQUISITION OF MILGRAY ELECTRONICS
 
     In January 1997, the Company completed the acquisition of Milgray
Electronics, Inc. ("Milgray"), a publicly traded distributor of electronics
components. Under the terms of the acquisition, shareholders of Milgray received
$14.77 per share for an aggregate purchase price of approximately $100 million.
 
                                       15
<PAGE>   17
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
The Company financed the acquisition through borrowings under a credit facility
arranged with a syndicate of banks.
 
     The acquisition was accounted for under the purchase method of accounting
and operating results of Milgray are included from the acquisition date in the
financial statements of the Company. The fair value of non-cash assets acquired,
including goodwill, was approximately $167 million and liabilities assumed
totaled approximately $67 million. Goodwill of $67 million is being amortized
over 25 years on a straight-line basis.
 
     In the first quarter of 1997, in conjunction with the acquisition, the
Company recorded a special before-tax charge totaling $4.1 million, for costs
associated with the integration of Milgray, including provisions for severance,
lease and related exit costs, and costs related to supplier terminations.
Substantially all amounts related to the integration were expended during 1997.
 
     The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and Milgray as if the
acquisition had occurred January 1, 1996. The unaudited pro forma results
include estimates for goodwill amortization and increased interest expense (in
thousands, except per share):
 
<TABLE>
<CAPTION>
                                                                1996
                                                              --------
<S>                                                           <C>
Net sales...................................................  $895,300
Income before extraordinary loss............................  $ 17,085
Net income..................................................  $ 16,410
Income before extraordinary loss per share:
  Basic.....................................................  $   1.93
  Diluted...................................................  $   1.88
Net income per share:
  Basic.....................................................  $   1.85
  Diluted...................................................  $   1.80
</TABLE>
 
LONG-TERM DEBT
 
     Long-term debt consisted of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31
                                                         --------------------
                                                           1997        1996
                                                         --------    --------
<S>                                                      <C>         <C>
Bank borrowings........................................  $173,500    $  8,000
Industrial Revenue Bonds...............................     6,330
9.70% Senior Notes.....................................                23,714
                                                         --------    --------
                                                          179,830      31,714
Less current portion...................................     7,500       7,143
                                                         --------    --------
                                                         $172,330    $ 24,571
                                                         ========    ========
</TABLE>
 
     Concurrent with the acquisition of Milgray, the Company entered into a $250
million secured revolving credit facility expiring in December 2001 with a
syndicate of banks to finance the purchase of Milgray, retire all existing debt
of both companies and provide for ongoing working capital requirements.
Borrowings under the facility are secured by the Company's receivables and
inventories. The new facility, which replaced the Company's previous bank line
of credit, provides for interest at either the bank's reference rate or LIBOR
plus 1.50% (7.4% at December 31, 1997). The facility includes a $50 million term
loan, payable quarterly over five years, and a revolving credit line. The
facility is subject to an annual commitment fee of .375% on the unused line of
credit. The agreement underlying the facility contains provisions for asset
acquisition limits, the maintenance of financial ratios, prohibition of
dividends (other than stock dividends), and other restrictions.
 
                                       16
<PAGE>   18
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     In connection with the placement of the credit facility, the Company
redeemed its outstanding 9.70% Senior Notes for $24.7 million, including $1
million in make-whole premiums. The transaction resulted in an extraordinary
charge in 1997 of $675,000, net of income tax benefit of $419,000.
 
     In February 1997, in connection with the acquisition of a 265,000 square
foot distribution center in Ontario, California, the Company assumed $9 million
of variable rate (approximately 3.5% at December 31, 1997) Industrial Revenue
Bonds due in 2015. The bonds and related distribution center were recorded at an
estimated fair value of $6.2 million. The bonds are secured by a $9 million
irrevocable letter of credit. The fair value of the bonds at December 31, 1997
was approximately $7.2 million as estimated using an interest rate currently
available to the Company for debt with similar terms and remaining maturities.
 
     In May 1997, the Company entered into separate interest rate swap
agreements with two banks in an aggregate notional amount of $50 million to
manage variable interest rate exposures. The agreements expire in May 2000. The
Company agreed to exchange, at quarterly intervals, the difference between the
Company's variable pay rate of 90 day LIBOR with the banks' fixed pay rate of
6.6%. The notional amounts of these agreements do not represent amounts
exchanged by the parties and thus, are not a measure of the exposure to the
Company. While it is the Company's intention to hold these contracts through
expiration, the cost to terminate the swap agreements was $840,000 at December
31, 1997, based on the fair value of the swap agreements as determined by
reference to current interest rates and agreements with similar terms.
 
