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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 For the year ended December 31, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For
the transition period fromto
 Commission file number 1-11471
 BELL INDUSTRIES, INC.
 (Exact Name of Registrant as Specified in its Charter)
 California
    
    95-2039211(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)8888 Keystone CrossingSuite 1700Indianapolis, Indiana
    
    46240(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code:
(317) 704-6000
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredN/A
    
    N/A
 Securities registered pursuant to Section 12(g) of the Act:
Common Stock
  o þ
  o þ
  þ o
  o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
  o þ




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##### 



TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    7Item 1B. Unresolved Staff Comments
    
    
    13Item 2. Properties
    
    
    13Item 3. Legal Proceedings
    
    
    13Item 4. (Removed and Reserved)
    
    
    13PART IIItem 5. Market for Registrants Common Equity, Related
Shareholder Matters and Issuer Purchases of Equity
Securities
    
    
    14Item 6. Selected Financial Data
    
    
    14Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    15Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 8. Financial Statements and Supplementary Data
    
    
    21Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    40Item 9A(T). Controls and Procedures
    
    
    40Item 9B. Other Information
    
    
    41PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    42Item 11. Executive Compensation
    
    
    45Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Shareholder Matters
    
    
    48Item 13. Certain Relationships and Related Transactions, and
Director Independence
    
    
    49Item 14. Principal Accountant Fees and Services
    
    
    50PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    52SIGNATURES
    
    
    53EXHIBIT INDEX
    
    
    54Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
     3




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PART I
 
 Item 1. Business
 Overview
   Recent Events
 Sale of SkyTel Division
      Amendments to Credit Facility
   4




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Amendments to Convertible Note
   Management Changes
   Bell Techlogix
  Project Based Services
    5




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Managed Services
   Technology Solutions
      Recreational Products Group
   6




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Company Information
  Environmental Matters
  Availability of Reports and Other Information
  
    
    our corporate Code of Ethics for Directors, Officers and Employees, which
qualifies as a code of ethics as defined by Item 406 of Regulation S-K of the
Exchange Act; and
 
    
    charters for our Audit Committee, Nominating Committee and Compensation Committee.
  
 Item 1A. Risk Factors
   7




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Risks Related to Our Growth Initiative
 Our growth initiatives may not achieve the intended benefits or may fail.
  The loss of key management or technical personnel could negatively affect our ability to implement
our growth initiatives.
  Risks Relating to Our Capital Structure
 Under the Amended Convertible Note, Newcastle has the ability to acquire in excess of a majority of
our outstanding common stock, as well as the right to designate at least 50% of the members of our
board of directors, which could give Newcastle control over the management of our business to the
detriment of our other shareholders.
  Our ability to make payments on our debt will be contingent on our future operating performance,
which will depend on a number of factors that are outside of our control.
   
    
    we may need to dedicate a substantial portion of our cash flows from operations to the payment
of our indebtedness, reducing the funds available for future working capital requirements,
capital expenditures, acquisitions or other general corporate requirements;
 
    
    a portion of our borrowings may be at variable rates of interest, which may result in higher
interest expense in the event of increases in interest rates;
  8




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
    
    we may be more vulnerable to a downturn in the industries in which we operate or a downturn in
the economy in general;
 
    
    we may be limited in our flexibility to plan for, or react to, changes in our businesses and
the industries in which we operate;
 
    
    we may be placed at a competitive disadvantage compared to our competitors that have less debt;
 
    
    we may be limited in our ability to react to unforeseen increases in certain costs and
obligations arising in our existing or previously owned businesses, including environmental,
legal, lease and tax liabilities;
 
    
    we may determine it to be necessary to dispose of certain assets or one or more of our
businesses to reduce our debt; and
 
    
    our ability to borrow additional funds may be limited.
  We are subject to restrictive debt covenants pursuant to our indebtedness. These covenants may
restrict our ability to finance our business and, if we do not comply with the covenants or
otherwise default under them, we may not have the funds necessary to pay all amounts that could
become due and the lenders could foreclose on substantially all of our assets.
  
    
    incur additional debt;
 
    
    create or incur liens;
 
    
    pay dividends or make other equity distributions to our shareholders;
 
    
    purchase or redeem share capital;
 
    
    make investments;
 
    
    sell assets;
 
    
    issue or sell share capital of certain subsidiaries;
 
    
    engage in transactions with affiliates;
 
    
    issue or become liable on a guarantee;
 
    
    voluntarily prepay, repurchase or redeem debt;
 
    
    create or acquire new subsidiaries; and
 
    
    effect a merger or consolidation of, or sell all or substantially all of our assets.
    9




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Our common stock is not traded on a national securities exchange.
   Risks Related to Our Operations
 We have a history of operating losses.
  Our previously owned businesses subject us to potential environmental liabilities, which could
adversely affect our results of operations.
  We may not be able to compete effectively with other companies in our business segments, which will
cause our net sales and market share to decline and adversely affect our business, financial
condition and results of operations.
  Future changes in financial accounting standards or practices or other legislative changes could
impact our business.
   10




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The cost of compliance or failure to comply with the Sarbanes-Oxley Act of 2002 may adversely
affect our business.
   Risks Related to our Bell Techlogix Business
 We rely on a limited number of hardware and software vendors to supply us with products in our Bell
Techlogix business, and the loss of our ability to rely upon any of those vendors or to obtain
their products in the future would adversely affect our results of operations.
  Our Bell Techlogix business has several large clients and the loss of one or more of these large
clients may materially and adversely affect our business, financial condition and results of
operations.
  Our Bell Techlogix business could be adversely impacted by conditions affecting the information
technology market, including current economic conditions.
   11




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Many of our contracts can be terminated by our clients on short notice and in many cases without
penalty. We also generally do not have exclusive arrangements with our clients or a minimum revenue
commitment from our clients, which creates uncertainty about the volume of services we will provide
and the amount of revenues we will generate from these clients.
  Risks Related to our Recreational Products Business
 Current economic conditions may adversely affect consumer spending and the financial condition of
our dealers and may significantly harm our Recreational Products business.
   Our recreational products business is seasonal and is subject to fluctuations based upon climatic
conditions.
  Our recreational products business relies heavily upon vendors with which we have no long-term
contracts.
  Risks Related to SkyTel
 We continue to be exposed to contingent liabilities relating to SkyTel, which could adversely
affect our financial condition.
   12




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Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  Area in square feet(number of locations)LeasedBell Techlogix
    
    
    98,000
    
    
    
    (6
    )Recreational Products Group
    
    
    154,000
    
    
    
    (3
    )Discontinued Operations
    
    
    34,000
    
    
    
    (1
    )Corporate (Headquarters Office)
    
    
    24,000
    
    
    
    (1
    )310,000
    
    
    
    (11
    )
   
 Item 3. Legal Proceedings
   
 Item 4. (Removed and Reserved)
  13




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Shareholder Matters
and Issuer Purchases of Equity Securities
  Quarter EndedMar. 31
    
    
    Jun. 30
    
    
    Sep. 30
    
    
    Dec. 31Year ended December 31, 2009High
    
    $
    3.00
    
    
    $
    1.10
    
    
    $
    1.66
    
    
    $
    1.40Low
    
    
    0.25
    
    
    
    0.60
    
    
    
    0.30
    
    
    
    0.74Close
    
    
    0.60
    
    
    
    1.05
    
    
    
    0.74
    
    
    
    1.05Year ended December 31, 2008High
    
    $
    18.80
    
    
    $
    15.40
    
    
    $
    4.20
    
    
    $
    1.40Low
    
    
    12.00
    
    
    
    1.80
    
    
    
    1.20
    
    
    
    0.25Close
    
    
    15.40
    
    
    
    3.20
    
    
    
    1.40
    
    
    
    0.25
   
 Item 6. Selected Financial Data
  Year ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in thousands, except per share data)Operating ResultsNet revenues
    
    $
    100,577
    
    
    $
    101,904
    
    
    $
    119,918
    
    
    $
    120,296
    
    
    $
    122,563Operating loss
    
    $
    (784
    )
    
    $
    (1,902
    )
    
    $
    (11,059
    )
    
    $
    (10,042
    )
    
    $
    (2,924
    )Loss from continuing operations
    
    $
    (1,870
    )
    
    $
    (3,405
    )
    
    $
    (9,111
    )
    
    $
    (7,364
    )
    
    $
    (2,068
    )(Loss) income from discontinued operations, net of tax
    
    $
    (36
    )
    
    $
    (962
    )
    
    $
    (2,196
    )
    
    $
    441
    
    
    $
    1,269(Loss) gain on sale of discontinued operations, net
of tax
    
    $
    
    
    
    $
    (500
    )
    
    $
    (3,940
    )
    
    $
    4,030
    
    
    $
    Net loss
    
    $
    (1,906
    )
    
    $
    (4,867
    )
    
    $
    (15,247
    )
    
    $
    (2,893
    )
    
    $
    (799
    )Financial PositionWorking capital
    
    $
    11,272
    
    
    $
    12,305
    
    
    $
    9,983
    
    
    $
    11,543
    
    
    $
    18,571Total assets
    
    $
    22,553
    
    
    $
    27,260
    
    
    $
    62,019
    
    
    $
    43,114
    
    
    $
    44,353Long-term liabilities
    
    $
    14,937
    
    
    $
    14,903
    
    
    $
    14,387
    
    
    $
    3,622
    
    
    $
    4,518Shareholders equity (deficit)
    
    $
    (2,088
    )
    
    $
    (256
    )
    
    $
    4,783
    
    
    $
    18,254
    
    
    $
    20,304
  14




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Year ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in thousands, except per share data)Share and Per Share DataBASIC AND DILUTEDLoss from continuing operations
    
    $
    (4.32
    )
    
    $
    (7.87
    )
    
    $
    (21.09
    )
    
    $
    (17.19
    )
    
    $
    (4.89
    )(Loss) income from discontinued operations, net of tax
    
    $
    (0.08
    )
    
    $
    (2.22
    )
    
    $
    (5.08
    )
    
    $
    1.03
    
    
    $
    3.00(Loss) gain on sale of discontinued operations, net
of tax
    
    $
    
    
    
    $
    (1.15
    )
    
    $
    (9.09
    )
    
    $
    9.41
    
    
    $
    Net loss
    
    $
    (4.40
    )
    
    $
    (11.24
    )
    
    $
    (35.29
    )
    
    $
    (6.75
    )
    
    $
    (1.89
    )Weighted average common shares (in 000s)
    
    
    433
    
    
    
    433
    
    
    
    432
    
    
    
    428
    
    
    
    423OTHER PER SHARE DATAShareholders equity (deficit)
    
    $
    (4.82
    )
    
    $
    (0.59
    )
    
    $
    11.07
    
    
    $
    42.61
    
    
    $
    47.97Market price  high
    
    $
    3.00
    
    
    $
    18.80
    
    
    $
    103.40
    
    
    $
    78.00
    
    
    $
    67.00Market price  low
    
    $
    0.25
    
    
    $
    0.25
    
    
    $
    16.40
    
    
    $
    45.00
    
    
    $
    39.60Financial RatiosCurrent ratio
    
    
    2.2
    
    
    
    2.0
    
    
    
    1.2
    
    
    
    1.5
    
    
    
    2.0Long-term liabilities to total capitalization
    
    
    116.3
    %
    
    
    101.7
    %
    
    
    75.0
    %
    
    
    16.6
    %
    
    
    18.2
    %
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Critical Accounting Policies and Estimates
  Environmental Matters
   15




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Recent Accounting Pronouncements
 s
  Results of Operations
   Year ended December 31,2009
    
    
    2008Net revenues:Bell TechlogixProducts
    
    $
    39,882
    
    
    $
    36,364Services
    
    
    26,252
    
    
    
    26,525Total Bell Techlogix
    
    
    66,134
    
    
    
    62,889Recreational Products Group
    
    
    34,443
    
    
    
    39,015Total net revenues
    
    $
    100,577
    
    
    $
    101,904Operating income (loss):Bell Techlogix
    
    $
    1,558
    
    
    $
    1,010Recreational Products Group
    
    
    1,191
    
    
    
    972Corporate costs
    
    
    (3,533
    )
    
    
    (3,884
    )Total operating loss
    
    
    (784
    )
    
    
    (1,902
    )Loss on sale of assets
    
    
    
    
    
    
    (28
    )Loss on extinguishment of debt
    
    
    
    
    
    
    (1,053
    )Interest expense, net
    
    
    (1,093
    )
    
    
    (844
    )Benefit from income taxes
    
    
    7
    
    
    
    422Loss from continuing operations
    
    
    (1,870
    )
    
    
    (3,405
    )Discontinued operations:Loss from discontinued operations, net of tax
    
    
    (36
    )
    
    
    (962
    )Loss on sale of discontinued operations, net of tax
    
    
    
    
    
    
    (500
    )Loss from discontinued operations, net of tax
    
    
    (36
    )
    
    
    (1,462
    )Net loss
    
    $
    (1,906
    )
    
    $
    (4,867
    )
  16




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Year ended December 31,2009
    
    
    2008Net revenues:Products
    
    
    73.9
    %
    
    
    74.0
    %Services
    
    
    26.1
    
    
    
    26.0Total net revenues
    
    
    100.0
    
    
    
    100.0Costs and expenses:Cost of products sold
    
    
    (61.1
    )
    
    
    (60.5
    )Cost of service provided
    
    
    (18.9
    )
    
    
    (18.1
    )Selling, general and administrative
    
    
    (20.8
    )
    
    
    (23.3
    )Loss on sale of assets
    
    
    
    
    
    
    Loss on extinguishment of debt
    
    
    
    
    
    
    (1.0
    )Interest expense, net
    
    
    (1.1
    )
    
    
    (0.8
    )Loss from continuing operations before income taxes
    
    
    (1.9
    )
    
    
    (3.8
    )Benefit from income taxes
    
    
    0.0
    
    
    
    0.4Loss from continuing operations
    
    
    (1.9
    )%
    
    
    (3.4
    )%The following summarizes other comparative operating results data:Cost of products sold as a percentage of products revenues
    
    
    82.6
    %
    
    
    81.7
    %Cost of services provided as a percentage of services revenues
    
    
    72.4
    %
    
    
    69.6
    %
 Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
  Net revenues
  Gross profit
  Selling, general and administrative expenses
  Interest and other, net
   17




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Income taxes
  Discontinued operations
  Business Segment Results
  Bell Techlogix
   Recreational Products Group
   Corporate
   18




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Changes in Financial Condition
 Liquidity and Capital Resources
  December 31,2009
    
    
    2008Cash and cash equivalents
    
    $
    2,608
    
    
    $
    3,233Net working capital
    
    $
    11,272
    
    
    $
    12,305Current ratio
    
    
    2.16
    
    
    
    1.98Long-term liabilities to capitalization(1)
    
    
    116.3
    %
    
    
    101.7
    %Shareholders deficit per share
    
    $
    (4.82
    )
    
    $
    (0.59
    )Days sales in receivables
    
    
    45
    
    
    
    50
 (1)
    
    Capitalization represents the sum of long-term liabilities and shareholders equity.   Secured Credit Facility with WFCF
    19




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Convertible Note Held By Newcastle
      Off-Balance Sheet Arrangements
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
   20




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Item 8. Financial Statements and Supplementary Data
 INDEX TO FINANCIAL STATEMENTS
 Financial Statements:Report of Independent Registered Public Accounting Firm
    