     Aggregate maturities of long-term debt are as follows (in thousands):
 
<TABLE>
<S>                        <C>            <C>                        <C>
1998.....................  $ 7,500        2000.....................  $ 12,500
1999.....................  $10,000        2001.....................  $143,500
</TABLE>
 
COMMON STOCK
 
     In May 1997, the Board of Directors declared a 20% stock dividend payable
to shareholders of record on May 30, 1997. In May 1996, the Board of Directors
declared a 5% stock dividend payable to shareholders of record on May 24, 1996.
In May 1995, the Board of Directors declared a 5% stock dividend payable to
shareholders of record on May 26, 1995. Share and per share amounts were
adjusted to give effect to the dividends.
 
     At the 1996 Annual Meeting, shareholders approved a proposal to increase
the number of authorized shares of common stock from 10 million to 35 million.
 
     At the 1995 Annual Meeting, shareholders approved a plan to change the
Company's state of incorporation from Delaware to California. Effective June 30,
1995, the plan was completed and each share of Bell Delaware common stock ($.25
par value) was converted to one share of Bell California common stock. This
change resulted in the transfer of $60.9 million from other paid-in capital to
common stock on that date.
 
STOCK PLANS AND WARRANTS
 
     The Company's 1990 Stock Option and Incentive Plan (the "1990 Plan") and
1994 Stock Option Plan (the "1994 Plan") each authorized 500,000 shares of
common stock to be available for purchase by employees. At the 1997 Annual
Meeting, the shareholders approved an amendment to the 1994 Plan which
authorized an additional 500,000 shares of common stock. At the 1996 Annual
Meeting the shareholders approved the Non-Employee Director Stock Option Plan
(the "1996 Plan"), which authorized 150,000 shares of common stock to be
available for purchase by non-employee directors of the Company.
 
     Under the stock option plans, both incentive and nonqualified stock
options, stock appreciation rights and restricted stock may be granted. Options
outstanding under the plans generally have a maximum term of five years, vest
over four years and were issued at market value. Weighted average exercise
prices at December 31, 1997 include the effect of the repricing of certain stock
options during 1997.
 
                                       17
<PAGE>   19
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     A summary of activity under the plans follows:
 
<TABLE>
<CAPTION>
                                                                              WEIGHTED
                                                                               AVERAGE
                                                   AVAILABLE      SHARES      EXERCISE     FAIR VALUE
                                                   FOR FUTURE      UNDER        PRICE      OF OPTION
                                                     GRANT        OPTION      PER SHARE    PER SHARE
                                                   ----------    ---------    ---------    ----------
<S>                                                <C>           <C>          <C>          <C>
Outstanding at December 31, 1994.................    572,556       455,904     $14.67
  Granted........................................   (118,500)      118,500      23.75        $7.98
  Exercised......................................                  (16,300)      6.68
  Canceled.......................................     10,711       (11,284)     10.85
  Adjustment for 5% stock dividend...............     28,327        22,790
                                                    --------     ---------     ------
Outstanding at December 31, 1995.................    493,094       569,610      16.28
  Granted........................................   (161,500)      161,500      20.42        $6.55
  Exercised......................................                  (34,864)      7.88
  Canceled.......................................      9,439        (9,439)     19.30
  Adjustment for 5% stock dividend...............     27,629        32,795
  Adoption of 1996 Plan..........................    150,000
                                                    --------     ---------     ------
Outstanding at December 31, 1996.................    518,662       719,602      16.83
  Granted........................................   (533,000)      533,000      19.39        $8.64
  Exercised......................................                 (156,140)     10.72
  Canceled.......................................    100,272      (100,272)     17.57
  Adjustment for 20% stock dividend..............    149,165       168,886
  Amendment to 1994 Plan.........................    500,000
                                                    --------     ---------     ------
Outstanding at December 31, 1997.................    735,099     1,165,076     $14.32
                                                    ========     =========     ======
</TABLE>
 
     A summary of weighted average amounts for stock options outstanding at
December 31, 1997 follows:
 
<TABLE>
<CAPTION>
                        REMAINING
                       OPTION LIFE                   OPTIONS        OPTIONS      EXERCISE
                        IN YEARS                   OUTSTANDING    EXERCISABLE      PRICE
                       -----------                 -----------    -----------    ---------
        <S>                                        <C>            <C>            <C>          <C>
           1.....................................     59,672          59,672      $ 9.17
           2.....................................    236,002         135,610       13.38
           3.....................................    123,232          36,969       14.38
           4.....................................    172,770          62,637       14.40
           5.....................................    573,400              --          --
                                                    --------       ---------
                                                   1,165,076         294,888      $12.87
                                                    ========       =========
</TABLE>
 
     At December 31, 1996 and 1995, 204,436 and 100,239 options were exercisable
at weighted average exercise prices of $13.12 and $11.33.
 