    
    22Consolidated Statements of Operations for the years ended December 31, 2009 and 2008
    
    
    23Consolidated Balance Sheets at December 31, 2009 and 2008
    
    
    24Consolidated Statements of Shareholders Deficit for the years ended December 31,
2009 and 2008
    
    
    25Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008
    
    
    26Notes to Consolidated Financial Statements
    
    
    27Financial Statement Schedule:Schedule II  Valuation and Qualifying Accounts
    
    
    40
   21




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
  22




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BELL INDUSTRIES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
 Year ended December 31,2009
    
    
    2008Net revenues:Products
    
    $
    74,325
    
    
    $
    75,379Services
    
    
    26,252
    
    
    
    26,525Total net revenues
    
    
    100,577
    
    
    
    101,904Costs and expenses:Cost of products sold
    
    
    61,420
    
    
    
    61,606Cost of services provided
    
    
    19,011
    
    
    
    18,459Selling, general and administrative
    
    
    20,930
    
    
    
    23,741Operating loss
    
    
    (784
    )
    
    
    (1,902
    )Interest expense, net
    
    
    1,093
    
    
    
    844Loss on sale of assets
    
    
    
    
    
    
    28Loss on extinguishment of debt
    
    
    
    
    
    
    1,053Loss from continuing operations before benefit from income taxes
    
    
    (1,877
    )
    
    
    (3,827
    )Benefit from income taxes
    
    
    (7
    )
    
    
    (422
    )Loss from continuing operations
    
    
    (1,870
    )
    
    
    (3,405
    )Discontinued operations:Loss from discontinued operations, net of tax
    
    
    (36
    )
    
    
    (962
    )Loss on sale of discontinued operations, net of tax
    
    
    
    
    
    
    (500
    )Loss from discontinued operations, net of tax
    
    
    (36
    )
    
    
    (1,462
    )Net loss
    
    $
    (1,906
    )
    
    $
    (4,867
    )Share and per share dataBasic and diluted:Loss from continuing operations
    
    $
    (4.32
    )
    
    $
    (7.87
    )Loss from discontinued operations
    
    
    (0.08
    )
    
    
    (3.37
    )Net loss
    
    $
    (4.40
    )
    
    $
    (11.24
    )Weighted average common shares outstanding
    
    
    433
    
    
    
    433
   23




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BELL INDUSTRIES, INC.
 
 CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,608
    
    
    $
    3,233Accounts receivable, less allowance for doubtful
accounts of $804 and $791, respectively
    
    
    9,210
    
    
    
    8,096Inventories, net
    
    
    8,012
    
    
    
    8,770Prepaid expenses and other current assets
    
    
    846
    
    
    
    1,819Notes receivable
    
    
    300
    
    
    
    3,000Total current assets
    
    
    20,976
    
    
    
    24,918Fixed assets, at cost:Leasehold improvements
    
    
    928
    
    
    
    915Computer equipment and software
    
    
    7,586
    
    
    
    8,247Furniture, fixtures and other
    
    
    3,718
    
    
    
    3,756Total fixed assets
    
    
    12,232
    
    
    
    12,918Less accumulated depreciation and amortization
    
    
    (11,430
    )
    
    
    (11,443
    )Fixed assets, net
    
    
    802
    
    
    
    1,475Other assets
    
    
    775
    
    
    
    867Total assets
    
    $
    22,553
    
    
    $
    27,260LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Floor plan payables
    
    $
    
    
    
    $
    291Accounts payable
    
    
    5,382
    
    
    
    7,189Accrued payroll
    
    
    1,882
    
    
    
    1,462Other accrued liabilities
    
    
    2,440
    
    
    
    3,671Total current liabilities
    
    
    9,704
    
    
    
    12,613Convertible note
    
    
    11,345
    
    
    
    10,840Other long-term liabilities
    
    
    3,592
    
    
    
    4,063Total liabilities
    
    
    24,641
    
    
    
    27,516Commitments and contingenciesShareholders deficit:Preferred stock:Authorized  1,000,000 shares, outstanding  noneCommon stock:Authorized  10,000,000 shares;Outstanding  433,416 shares
    
    
    35,569
    
    
    
    35,495Accumulated deficit
    
    
    (37,657
    )
    
    
    (35,751
    )Total shareholders deficit
    
    
    (2,088
    )
    
    
    (256
    )Total liabilities and shareholders deficit
    
    $
    22,553
    
    
    $
    27,260
   24




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##### Table of Contents



BELL INDUSTRIES, INC.
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIT
(Dollars in thousands)
 Accumulated otherCommon stock
    
    
    Accumulated
    
    
    comprehensive
    
    
    Total ShareholdersShares
    
    
    Amount
    
    
    deficit
    
    
    income
    
    
    DeficitBalance at January 1, 2008
    
    
    432,511
    
    
    $
    34,983
    
    
    $
    (30,536
    )
    
    $
    336
    
    
    $
    4,783Stock-based compensation
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    150Employee benefit plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (336
    )
    
    
    (336
    )Fractional shares
issued in 1-for-20
reverse stock split
    
    
    905Beneficial conversion
feature, net of tax
    
    
    
    
    
    
    362
    
    
    
    
    
    
    
    
    
    
    
    362Adoption of ASC 715,
net of tax
    
    
    
    
    
    
    
    
    
    
    (348
    )
    
    
    
    
    
    
    (348
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (4,867
    )
    
    
    
    
    
    
    (4,867
    )Balance at December 31, 2008
    
    
    433,416
    
    
    $
    35,495
    
    
    $
    (35,751
    )
    
    $
    
    
    
    $
    (256
    )Stock-based compensation
    
    
    
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    51Beneficial conversion
feature, net of tax
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    23Net loss
    
    
    
    
    
    
    
    
    
    
    (1,906
    )
    
    
    
    
    
    
    (1,906
    )Balance at December 31, 2009
    
    
    433,416
    
    
    $
    35,569
    
    
    $
    (37,657
    )
    
    $
    
    
    
    $
    (2,088
    )
   25




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##### Table of Contents



BELL INDUSTRIES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 Year ended December 31,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (1,906
    )
    
    $
    (4,867
    )Loss from discontinued operations, net of tax
    
    
    36
    
    
    
    962Loss on sale of discontinued operations, net of tax
    
    
    
    
    
    
    500Adjustments to reconcile net loss to net cash used in operating
activities for continuing operations:Loss on sale of assets
    
    
    
    
    
    
    28Gain on termination of retiree medical plan
    
    
    
    
    
    
    (336
    )Depreciation, amortization and accretion
    
    
    895
    
    
    
    1,636Stock-based compensation
    
    
    51
    
    
    
    47Non-cash interest expense
    
    
    785
    
    
    
    607Provision for losses on accounts receivable, net
    
    
    19
    
    
    
    348Provision for losses on inventory
    
    
    (15
    )
    
    
    (199
    )Loss on extinguishment of debt
    
    
    
    
    
    
    1,053Changes in assets and liabilities, net of acquisitions and disposals:Accounts receivable
    
    
    (1,133
    )
    
    
    3,860Inventories
    
    
    773
    
    
    
    1,752Accounts payable
    
    
    (1,807
    )
    
    
    (3,249
    )Accrued payroll
    
    
    420
    
    
    
    (177
    )Accrued liabilities and other
    
    
    (1,263
    )
    
    
    (3,186
    )Net cash used in operating activities for continuing operations
    
    
    (3,145
    )
    
    
    (1,221
    )Net cash used in operating activities for discontinued operations
    
    
    (263
    )
    
    
    (1,470
    )Net cash used in operating activities
    
    
    (3,408
    )
    
    
    (2,691
    )Cash flows from investing activities:Purchases of fixed assets and other
    
    
    (131
    )
    
    
    (842
    )Proceeds from life insurance policy
    
    
    
    
    
    
    488Proceeds from sale of assets
    
    
    5
    
    
    
    11Net cash used in investing activities for continuing operations
    
    
    (126
    )
    
    
    (343
    )Net cash provided by investing activities for discontinued operations
    
    
    3,493
    
    
    
    12,000Net cash provided by investing activities
    
    
    3,367
    
    
    
    11,657Cash flows from financing activities:Net repayments under revolving credit facility
    
    
    
    
    
    
    (4,775
    )Debt acquisition costs
    
    
    (174
    )
    
    
    (130
    )Net payments of floor plan payables
    
    
    (291
    )
    
    
    (773
    )Principal payments on capital leases
    
    
    (119
    )
    
    
    (129
    )Net cash used in financing activities for continuing operations
    
    
    (584
    )
    
    
    (5,807
    )Net cash used in financing activities for discontinued operations
    
    
    
    
    
    
    (335
    )Net cash used in financing activities
    
    
    (584
    )
    
    
    (6,142
    )Net increase (decrease) in cash and cash equivalents
    
    
    (625
    )
    
    
    2,824Cash and cash equivalents at beginning of year
    
    
    3,233
    
    
    
    409Cash and cash equivalents at end of year
    
    $
    2,608
    
    
    $
    3,233Supplemental cash flow information:Interest paid
    
    $
    188
    
    
    $
    363Income taxes paid
    
    $
    10
    
    
    $
    12Capital lease obligations incurred (including discontinued operations)
    
    $
    
    
    
    $
    263
   26




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##### Table of Contents



BELL INDUSTRIES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1   Summary of Accounting Policies
 Principles of consolidation
 Cash and cash equivalents
 Revenue recognition and receivables
 Bell Techlogix
    Recreational Products Group (RPG)
    27




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##### Table of Contents



Inventories
 Shipping and handling costs
 Deferred catalog and advertising costs
 Vendor rebates
 Deferred financing costs
 Fixed assets, depreciation and amortization
 Long-lived assets
 Income taxes
 Environmental matters
 Retiree medical program
 Life insurance
 Comprehensive income (loss)
 Stock-based compensation
  28




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##### Table of Contents



Per share data
 2009
    
    
    2008Basic weighted average shares outstanding
    
    
    433
    
    
    
    433Potentially dilutive stock options and convertible debt
    
    
    2,846
    
    
    
    141Anti-dilutive due to net loss in period
    
    
    (2,846
    )
    
    
    (141
    )Diluted weighted average shares outstanding
    
    
    433
    
    
    
    433
   Use of estimates
 New Pronouncements
 s
  Note 2   Acquisition and Sale of SkyTel Division
   29




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##### Table of Contents



December 31,2009
    
    
    2008Net revenues
    
    $
    
    
    
    $
    35,088Loss before income taxes
    
    
    (36
    )
    
    
    (1,462
    )Provision for income taxes
    
    
    
    
    
    
    Loss from discontinued operations, net of tax
    
    $
    (36
    )
    
    $
    (1,462
    )
   Note 3   Fair Value of Financial Instruments
  Level 1 
    
    Quoted prices (unadjusted) in active markets for identical
assets or liabilities that the Company has the ability to access
as of the measurement date. Financial assets and liabilities
utilizing Level 1 inputs include active exchange-traded
securities and exchange-based derivatives.Level 2 
    
    Inputs other than quoted prices included within Level 1 that are
directly observable for the asset or liability or indirectly
observable through corroboration with observable market data.
Financial assets and liabilities utilizing Level 2 inputs
include fixed income securities, non-exchange-based derivatives,
mutual funds, and fair-value hedges.Level 3 
    
    Unobservable inputs for the asset or liability only used when
there is little, if any, market activity for the asset or
liability at the measurement date. Financial assets and
liabilities utilizing Level 3 inputs include
infrequently-traded, non-exchange-based derivatives and
commingled investment funds, and are measured using present
value pricing models.
  30




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##### Table of Contents



Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Notes
    
    
    Environmental(In thousands)
    
    Receivable
    
    
    LiabilityFair Value at December 31, 2008
    
    $
    3,000
    
    
    $
    2,959Total realized gains or losses
    
    
    
    
    
    
    Changes in net asset or liability resulting from collections or settlements
    
    
    (2,700
    )
    
    
    (510
    )Transfers in and/or out of Level 3
    
    
    
    
    
    
    Fair Value at December 31, 2009
    
    $
    300
    
    
    $
    2,449
   Note 4   Floor Plan Arrangements
  Note 5   Stock Repurchase Program
  Note 6   Stock Plans
    31




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##### Table of Contents



Weighted averageWeighted
    
    
    remainingaverage
    
    
    contractual term
    
    
    AggregateShares
    
    
    exercise price
    
    

(in years)
    
    
    intrinsic valueOutstanding at
December 31, 2007
    
    
    54,650
    
    
    $
    74.80
    
    
    
    6.4
    
    
    $
    Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Canceled or expired
    
    
    (27,900
    )
    
    
    60.38Outstanding at
December 31, 2008
    
    
    26,750
    
    
    $
    89.84
    
    
    
    4.1
    
    
    $
    Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Canceled or expired
    
    
    (4,250
    )
    
    
    79.85Outstanding at
December 31, 2009
    
    
    22,500
    
    
    $
    91.73
    
    
    
    3.9
    
    
    $
    Exercisable at
December 31, 2009
    
    
    18,650
    
    
    $
    86.51
    
    
    
    3.5
    
    
    $
    
  Weightedaverage grantShares
    
    
    date fair valueNon-vested at December 31, 2008
    
    
    6,450
    
    
    $
    21.90Granted
    
    
    
    
    
    
    Vested
    
    
    (2,600
    )
    
    
    20.26Canceled
    
    
    
    
    
    
    Non-vested at December 31, 2009
    
    
    3,850
    
    
    $
    23.00
    32




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##### Table of Contents



Note 7   Debt
  Credit Facility
         33




---



##### Table of Contents



Convertible Note
       Amended convertible note at December 31, 2008
    
    $
    10,840Beneficial conversion feature
    
    
    (23
    )Accretion of beneficial conversion feature
    
    
    64Accrued interest
    
    
    464Amended convertible note at December 31, 2009
    
    $
    11,345
  Note 8   Income Taxes
  2009
    
    
    2008CurrentFederal
    
    $
    
    
    
    $
    (396
    )State
    
    
    (7
    )
    
    
    (26
    )$
    (7
    )
    
    $
    (422
    )
  34




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##### Table of Contents



2009
    
    
    2008Federal statutory tax rate
    
    
    (34.0
    )%
    
    
    (34.0
    )%State taxes, net of federal benefit
    
    
    (0.4
    )
    
    
    (0.5
    )Change in valuation allowance against net deferred tax assets
    
    
    32.9
    
    
    
    33.6Nondeductible items, unrecognized tax benefits and other, net
    
    
    1.1
    
    
    
    (6.8
    )Effective tax rate
    
    
    (0.4
    )%
    
    
    7.7
    %
  December 31,2009
    
    
    2008Deferred tax assets:Net operating loss carryforwards
    
    $
    11,948
    
    
    $
    11,551Accrued environmental and legal
    
    
    1,037
    
    
    
    1,186Depreciation and amortization
    
    
    110
    
    
    
    Employee benefit accruals
    
    
    394
    
    
    
    163Accrued deal costs
    
    
    
    
    
    
    358Stock-based and deferred compensation
    
    
    526
    
    
    
    514Deferred rent
    
    
    204
    
    
    
    266Intangibles
    
    
    74
    
    
    
    151Receivables allowance
    
    
    295
    
    
    
    283Inventory reserves
    
    
    246
    
    
    