     Under the Bell Industries Employees' Stock Purchase Plan (the "ESPP")
750,000 shares were authorized for future issuance to Bell employees. Eligible
employees may purchase Bell stock at 85% of market value through the ESPP at
various offering times during the year. Under the ESPP, the Company issued
117,921, 74,024, and 58,115 shares during 1997, 1996, and 1995. The weighted
average fair value per share of the purchase rights granted in 1997, 1996 and
1995 were $3.90, $4.28 and $4.57. At December 31, 1997, 704,591 shares were
available for future issuance under the ESPP.
 
     In 1993, the Company's previous senior noteholders received warrants to
purchase 258,320 shares of the Company's common stock, exercisable at any time
prior to February 1, 2001 at $9.40 per share. In 1997, warrants representing
8,668 shares were exercised and warrants to purchase 249,652 shares remain
outstanding at December 31, 1997.
 
                                       18
<PAGE>   20
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     The Black-Scholes model was utilized for estimating the fair value of
stock-based grants using an assumed volatility of approximately 30% and an
expected four year life for stock options, and an assumed volatility of
approximately 10% and an expected four month life for the ESPP. The assumed risk
free interest rate ranged between 5% and 6% for all plans. Stock based
compensation costs determined under the fair value method would have reduced the
Company's reported net income by $1.2 million ($.13 per share) in 1997, $0.5
million ($.05 per share) in 1996, and $0.3 million ($.03 per share) in 1995.
 
INCOME TAXES
 
     The income tax provision charged to operations was as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                 1997       1996       1995
                                                -------    -------    -------
<S>                                             <C>        <C>        <C>
Current
  Federal.....................................  $ 3,921    $ 8,259    $10,326
  State.......................................    1,296      2,273      2,438
Deferred
  Federal.....................................    3,072        810     (1,755)
  State.......................................      396        192       (168)
                                                -------    -------    -------
                                                $ 8,685    $11,534    $10,841
                                                =======    =======    =======
</TABLE>
 
     A reconciliation of the federal statutory tax rate to the effective tax
rate follows:
 
<TABLE>
<CAPTION>
                                                 1997       1996       1995
                                                -------    -------    -------
<S>                                             <C>        <C>        <C>
Federal statutory tax rate....................     35.0%      35.0%      35.0%
State taxes, net of federal benefit...........      5.8        5.8        5.6
Non-deductible goodwill.......................      5.6        0.6        0.5
Other, net....................................      (.1)       0.6        0.9
                                                -------    -------    -------
Effective tax rate............................     46.3%      42.0%      42.0%
                                                =======    =======    =======
</TABLE>
 
     The provision (credit) for deferred income taxes is summarized as follows
(in thousands):
 
<TABLE>
<CAPTION>
                                                 1997       1996       1995
                                                -------    -------    -------
<S>                                             <C>        <C>        <C>
Receivables allowance.........................  $   550    $    26    $  (177)
Inventory reserves............................      727         58        190
Employee benefit accruals.....................      219        148       (530)
Depreciation..................................      396        429       (221)
Lease commitment provision....................      870          8     (1,106)
Other.........................................      706        333        (79)
                                                -------    -------    -------
                                                $ 3,468    $ 1,002    $(1,923)
                                                =======    =======    =======
</TABLE>
 
                                       19
<PAGE>   21
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     Deferred tax balances were composed of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31
                                                             ----------------
                                                              1997      1996
                                                             ------    ------
<S>                                                          <C>       <C>
Deferred tax assets:
  Receivables allowance....................................  $1,404    $  564
  Inventory reserves.......................................   3,210       409
  Employee benefit accruals................................   2,600     2,018
  Lease commitment provision...............................     696     1,098
  Discontinued operations..................................   1,705     2,305
  Other....................................................     665       309
                                                             ------    ------
                                                             10,280     6,703
Deferred tax liabilities:
  Depreciation.............................................    (675)     (357)
                                                             ------    ------
Net deferred tax balances..................................  $9,605    $6,346
                                                             ======    ======
</TABLE>
 
     Current deferred income tax benefits, included with prepaid expenses and
other, and noncurrent deferred income tax benefits, included with other assets,
were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31
                                                             ----------------
                                                              1997      1996
                                                             ------    ------
<S>                                                          <C>       <C>
Current deferred income tax benefits
  Federal..................................................  $7,936    $4,339
  State....................................................     506        94
Noncurrent deferred income tax benefits
  Federal..................................................   1,036     1,702
  State....................................................     127       211
                                                             ------    ------
                                                             $9,605    $6,346
                                                             ======    ======
</TABLE>
 
EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS
 
     The Company has a qualified, trusteed, savings and profit sharing plan for
eligible employees. Employees must contribute at least 1% of their annual
compensation to participate in the plan. The Company's contributions to the
plan, as determined by the Board of Directors, were $.9 million in 1997, $1.1
million in 1996 and $1 million in 1995.
 
     The Company has deferred compensation plans available for certain
directors, officers and other key employees. Expense associated with the
deferred compensation element of these plans was $0.7 million in 1997, $0.6
million in 1996 and $1.1 million in 1995.
 
     The Company provides postretirement medical coverage for qualifying
employees who were employed prior to January 1, 1998. Annual costs and
accumulated and vested benefit obligations relating to postretirement medical
benefits were not significant.
 
                                       20
<PAGE>   22
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
COMMITMENTS AND CONTINGENCIES
 
     At December 31, 1997 the Company had operating leases on certain of its
facilities and equipment expiring in various years through 2004. Under certain
operating leases, the Company is required to pay property taxes and insurance.
Rent expense pertaining to operating leases was $7.5 million in 1997,
$4.7 million in 1996 and $3.9 million in 1995. Amortization of capitalized
leases, which expired in 1997, amounted to $.9 million in 1997, $1.7 million in
1996 and $1.6 million in 1995.
 
     Minimum annual rentals on operating leases for the five years subsequent to
1997 and thereafter are as follows (in thousands):
 
<TABLE>
<S>                                                          <C>
1998.......................................................  $ 8,142
1999.......................................................    7,152
2000.......................................................    2,673
2001.......................................................    1,472
2002.......................................................    1,134
  Thereafter...............................................      707
                                                             -------
                                                             $21,280
                                                             =======
</TABLE>
 
     The Company is involved in litigation incidental to its business. In the
opinion of management, the expected outcome of such litigation will not
materially affect the Company's financial position or results of operations.
 
SPECIAL ITEMS
 
     In 1995, the Company sold the assets of a division which manufacturers
switches, push-buttons and electroluminescent panels used in commercial
aircraft. Total cash proceeds were approximately $7.7 million resulting in a
gain before income taxes of $3.1 million. Operating results of the division were
not material to the Company's consolidated operating results.
 
     In 1995, the Company agreed to purchase a building to consolidate national
service and computer center operations at a larger facility. The related
decision to sublease the corporate offices for the remaining lease term resulted
in a $2.8 million charge for the net lease commitment.
 
                                       21
<PAGE>   23
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
BUSINESS SEGMENT INFORMATION
 
     Depreciation and amortization, identifiable assets, and capital
expenditures by business segment are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31
                                                     --------------------------------
                                                       1997        1996        1995
                                                     --------    --------    --------
<S>                                                  <C>         <C>         <C>
Depreciation and amortization
  Electronics......................................  $  2,784    $  2,077    $  2,007
  Graphics Imaging.................................       704         444         185
  Recreational Products............................       232         225         215
  Corporate........................................     6,280       3,482       3,533
                                                     --------    --------    --------
                                                     $ 10,000    $  6,228    $  5,940
                                                     ========    ========    ========
Identifiable assets
  Electronics......................................  $326,636    $143,631    $175,278
  Graphics Imaging.................................    53,477      51,184      22,553
  Recreational Products............................    18,840      19,064      16,548
  Corporate........................................    32,280      27,431      19,503
                                                     --------    --------    --------
                                                     $431,233    $241,310    $233,882
                                                     ========    ========    ========
Capital expenditures
  Electronics......................................  $  7,341    $  2,756    $  3,246
  Graphics Imaging.................................       138       1,079         574
  Recreational Products............................       212         467         196
  Corporate........................................     8,504       5,271       1,003
                                                     --------    --------    --------
                                                     $ 16,195    $  9,573    $  5,019
                                                     ========    ========    ========
</TABLE>
 
     The net sales and operating income of each of the Company's business
segments are included under "Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition." A description of the Company's
business and products appears under "Item 1. Business." Sales between product
groups are insignificant. Corporate assets are primarily cash, information
technology equipment and deferred income tax benefits.
 