    258Other
    
    
    207
    
    
    
    11715,041
    
    
    
    14,847Deferred tax liabilities:Prepaid items
    
    
    (158
    )
    
    
    (203
    )Depreciation and amortization
    
    
    
    
    
    
    (8
    )Other
    
    
    
    
    
    
    (143
    )Net deferred tax balance before valuation allowance
    
    
    14,883
    
    
    
    14,493Valuation allowance
    
    
    (14,883
    )
    
    
    (14,493
    )Net deferred tax balance after valuation allowance
    
    $
    
    
    
    $
    
       35




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##### Table of Contents



Note 9   Employee Benefit and Deferred Compensation Plans
   Note 10   Retiree Medical Program
  Note 11   Environmental Matters
     Note 12   Litigation
   36




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##### Table of Contents



Other litigation:
 Note 13   Commitments and Contingencies
   December 31,2009Computer equipment and software
    
    $
    254Furniture, fixtures and other
    
    
    9Less accumulated amortization
    
    
    (221
    )$
    42
   Capitalleases2010
    
    $
    142011
    
    
    3Net minimum lease payments
    
    
    17Less: Amount representing interest(1)
    
    
    (2
    )Present value of net minimum lease payments(2)
    
    $
    15
 (1)
    
    Amount necessary to reduce net minimum lease
payments to present value calculated at the
Companys incremental borrowing rate at the
inception of the leases.(2)
    
    Included in current other accrued liabilities
and other long term accrued liabilities in the
amounts of $13,000 and $2,000, respectively, in
the Consolidated Balance Sheet at December 31,
2009.  Operatingleases2010
    
    $
    2,2882011
    
    
    1,9132012
    
    
    1,4192013
    
    
    4362014
    
    
    417$
    6,473
  37




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##### Table of Contents



Note 14   Related Party Transactions
    Note 15   Business Segments and Related Information
   Year endedDecember 31,2009
    
    
    2008Net revenues:Bell TechlogixProducts
    
    $
    39,882
    
    
    $
    36,364Services
    
    
    26,252
    
    
    
    26,52566,134
    
    
    
    62,889Recreational Products Group
    
    
    34,443
    
    
    
    39,015$
    100,577
    
    
    $
    101,904Operating income (loss):Bell Techlogix
    
    $
    1,558
    
    
    $
    1,010Recreational Products Group
    
    
    1,191
    
    
    
    972Corporate
    
    
    (3,533
    )
    
    
    (3,884
    )(784
    )
    
    
    (1,902
    )
  38




---



##### Table of Contents



Year endedDecember 31,2009
    
    
    2008Loss on sale of assets
    
    
    
    
    
    
    (28
    )Loss on extinguishment of debt
    
    
    
    
    
    
    (1,053
    )Interest expense, net
    
    
    (1,093
    )
    
    
    (844
    )Loss from continuing operations before benefit from income taxes
    
    $
    (1,877
    )
    
    $
    (3,827
    )Depreciation and amortization:Bell Techlogix
    
    $
    617
    
    
    $
    1,315Recreational Products Group
    
    
    96
    
    
    
    116Corporate
    
    
    182
    
    
    
    205$
    895
    
    
    $
    1,636Total assets:Bell Techlogix
    
    $
    8,023
    
    
    $
    6,494Recreational Products Group
    
    
    9,825
    
    
    
    11,184Corporate
    
    
    4,385
    
    
    
    5,646Discontinued operations
    
    
    320
    
    
    
    3,936$
    22,553
    
    
    $
    27,260Capital expenditures:Bell Techlogix
    
    $
    46
    
    
    $
    758Recreational Products Group
    
    
    65
    
    
    
    22Corporate
    
    
    20
    
    
    
    62Discontinued operations
    
    
    
    
    
    
    1,000$
    131
    
    
    $
    1,842
 Note 16   Subsequent Events
       39




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##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
  Balance at
    
    
    Charge tobeginning of
    
    
    costs and
    
    
    
    
    
    
    Balance at endDescription
    
    period
    
    
    expenses
    
    
    Deductions
    
    
    of periodYear ended December 31, 2009:Allowance for doubtful accounts
    
    $
    791
    
    
    $
    19
    
    
    $
    6
    
    
    $
    804Inventory reserves
    
    
    476
    
    
    
    (15
    )
    
    
    (2
    )
    
    
    463Deferred tax valuation allowance
    
    
    14,493
    
    
    
    390
    
    
    
    
    
    
    
    14,883$
    15,760
    
    
    $
    394
    
    
    $
    4
    
    
    $
    16,150Year ended December 31, 2008:Allowance for doubtful accounts
    
    $
    730
    
    
    $
    434
    
    
    $
    373
    
    
    $
    791Inventory reserves
    
    
    675
    
    
    
    (199
    )
    
    
    
    
    
    
    476Deferred tax valuation allowance
    
    
    12,147
    
    
    
    2,346
    
    
    
    
    
    
    
    14,493$
    13,552
    
    
    $
    2,581
    
    
    $
    373
    
    
    $
    15,760
 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A(T). Controls and Procedures
    40




---



##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
   
    
    pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the
assets of the Company;
    
    provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of
America, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of management and
directors of the Company; and
    
    provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Companys
assets that could have a material effect on the financial statements.
  Internal
Control  Integrated Framework Internal Control  Integrated
Framework
  
 Item 9B. Other Information
 Annual Meeting of Shareholders
  Proposal 1.
 FOR
    
    
    VOTES WITHHELDDale A. Booth
    
    
    353,420
    
    
    
    38,767Clinton J. Coleman
    
    
    353,154
    
    
    
    39,033Michael R. Parks
    
    
    354,814
    
    
    
    37,373Mark E. Schwarz
    
    
    354,759
    
    
    
    37,428
 Proposal 2.
 FOR
    
    AGAINST
    
    
    ABSTAIN369,485
    
    
    15,694
    
    
    
    7,008
 Designation of Principal Financial and Principal Accounting Officer
   41




---



##### Table of Contents



PART III
 
 Item 10. Director, Executive Officers and Corporate Governance
 Information Regarding Directors
  Mark E. Schwarz,
 Michael R. Parks,
 Clinton J. Coleman
 Dale A. Booth
   42




---



##### Table of Contents



Information Regarding Executive Officers
  Name
    
    Age
    
    
    Positions with our CompanyClinton J. Coleman
    
    
    32
    
    
    Chief Executive OfficerJacqueline S. Cregar
    
    
    33
    
    
    Corporate Controller and Assistant Secretary
  Jacqueline S. Cregar
 Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  
    
    honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
    
    full, fair, accurate, timely and understandable disclosure in our SEC
reports and other public communications;
    
    compliance with applicable governmental laws, rules and regulations;
    
    prompt internal reporting of violations of the Code of Ethics to
appropriate persons identified in the code; and
    
    accountability for adherence to the Code of Ethics.
 www.bellind.com
 Board Committees
   43




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##### Table of Contents



Audit Committee.
 