     During 1996 the Company purchased five graphics distribution businesses for
approximately $10.8 million in cash and the issuance of 153,148 shares of common
stock. The Company purchased two distribution businesses during 1995 for
approximately $3.4 million in cash. Goodwill related to these transactions was
not significant. Operating results for the purchased businesses were not
significant.
 
                                       22
<PAGE>   24
 
                  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                          QUARTER ENDED
                                                           --------------------------------------------
                                                           MAR. 31     JUN. 30     SEP. 30     DEC. 31
                                                           --------    --------    --------    --------
<S>                                                        <C>         <C>         <C>         <C>
YEAR ENDED DECEMBER 31, 1997
Net sales................................................  $218,503    $233,779    $225,448    $213,007
                                                           --------    --------    --------    --------
Costs and expenses
  Cost of products sold..................................   170,820     184,787     178,234     169,227
  Selling and administrative.............................    36,807      36,940      34,489      34,258
  Depreciation and amortization..........................     2,567       2,593       2,385       2,455
  Interest...............................................     2,681       2,908       3,221       3,499
  Integration charge.....................................     4,100
                                                           --------    --------    --------    --------
                                                            216,975     227,228     218,329     209,439
                                                           --------    --------    --------    --------
Income before income taxes and extraordinary loss........     1,528       6,551       7,119       3,568
Income tax provision.....................................       699       3,082       3,311       1,593
                                                           --------    --------    --------    --------
Income before extraordinary loss.........................       829       3,469       3,808       1,975
Loss on early retirement of debt.........................       675
                                                           --------    --------    --------    --------
Net income...............................................  $    154    $  3,469    $  3,808    $  1,975
                                                           ========    ========    ========    ========
SHARE AND PER SHARE DATA
BASIC
  Income before extraordinary loss.......................  $    .09    $    .38    $    .42    $    .21
                                                           ========    ========    ========    ========
  Net income.............................................  $    .02    $    .38    $    .42    $    .21
                                                           ========    ========    ========    ========
  Weighted average common shares.........................     9,069       9,113       9,171       9,274
                                                           ========    ========    ========    ========
DILUTED
  Income before extraordinary loss.......................  $    .09    $    .37    $    .40    $    .21
                                                           ========    ========    ========    ========
  Net income.............................................  $    .02    $    .37    $    .40    $    .21
                                                           ========    ========    ========    ========
  Weighted average common shares.........................     9,388       9,321       9,494       9,515
                                                           ========    ========    ========    ========
 
YEAR ENDED DECEMBER 31, 1996
Net sales................................................  $143,050    $156,709    $164,306    $159,128
Costs and expenses
  Cost of products sold..................................   110,511     121,665     128,594     124,864
  Selling and administrative.............................    24,480      24,766      25,658      25,293
  Depreciation and amortization..........................     1,559       1,486       1,550       1,633
  Interest...............................................       959         885         952         877
                                                           --------    --------    --------    --------
                                                            137,509     148,802     156,754     152,667
                                                           --------    --------    --------    --------
Income before income taxes...............................     5,541       7,907       7,552       6,461
Income tax provision.....................................     2,329       3,319       3,172       2,714
                                                           --------    --------    --------    --------
Net income...............................................  $  3,212    $  4,588    $  4,380    $  3,747
                                                           ========    ========    ========    ========
SHARE AND PER SHARE DATA
BASIC
  Net income.............................................  $    .37    $    .52    $    .49    $    .42
                                                           ========    ========    ========    ========
  Weighted average common shares.........................     8,746       8,843       8,867       8,953
                                                           ========    ========    ========    ========
DILUTED
  Net income.............................................  $    .36    $    .50    $    .48    $    .41
                                                           ========    ========    ========    ========
  Weighted average common shares.........................     9,053       9,138       9,051       9,193
                                                           ========    ========    ========    ========
</TABLE>
 
                                       23
<PAGE>   25
 
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              ADDITIONS   DEDUCTIONS
                                                              ---------   ----------
                                                 BALANCE AT   CHARGE TO    ACCOUNTS    BALANCE AT
                                                 BEGINNING    COSTS AND    CHARGED        END
                  DESCRIPTION                    OF PERIOD    EXPENSES       OFF       OF PERIOD
                  -----------                    ----------   ---------   ----------   ----------
<S>                                              <C>          <C>         <C>          <C>
Allowance for doubtful accounts:
  Year ended December 31:
     1995......................................    $1,041       1,716        1,285       $1,472
     1996......................................    $1,472       1,235        1,081       $1,626
     1997......................................    $1,626       2,138        1,091       $2,673
</TABLE>
 
                                       24
<PAGE>   26
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
     Not applicable.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     (a) Directors: The information required by Item 10 with respect to
directors appears in the Proxy Statement for the 1998 Annual Meeting of
Shareholders and is hereby incorporated by reference.
 
     (b) Executive Officers: The information required by Item 10 with respect to
Executive Officers appears in Part I of this Annual Report on Form 10-K.
 
ITEM 11. EXECUTIVE COMPENSATION
 
     The information required by Item 11 appears in the Proxy Statement for the
1998 Annual Meeting of Shareholders and is hereby incorporated by reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The information required by Item 12 appears under "Election of Directors"
in the Proxy Statement for the 1998 Annual Meeting of Shareholders and is hereby
incorporated by reference.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The information required by Item 13 appears in the Proxy Statement for the
1998 Annual Meeting of Shareholders and is hereby incorporated by reference.
 
                                       25
<PAGE>   27
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
 
(a) 1. FINANCIAL STATEMENTS:
 
       The Consolidated Financial Statements and Report of Independent
       Accountants dated January 28, 1998 are included under Item 8 of this
       Annual Report on Form 10-K.
 
     2.FINANCIAL STATEMENT SCHEDULE:
 
       The financial statement schedule listed in the Index to Financial
       Statements included under Item 8 is filed as part of this Annual Report
       on Form 10-K.
 
     3. EXHIBITS:
 
<TABLE>
       <C>     <S>
        2.(a)  Agreement and Plan of Merger, dated as of November 26, 1996
               among Registrant, ME Acquisitions, Inc., and Milgray
               Electronics, Inc. is incorporated by reference to Exhibit
               2.1 of the Form 8-K dated January 7, 1997.
        3.(a)  The Restated Articles of Incorporation and Restated By-laws
               are incorporated by reference to Exhibits 3.1 and 3.2,
               respectively, to Registrant's Form 8-B dated March 22, 1995,
               as amended.
        4.(a)  The Specimen of Registrant's Common Stock certificates is
               incorporated by reference to Exhibit 5 to Amendment number 1
               to Registrant's Form 8-B filed January 15, 1980.
          (b)  Warrant Agreement dated September 15, 1993 including Form of
               Warrant Certificate issued to the named Insurance Companies
               included in the Note Purchase Agreement dated February 1,
               1991, as amended, is incorporated by reference to Exhibit
               4.e of the Form 10-K dated June 30, 1993.
       10.(a)  The Employment and Deferred Compensation Agreements dated
               January 1, 1979 and the Amendment thereto dated August 6,
               1979 concerning certain officers of Registrant are
               incorporated by reference to Exhibits 9A, 9C and 9D to
               Amendment number 1 to Registrant's Form 8-B dated November
               19, 1979.
          (b)  The 1990 Stock Option and Incentive Plan is incorporated by
               reference to Exhibit A of Registrant's definitive Proxy
               Statement (File No. 1-7899) filed in connection with the
               Annual Meeting of Shareholders held October 29, 1990.
          (c)  The 1993 Employees' Stock Purchase Plan is incorporated by
               reference to Exhibit A of Registrant's definitive Proxy
               Statement (File No. 1-7899) filed in connection with the
               Annual Meeting of Shareholders held November 2, 1993.
          (d)  The Amendment to Employment and Deferred Compensation
               Agreement dated September 14, 1994 is incorporated by
               reference to Exhibit (10) of the Registrant's Quarterly
               Report on Form 10-Q dated September 30, 1994.
          (e)  The Bell Industries, Inc. Directors' Retirement Plan for
               Non-employees is incorporated by reference to Exhibit (99)
               of the Registrant's Quarterly Report on Form 10-Q dated
               September 30, 1994.
          (f)  The 1994 Stock Option Plan is incorporated by reference to
               Exhibit A of the Registrant's definitive Proxy Statement
               (File No. 1-7899) filed in connection with the Annual
               Meeting of Shareholders held on November 1, 1994.
          (g)  Employment and Deferred Compensation Agreement dated
               February 15, 1995 between the Registrant and Paul F.
               Doucette is incorporated by reference to Exhibit 10.8 to
               Registrant's Form 8-B dated March 22, 1995, as amended.
          (h)  Form of Severance Agreement between the Registrant and its
               executive officers, other than Messrs. Williams and Doucette
               is incorporated by reference to Exhibit 10.9 to Registrant's
               Form 8-B dated March 22, 1995, as amended.
</TABLE>
 