    
    Mr. Booth qualifies as an audit committee financial expert, as defined by the SEC; and
    
    all members of the audit committee (i) are independent under the AMEX independence
standards, (ii) other than Mr. Schwarz, meet the criteria for independence as set forth
in the Exchange Act, (iii) have not participated in the preparation of our financial
statements at any time during the past three years and (iv) are financially
sophisticated as such term is defined in the American Stock Exchange Company Guide.
Mr. Schwarz is not independent as a result of his affiliation with Newcastle.
 www.bellind.com
 
    
    oversee our auditing, accounting and control functions, including having
primary responsibility for our financial reporting process;
    
    monitor the integrity of our financial statements to ensure the balance,
transparency and integrity of published financial information;
    
    monitor our outside auditors independence, qualifications and performance;
    
    monitor our compliance with legal and regulatory requirements; and
    
    monitor the effectiveness of our internal controls and risk management system.
  Compensation Committee.
 
    
    all members of the compensation committee qualify as independent
under the AMEX independence standards;
    
    all members of the compensation committee, other than Mr. Schwarz,
qualify as non-employee directors under Rule 16b-3 of the Exchange
Act; and
    
    all members of the compensation committee qualify as outside
directors under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the Code).
 www.bellind.com
 Nominating Committee. www.bellind.com
  44




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##### Table of Contents



Item 11. Executive Compensation
 EXECUTIVE COMPENSATION
  Summary Compensation Table
  All OtherCompensation
    
    
    TotalName and Principal Position
    
    Year
    
    
    Salary ($)
    
    
    Bonus ($)(3)
    
    
    ($)(4)
    
    
    ($)Clinton J. Coleman
    
    
    2009
    
    
    
    250,000
    
    
    
    
    
    
    
    12,000
    
    
    
    262,000Interim Chief Executive Officer(1)
    
    
    2008
    
    
    
    250,000
    
    
    
    
    
    
    
    12,000
    
    
    
    262,000Kevin J. Thimjon
    
    
    2009
    
    
    
    275,000
    
    
    
    90,000
    
    
    
    1,312
    
    
    
    366,312President and Chief Financial Officer(2)
    
    
    2008
    
    
    
    265,000
    
    
    
    85,000
    
    
    
    2,080
    
    
    
    352,080
 
 (1)
    
    Mr. Coleman was appointed Interim Chief Executive Officer as of
July 13, 2007 and was paid at an annual rate of $250,000. On January
4, 2010, Mr. Clinton became Chief Executive Officer.(2)
    
    Mr. Thimjon was appointed as our Chief Financial Officer as of
January 8, 2007 and promoted to President and Chief Financial Officer
on February 14, 2008. Mr. Thimjon resigned as President and Chief
Financial Officer effective January 22, 2010.(3)
    
    The bonus paid in 2008 represents a discretionary award paid to
Mr. Thimjon in connection with his performance in 2007, which bonus
was subject to the closing of our sale of the SkyTel division. The
bonus was paid to Mr. Thimjon after the closing of our transaction
with Velocita. The bonus paid in 2009 represents a discretionary
bonus paid to Mr. Thimjon in connection with his performance in 2008,
which bonus was subject to our financial performance relative to
objectives determined by the board of directors.(4)
    
    For Mr. Coleman, the amounts in this column represent the director
fees paid to Mr. Coleman during 2009 and 2008, respectively. For
Mr. Thimjon, the amounts in this column represent our matching
contributions under the Bell Industries Employees Savings and Profit
Sharing Plan during 2009 and 2008, respectively.  45




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##### Table of Contents



Narrative Disclosure To Summary Compensation Table
 Employment Agreements or Arrangements
 Clinton J. Coleman.
 Kevin J. Thimjon.
 Material Terms of Bonus Awards
   Material Terms of Option Awards
  Additional Compensation Disclosure
 Savings and Profit Sharing Plan
  Change of Control and Consulting Arrangements
    46




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##### Table of Contents



Indemnification Agreements
  Outstanding Equity Awards at Fiscal Year End Table
  Option AwardsNumber of Securities
    
    
    Number of SecuritiesUnderlying Unexercised
    
    
    Underlying UnexercisedOptions
    
    
    Options
    
    
    Option Exercise
    
    
    Option ExpirationName
    
    (#) Exercisable
    
    
    (#) Unexercisable
    
    
    Price ($)
    
    
    DateClinton J. Coleman
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kevin J. Thimjon(1)
    
    
    1,500
    
    
    
    1,000
    
    
    
    76.60
    
    
    
    1/8/17750
    
    
    
    500
    
    
    
    80.00
    
    
    
    1/8/17750
    
    
    
    500
    
    
    
    120.00
    
    
    
    1/8/17750
    
    
    
    500
    
    
    
    160.00
    
    
    
    1/8/17
 (1)
    
    Each of these option grants were made as non-qualified option grants upon Mr. Thimjons appointment as our
Chief Financial Officer in January 2007. The grants were not issued under any shareholder approved option or
equity incentive plan; however, they were issued as inducement grants under the applicable rules of the AMEX.
Each of these grants were to become exercisable in increments of an additional 20% of the total number of
shares underlying such options on January 8, 2010 and January 8, 2011. All unexercised options were
cancelled in January 2010 upon Mr. Thimjons resignation. DIRECTOR COMPENSATION
  Director Compensation Table
  Fees Earned or PaidName
    
    in Cash ($)
    
    
    Total ($)Mark E. Schwarz(1)
    
    
    24,000
    
    
    
    24,000Dale A. Booth
    
    
    17,000
    
    
    
    17,000Michael R. Parks(1)
    
    
    12,000
    
    
    
    12,000Clinton J. Coleman
    
    
    12,000
    
    
    
    12,000
 (1)
    
    At December 31, 2009, 1,000 stock options were outstanding for each of Messrs. Schwarz and Parks.  47




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##### Table of Contents



Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
and Related Shareholder Matters
 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  Number of Shares
    
    
    Percent ofBeneficial Owner(1)
    
    Beneficially Owned
    
    
    ClassDirectors and Executive OfficersKevin J. Thimjon
    
    
    
    
    
    
    *Mark E. Schwarz(2)
    
    
    3,083,225
    
    
    
    90.7
    %Michael R. Parks(3)
    
    
    1,500
    
    
    
    *Clinton J. Coleman
    
    
    
    
    
    
    Dale A. Booth
    
    
    
    
    
    
    All Directors and Executive Officers as a Group (5 Persons) (4)
    
    
    3,084,725
    
    
    
    90.8
    %5% ShareholdersRoyce & Associates, LLC(5)
    
    
    38,160
    
    
    
    8.8
    %Berlin Financial, Ltd.(6)
    
    
    22,693
    
    
    
    5.2
    %Newcastle Capital Management, L.P.(7)
    
    
    3,022,691
    
    
    
    90.6
    %
 
 *
    
    Less than 1%(1)
    
    Each of our directors and executive officers may be reached at 8888 Keystone
Crossing, Suite 1700, Indianapolis, Indiana 46240.(2)
    
    Includes 1,000 shares issuable pursuant to currently exercisable stock
options. Includes 119,524 shares held by Newcastle Partners, L.P. for which
Mr. Schwarz disclaims beneficial ownership. Includes 2,962,201 shares issuable
pursuant to the Amended Convertible Note for which Mr. Schwarz disclaims
beneficial ownership.(3)
    
    Includes 1,000 shares issuable pursuant to currently exercisable stock options.(4)
    
    Includes 2,000 shares issuable pursuant to currently exercisable stock options
and 2,962,201 shares issuable pursuant to the Amended Convertible Note.(5)
    
    Based on Schedule 13G/A filed on January 22, 2008 by Royce & Associates, LLC,
an investment advisor, whose address is 1414 Avenue of the Americas, New York,
New York 10019.(6)
    
    Based on Schedule 13G filed on July 17, 2007 by Berlin Financial, Ltd., an
investment advisor, whose address is 1325 Carnegie Ave., Cleveland, OH 44115.(7)
    
    Based on Schedule 13D/A filed on July 28, 2009 by Newcastle Capital
Management, L.P. and its affiliates, whose address is 200 Crescent Court,
Suite 1400, Dallas, Texas 75201.  48




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##### Table of Contents



Equity Compensation Plan Information
  Number of SecuritiesRemaining Available forNumber of Securities to
    
    
    Weighted-Average
    
    
    future Issuance Under Equitybe Issued upon Exercise
    
    
    Exercise Price of
    
    
    Compensation Plansof Outstanding Options,
    
    
    Outstanding Options,
    
    
    (Excluding SecuritiesWarrants, and Rights
    
    
    Warrants, and Rights
    
    
    Reflected in Column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation plans
approved by shareholders
    