                                       26
<PAGE>   28
 
<TABLE>
       <S>     <C>
          (i)  Form of Indemnity Agreement between the Registrant and its
               executive officers and directors is incorporated by
               reference to Exhibit 10.10 to Registrant's Form 8-B dated
               March 22, 1995, as amended.
          (j)  The Amendment to Employment and Deferred Compensation
               Agreement dated September 26, 1995 is incorporated by
               reference to Exhibit 10.k to Registrant's Form 10-K dated
               December 31, 1995.
          (k)  Non-Employee Directors' Stock Option Plan, as revised is,
               incorporated by reference to Exhibit 10.l to Registrant's
               Form 10-K dated December 31, 1995.
          (l)  Form of Stock Option Agreement between the Registrant and
               Non-employee Directors is incorporated by reference to
               Exhibit 10.m to Registrant's Form 10-K dated December 31,
               1995.
          (m)  Asset Purchase Agreement by and between Bell Industries,
               Inc. and IDD Aerospace Corp. dated October 2, 1995 is
               incorporated by reference to Exhibit 10.n to Registrant's
               Form 10-K dated December 31, 1995.
          (n)  The Amendment to Employment and Deferred Compensation
               Agreement between the Registrant and Theodore Williams dated
               November 21, 1996 is incorporated by reference to Exhibit
               10.n to Registrant's 10-K dated December 31, 1996.
          (o)  Credit Agreement dated as of January 7, 1997 among
               Registrant, Bell Ontario Holding, Inc., the Lenders listed
               therein, and Union Bank of California, N.A., as agent (which
               includes, among the Exhibits, Form of Company Security
               Agreement, Form of Company Pledge Agreement, Form of
               Subsidiary Security Agreement, Form of Subsidiary Guarantee
               and Form of Subsidiary Pledge Agreement) is incorporated by
               reference to Exhibit 10.1 to Registrant's Form 8-K dated
               January 7, 1997.
          (p)  Amendments No. 1, 2, 3 and 4 to the Credit Agreement dated
               January 21, 1997, February 7, 1997, August 1, 1997 and
               December 31, 1997 among Registrant, Bell Ontario Holding,
               Inc., the Lenders listed therein, and Union Bank of
               California, N.A., as agent.
          (q)  Severance Agreement dated as of January 20, 1997 between the
               Registrant and Bruce M. Jaffe is incorporated by reference
               and Exhibit 10.p to Registrant's Form 10-K dated December
               31, 1996.
          (r)  Amendment to the 1994 Stock Option Plan dated August 8, 1997
               is incorporated by reference to Exhibit 99 to Registrant's
               Form 10-Q dated June 30, 1997.
          (s)  Post-effective Amendment No. 1 to the 1994 Stock Option Plan
               dated August 12, 1997 is incorporated by reference to
               Exhibit 4.1.1 to Registrant's Form S-8 dated August 12,
               1997.
          (t)  1997 Deferred Compensation Plan dated August 27, 1997 is
               incorporated by reference to Registrant's Form S-8 dated
               August 28, 1997.
       21.     Subsidiaries of the Registrant.
       23.     Consent of Independent Accountants.
       27.     Financial Data Schedule.
</TABLE>
 
(b) REPORTS ON FORM 8-K:
 
     None
 
                                       27
<PAGE>   29
 
                                   SIGNATURES
 
     Pursuant to the requirement of Section 13 or 15(d) 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: /s/ GORDON GRAHAM
                                            ------------------------------------
                                            Gordon Graham
                                            President and Chief Executive
                                              Officer
Date: March 6, 1998
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 6, 1998 by the following persons on behalf
of the Registrant and in the capacities indicated.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                            TITLE
                      ---------                                            -----
<S>                                                    <C>
 
/s/ THEODORE WILLIAMS                                  Chairman of the Board
-----------------------------------------------------
Theodore Williams
 
/s/ HERBERT S. DAVIDSON                                Vice Chairman of the Board
-----------------------------------------------------
Herbert S. Davidson
 
/s/ GORDON GRAHAM                                      President and Chief Executive Officer
-----------------------------------------------------
Gordon M. Graham
 
/s/ JOHN J. COST                                       Director and Secretary
-----------------------------------------------------
John J. Cost
 
/s/ ANTHONY L. CRAIG                                   Director
-----------------------------------------------------
Anthony L. Craig
 
/s/ MILTON ROSENBERG                                   Director
-----------------------------------------------------
Milton Rosenberg
 
/s/ TRACY A. EDWARDS                                   Executive Vice President -- Finance and
-----------------------------------------------------  Operations and Chief Financial and Accounting
Tracy A. Edwards                                       Officer
</TABLE>
 
                                       28
<PAGE>   30
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBITS
--------
<S>   <C>                                                                <C>
 (2)  Agreement and Plan of Merger dated as of November 26, 1996 among
      Registrant, ME Acquisition, Inc. and Milgray Electronics, Inc....    (*)
 (3)  Articles of incorporation and by-laws............................    (*)
 (4)  Instruments defining the rights of security holders, including
      indentures.......................................................
      (a)  Specimen of Registrant's Common Stock certificate...........    (*)
      (b)  Warrant Agreement dated September 15, 1993 including Form of
           Warrant Certificate issued to the named Insurance Companies
           included in the Note Purchase Agreement dated February 1,
           1991, as amended............................................    (*)
(10)  Material contracts...............................................
      (a)  The Employment and Deferred Compensation Agreements dated
           January 1, 1979 and the Amendment thereto dated August 6,
           1979 concerning certain officers of Registrant..............    (*)
      (b)  The 1990 Stock Option and Incentive Plan included as Exhibit
           A to Registrant's definitive Proxy Statement (File No.
           1-7899) filed in connection with the Annual Meeting of
           Shareholders held October 29, 1990..........................    (*)
      (c)  The 1993 Employees' Stock Purchase Plan included as Exhibit
           A to Registrant's definitive Proxy Statement (File No.
           1-7899) filed in connection with the Annual Meeting of
           Shareholders held November 2, 1993..........................    (*)
      (d)  The Amendment to Employment and Deferred Compensation
           Agreement dated September 14, 1994 included as to Exhibit
           (10) of the Registrant's Quarterly Report on Form 10-Q dated
           September 30, 1994..........................................    (*)
      (e)  The Bell Industries, Inc. Directors' Retirement Plan for
           Non-employees included as Exhibit (99) of the Registrant's
           Quarterly Report on Form 10-Q dated September 30, 1994......    (*)
      (f)  The 1994 Stock Option Plan included as Exhibit A of the
           Registrant's definitive Proxy Statement (File No. 1-7899)
           filed in connection with the Annual Meeting of Shareholders
           held on November 1, 1994....................................    (*)
      (g)  Employment and Deferred Compensation Agreement dated
           February 15, 1995 between the Registrant and Paul F.
           Doucette....................................................    (*)
      (h)  Form of Severance Compensation Agreement between the
           Registrant and its executive officers, other than Messrs.
           Williams and Doucette.......................................    (*)
      (i)  Form of Indemnity Agreement between the Registrant and its
           executive officers and directors............................    (*)
      (j)  The Amendment to Employment and Deferred Compensation
           Agreement dated September 26, 1995..........................    (*)
      (k)  Non-Employee Directors' Stock Option Plan, as revised.......    (*)
      (l)  Form of Stock Option Agreement between the Registrant and
           Non-employee Directors......................................    (*)
      (m)  Asset Purchase Agreement by and between Bell Industries,
           Inc. and IDD Aerospace Corp. dated October 2, 1995..........    (*)
      (n)  The Amendment to Employment and Deferred Compensation
           Agreement dated November 21, 1996...........................    (*)
</TABLE>
<PAGE>   31
 
<TABLE>
<S>   <C>                                                                               <C>
      (o)  Credit Agreement dated as of January 7, 1997 among Registrant, Bell Ontario
           Holding, Inc., the Lenders named therein, and Union Bank of California, as
           agent.                                                                         (*)
      (p)  Amendments No. 1, 2, 3 and 4 to the Credit Agreement dated January 21,
           1997, February 7, 1997, August 1, 1997 and December 31, 1997 among
           Registrant, Bell Ontario Holding, Inc., the Lenders listed therein, and
           Union Bank of California, N.A., as agent...........................
      (q)  Severance Agreement dated January 20, 1997 between the Registrant and Bruce
           M. Jaffe...........................................................            (*)
      (r)  Amendment to the 1994 Stock Option Plan dated August 8, 1997.......            (*)
      (s)  Post-effective Amendment No. 1 to the 1994 Stock Option Plan dated August
           12, 1997...........................................................            (*)
      (t)  1997 Deferred Compensation Plan dated August 27, 1997..............            (*)
(21)  Subsidiaries of the Registrant
(23)  Consent of Independent Accountants
(27)  Financial Data Schedule
</TABLE>
 
---------------
 
(*) Incorporated by reference.