    
    8,500
    
    
    $
    75.76
    
    
    
    42,500Equity compensation plans
not approved by
shareholders
    
    
    14,000
    (1)
    
    $
    97.09
    
    
    
    Total
    
    
    22,500
    
    
    $
    89.03
    
    
    
    42,500
 (1)
    
    Shares issued under equity compensation plans not approved by shareholders include (i) options granted under our 2001 Stock
Option Plan to purchase 7,750 shares of our common stock; and (ii) options to purchase 6,250 shares granted to Mr. Thimjon
under his employment agreement, as an inducement for him to join the Company. Mr. Thimjons unexercised options were
cancelled upon his resignation in January 2010. 
 Item 13. Certain Relationships and Related Transactions and Director Independence
 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 Review of Related Person Transactions
    Related Person Transactions
  Related Person Transactions in 2009
   49




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##### Table of Contents



Related Person Transactions in 2008
    Director Independence
  
 Item 14. Principal Accountant Fees and Services
  Audit Fees
  Audit Related
    
    
    
    
    
    
    All OtherFirm
    
    Year
    
    
    Audit Fees ($)
    
    
    Fees ($)
    
    
    Tax Fees ($)
    
    
    Fees ($)
    
    
    Total ($)Crowe Horwath, LLP
    
    
    2009
    (1)
    
    
    255,000
    
    
    
    16,000
    
    
    
    40,000
    
    
    
    
    
    
    
    311,0002008
    (2)
    
    
    250,000
    
    
    
    35,250
    
    
    
    18,252
    
    
    
    
    
    
    
    303,502
 (1)
    
    For the year ended December 31, 2009, Crowe Horwath billed us an
aggregate of $210,000 for professional services in connection with the
audit of our consolidated financial statements and $45,000 for
professional services in connection with the reviews of our
consolidated interim financial statements included in our Quarterly
Report on Form 10-Q for the periods ended March 31, 2009, June 30,
2009 and September 30, 2009. For the year ended December 31, 2009,
Crowe Horwath also billed us an aggregate of $16,000 for professional
services rendered for audit-related services related to our 401(k)
plan. In addition, Crowe Horwath billed us $40,000 related to
professional services rendered for the review of our federal and state
income tax returns during the year ended December 31, 2009.  50




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##### Table of Contents



(2)
    
    For the year ended December 31, 2008, Crowe Horwath billed us an
aggregate of $205,000 for professional services in connection with the
audit of our consolidated financial statements and $45,000 for
professional services in connection with the reviews of our
consolidated interim financial statements included in our Quarterly
Report on Form 10-Q for the periods ended March 31, 2008, June 30,
2008 and September 30, 2008. Crowe Horwath also billed us an aggregate
of $15,000 for professional services rendered for audit-related
services related to our 401(k) plan and $20,250 for professional
services related to the audit of discontinued operations and the
Amended Convertible Note during the year ended December 31, 2008. In
addition, Crowe Horwath billed us $18,252 related to professional
services rendered for the review of our federal and state income tax
returns during the year ended December 31, 2008. Policy for Pre-Approval of Independent Auditor Services
   51




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedule
 Financial Statements:
  Financial Statement Schedule:
    52




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##### Table of Contents



SIGNATURES
  BELL INDUSTRIES, INC.By:
    /s/ CLINTON J. COLEMANClinton J. ColemanChief Executive Officer   Signature
    
    Title/s/ MARK E. SCHWARZ

Mark E. Schwarz
    
    Director and Chairman of the Board/s/ CLINTON J. COLEMAN

Clinton J. Coleman
    
    Chief Executive Officer
(Principal Executive Officer)
Director/s/ JACQUELINE S. CREGAR

Jacqueline S. Cregar
    
    Corporate Controller and Assistant Secretary

(Principal Financial Officer and Principal
Accounting Officer)/s/ DALE A. BOOTH

Dale A. Booth
    
    Director/s/ MICHAEL R. PARKS

Michael R. Parks
    
    Director
  53




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description2.

    
    Agreement and Plan of Merger, dated as of
November 26, 1996, among the Registrant, ME
Acquisitions, Inc., and Milgray Electronics,
Inc. (incorporated by reference to Exhibit 2.1
of the Registrants Current Report on Form 8-K
dated January 7, 1997)3.a.

    
    Restated Articles of Incorporation
(incorporated by reference to Exhibit 3.1 of
the Registrants Form 8-B dated March 22,
1995, as amended)3.b

    
    Restated By-laws (incorporated by reference to
Exhibit 3.2 of the Registrants Form 8-B dated
March 22, 1995, as amended)4.

    
    Specimen of Registrants Common Stock
certificates (incorporated by reference to
Exhibit 5 of Amendment Number 1 of the
Registrants Form 8-B filed January 15, 1980)10.a.

    
    Form of Indemnity Agreement between the
Registrant and its executive officers and
directors (incorporated by reference to
Exhibit 10.10 of the Registrants Form 8-B
dated March 22, 1995, as amended)10.b.

    
    Agreement for Wholesale Financing, dated as of
May 11, 2001, between the Registrant and
Deutsche Financial Services Corporation
(incorporated by reference to Exhibit 10.1 of
the Registrants Quarterly Report on Form 10-Q
dated June 30, 2001)10.c.

    
    Amended and Restated Agreement for Wholesale
Financing, dated as of July 18, 2002, between
the Registrant and IBM Credit Corporation
(incorporated by reference to Exhibit 10.r of
the Registrants Annual Report on Form 10-K
dated December 31, 2004)10.d.

    
    Amendment to Agreement for Wholesale
Financing, dated as of December 12, 2003,
between the Registrant and GE Commercial
Distribution Finance Corporation (formerly
known as Deutsche Financial Corporation)
(incorporated by reference to Exhibit 10.v of
the Registrants Annual Report on Form 10-K
dated December 31, 2004)10.e.

    
    Letter Agreement, dated as of May 11, 2004,
between the Registrant and IBM Credit LLC
(formerly IBM Credit Corporation)
(incorporated by reference to Exhibit 10.w of
the Registrants Annual Report on Form 10-K
dated December 31, 2004)10.f.

    
    Asset Purchase Agreement, dated as of
November 10, 2006, between SkyTel Corp. and
the Registrant (incorporated by reference to
Exhibit 10.1 of the Registrants Current
Report on Form 8-K dated November 10, 2006)10.g.

    
    Amendment No. 1 to the Asset Purchase
Agreement, dated as of November 16, 2006,
between SkyTel Corp. and the Registrant
(incorporated by reference to Exhibit 10.1 of
the Registrants Current Report on Form 8-K
dated November 16, 2006)10.h.

    
    Credit Agreement, dated as of January 31,
2007, between the Registrant and Wells Fargo
Foothill, Inc. (incorporated by reference to
Exhibit 10.1 of the Registrants Current
Report on Form 8-K dated January 31, 2007)10.i.

    
    Amendment Number Two to Credit Agreement,
Consent and Waiver, dated August 13, 2007,
between the Registrant and Wells Fargo
Foothill, Inc. (incorporated by reference to
Exhibit 10.1 of the Registrants Current
Report on Form 8-K dated August 13, 2007)10.j.

    
    Amendment Number Three to Credit Agreement,
dated April 11, 2008, between the Registrant
and Wells Fargo Foothill, Inc. (incorporated
by reference to Exhibit 10.1 of the
Registrants Current Report on Form 8-K dated
April 11, 2008)10.k.

    
    Amendment Number Four to Credit Agreement,
Consent and Partial Release, dated June 13,
2008, between the Registrant and Wells Fargo
Foothill, Inc. (incorporated by reference to
Exhibit 10.2 of the Registrants Current
Report on Form 8-K dated June 13, 2008)10.l.

    
    Amendment Number Five to Credit Agreement and
Joinder Agreement, dated March 12, 2009,
between the Registrant and Wells Fargo
Foothill, Inc. (incorporated by reference to
Exhibit 10.l of the Registrants Annual Report
on Form 10-K dated December 31, 2008)10.m.

    
    Amendment Number Six to Credit Agreement,
dated March 25, 2009, between the Registrant
and Wells Fargo Foothill, Inc. (incorporated
by reference to Exhibit 10.m of the
Registrants Annual Report on Form 10-K dated
December 31, 2008)
  54




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##### Table of Contents



ExhibitNumber

    
    Description10.n.

    
    Amendment Number Seven to Credit Agreement,
dated February 11, 2010, between the
Registrant and Wells Fargo Capital Finance,
Inc. (formerly Wells Fargo Foothill, N.A.)
(incorporated by reference to Exhibit 10.1 of
the Registrants Current Report on Form 8-K
dated February 18, 2010)10. o.

    
    $10,000,000 Amended and
Restated Convertible
Promissory Note, dated
March 12, 2007, issued by the
Registrant to Newcastle
Partners, L.P. (incorporated
by reference to Exhibit 4.1 of
the Registrants Current
Report on Form 8-K dated
March 12, 2007)10.p.

    
    $11,137,321 Second Amended and
Restated Convertible
Promissory Note, dated
June 13, 2008, issued by the
Registrant to Newcastle
Partners, L.P. (incorporated
by reference to Exhibit 4.1 of
the Registrants Current
Report on Form 8-K dated
June 13, 2008)10.q.

    
    Waiver and Amendment
Agreement, dated June 13,
2008, between the Registrant
and Newcastle Partners, L.P.
(incorporated by reference to
Exhibit 10.3 of the
Registrants Current Report on
Form 8-K dated June 13, 2008)10.r.

    
    Amendment Number One to the
Second Amended and Restated
Convertible Promissory Note,
dated March 25, 2009, between
the Registrant and Newcastle
Partners, L.P. (incorporated
by reference to Exhibit 10.q
of the Registrants Annual
Report on Form 10-K dated
December 31, 2008)10.s.

    
    Amendment Number Two to the
Second Amended and Restated
Convertible Promissory Note,
dated February 11, 2010,
between the Registrant and BI
Holdings, L.P., the successor
payee to Newcastle Partners,
L.P. (incorporated by
reference to Exhibit 10.2 of
the Registrants Current
Report on Form 8-K dated
February 18, 2010)10.t.

    
    Purchase Agreement, dated as
of January 31, 2007, between
the Registrant and Newcastle
Partners, L.P. (incorporated
by reference to Exhibit 4.1 of
the Registrants Current
Report on Form 8-K dated
January 31, 2007)10.u.

    
    Security Agreement, dated as
of January 31, 2007, between
the Registrant and Wells Fargo
Foothill, Inc. (incorporated
by reference to Exhibit 10.2
of the Registrants Current
Report on Form 8-K dated
January 31, 2007)10.v.

    
    Security Agreement, dated as
of March 12, 2007, between the
Registrant and Newcastle
Partners, L.P. (incorporated
by reference to Exhibit 10.1
of the Registrants Current
Report on Form 8-K dated
March 12, 2007)10.w.

    
    Registration Rights Agreement,
dated as of January 31, 2007,
between the Registrant and
Newcastle Partners, L.P.
(incorporated by reference to
Exhibit 4.3 of the
Registrants Current Report on
Form 8-K dated January 31,
2007)10.x.

    
    Stock Purchase Agreement,
dated June 15, 2007, among
Sprint Nextel Corporation,
each of the stockholders of
New York MDS, Inc. and the
Stockholders Representative
(incorporated by reference to
Exhibit 10.1 of the
Registrants Current Report on
Form 8-K dated June 15, 2007)10.y.

    
    Stock Purchase Agreement,
dated June 15, 2007, among
Sprint Nextel Corporation,
each of the stockholders of
Atlanta MDS Co., Inc. and the
Stockholders Representative
(incorporated by reference to
Exhibit 10.2 of the
Registrants Current Report on
Form 8-K dated June 15, 2007)10.z.

    
    Asset Purchase Agreement,
dated February 14, 2008,
between the Registrant and
SkyGuard, LLC (incorporated by
reference to Exhibit 10.1 of
the Registrants Current
Report on Form 8-K dated
February 20, 2008)10.aa.

    
    Asset Purchase Agreement,
dated March 30, 2008, between
the Registrant and Velocita
Wireless, LLC (incorporated by
reference to Exhibit 10.1 of
the Registrants Current
Report on Form 8-K dated
April 3, 2008)10.bb.

    
    Amendment No. 1 to Asset
Purchase Agreement, dated as
of June 13, 2008, between the
Registrant and Velocita
Wireless LLC (incorporated by
reference to Exhibit 10.1 of
the Registrants Current
Report on Form 8-K dated
June 13, 2008)
  55




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##### Table of Contents



ExhibitNumber

    
    Description10.cc.

    
    Settlement Agreement and Mutual Release, dated as of May 12, 2009, by
and among the Registrant, Bell Techlogix, Inc., Velocita Wireless LLC,
United Wireless Holdings Inc., North American Wireless Holdings LLC,
Skytel Spectrum LLC, ST Network Services LLC, United Spectrum Management
Services LLC, ST Messaging Services LLC and Messaging Management
Services LLC (incorporated by reference to Exhibit 10.d of the
Registrants Quarterly Report on Form 10-Q dated March 31, 2009)10.dd.
*
    
    1997 Deferred Compensation Plan dated August 27, 1997 (incorporated by
reference to Exhibit 4.1 of the Registrants Form S-8 dated August 28,
1997)10.ee.
*
    
    Bell Industries, Inc. 2001 Stock Option Plan (incorporated by reference
to Exhibit 99 of the Registrants Quarterly Report on Form 10-Q dated
September 30, 2001)10.ff.
*
    
    Employment Letter, dated as of January 5, 2007, between the Registrant
and Kevin Thimjon (incorporated by reference to Exhibit 10.1 of the
Registrants Current Report on Form 8-K dated January 5, 2007)10.gg.
*
    
    First Amendment to Employment Letter, effective February 15, 2008,
between the Registrant and Kevin Thimjon (incorporated by reference to
Exhibit 10.2 of the Registrants Current Report on Form 8-K dated
February 20, 2008)10.hh.
*
    
    Bell Industries, Inc. 2007 Stock Incentive Plan, as
amended (incorporated by reference to Exhibit 10.1 of
the Registrants Current Report on Form 8-K dated
October 16, 2008)21.1

    
    Subsidiaries of the Registrant.23.1

    
    Consent of Independent Registered Public Accounting Firm.31.1

    
    Certification of Clinton J. Coleman, Chief Executive
Officer of the Registrant, pursuant to Rule 13a-14
adopted under the Securities Exchange Act of 1934, as
amended, and Section 302 of the Sarbanes-Oxley Act of
2002.31.2

    
    Certification of Jacqueline S. Cregar, Corporate
Controller and Assistant Secretary of the Registrant,
pursuant to Rule 13a-14 adopted under the Securities
Exchange Act of 1934, as amended, and Section 302 of the
Sarbanes-Oxley Act of 2002.32.1

    
    Certification of Clinton J. Coleman, Chief Executive
Officer of the Registrant, furnished pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2

    
    Certification of Jacqueline S. Cregar, Corporate
Controller and Assistant Secretary of the Registrant,
furnished pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 *
    
    The indicated exhibit is a management contract, compensatory plan or
arrangement required to be filed by Item 601 of Regulation S-K.  56