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Data Storage Archive

Bell Microproducts Reports Second Quarter 2005 Financial Results

28 July 2005

Bell Microproducts Inc., today announced its financial results for the second
quarter ended June 30, 2005.

Revenues of $788 million were a record for the second quarter, increasing
25% compared to last year's second quarter revenues of $630 million. Net
earnings for the quarter ended June 30, 2005 were $3.2 million, or $0.11 per
share on 29.7 million diluted shares. This compares to last year's second
quarter net earnings of $1.1 million or $0.04 per share on 27.7 million
diluted shares.

Revenues of $1.59 billion were also a record for the first six months of
2005, increasing 23% compared to $1.29 billion reported in the first six
months of 2004. Net earnings for the first six months of 2005 were $7.6
million, or $0.25 per share on 29.7 million diluted shares. This compares to
net earnings of $2.8 million, or $0.10 per diluted share on 27.9 million
diluted shares in the first six months of 2004.

Commenting on the second quarter 2005 financial results, W. Donald Bell,
President and CEO of Bell Microproducts said, "We are pleased to report record
second quarter revenues and a 175% increase in EPS. We generated revenue
improvement in all geographies and most major product categories during the
quarter as compared to the same period in 2004. We continued to demonstrate
our ability to increase sales at above-market growth rates, and we
significantly improved our operating margin to 1.35%, as compared to 0.93% in
the same period last year. Our sales growth, coupled with tight control of
operating expenses, continues to demonstrate the positive operating leverage
in our business model."

Mr. Bell added, "We achieved strong performance in our Enterprise business
units -- Rorke Data, Total Tec Systems and OpenPSL. These units performed
well in the second quarter and continued to generate high gross profit and
operating margins. We also performed well in our North American and Latin
American distribution businesses. Operating margins in our North American
business continue to run above 2.0% and we are continuing to drive growth in
both revenue and profitability in our Latin American operations."

"In addition to our improved second quarter operating results, we also
completed the strategic acquisition of Net Storage Computers, LTDA,
headquartered in Sao Paulo, Brazil earlier this month. Net Storage Computers
is a leading distributor of storage products and peripherals to VARs and
system integrators in Brazil. As a result of its account base and product
mix, Net Storage operates with gross profit and operating margins higher than
our corporate averages. This acquisition strategically increases our in-
country presence in South America's largest economy. Furthermore, we expect
the acquisition will be accretive to our EPS."

Geographic Highlights
-- Revenue in the second quarter was split among the Company's geographies
as follows: North America 43%, Europe 45%, and Latin America 12%.
-- North American revenue increased 32% compared to the second quarter of
2004.
-- Latin American revenue increased 15% compared to the second quarter of
2004.
-- European revenue increased 22% compared to the second quarter of 2004,
driven by the acquisition of OpenPSL, which occurred in late June of
2004. Sales of existing divisions increased 10% compared to last year.
In local currency, total European revenue increased 19% and existing
divisions increased 8% compared to the second quarter of 2004.

Solutions and Components and Peripherals Highlights
-- For the second quarter 2005, Solutions represented 51% of the Company's
product mix and Components and Peripherals accounted for 49% of the
mix.
-- The Solutions category of the Company's business grew 19% compared to
the second quarter or 2004, with storage systems, software, and
services driving the growth.
-- Components and Peripherals grew 32% compared to the second quarter of
2004, with all product groups generating year over year growth,
including disk drives, industrial and other components.

Operating Trends
Gross profit margins in the second quarter of 2005 increased to 7.2% from
the 7.1% reported in the first quarter of this year, but declined compared to
7.8% reported in the second quarter of 2004. The decline in corporate gross
profit margins from last year was primarily due to the reduction in certain
vendor incentives and market pressure in the Company's European distribution
operation. On a sequential basis, gross margins improved due to the
performance of the Company's Enterprise business units and the mix shift to
higher margin Solutions products.

Operating expenses continued to remain under tight control. Operating
expenses declined to 5.9% of revenue compared to 6.9% in last year's second
quarter, and increased slightly from the 5.6% reported in this year's first
quarter. The reduction in operating expenses as a percent of sales from last
year's second quarter was driven by disciplined expense control programs and
improved asset management.

Inventories were $267 million at June 30, 2005 compared to $225 million at
June 30, 2004 and $282 million at March 31, 2005. This resulted in average
days in inventory of 33 days in the second quarter of 2005, compared to 35
days in the second quarter of 2004, and 34 days in the first quarter of 2005.

Accounts Receivable were $377 million at June 30, 2005 compared to $355
million at June 30, 2004 and $401 million at March 31, 2005. Days sales
outstanding (DSO) were 43 days in the second quarter of 2005 versus 51 days in
the second quarter of 2004, and 45 days in the first quarter of 2005.

The Company's cash conversion cycle was 39 days in the second quarter of
2005 compared to 48 days in the second quarter of 2004 and 42 days in the
first quarter of 2005. Total debt net of cash was $228 million as of June 30,
2005 compared to $247 million at June 30, 2004 and $256 million as of March
31, 2005.

Management Discussion and Outlook
Mr. Bell concluded, "The second quarter of 2005 was another strong quarter
for our Company. We grew quarterly sales by 25%, or more than $158 million,
and posted an impressive improvement in profitability compared to the same
period in 2004. Although market conditions in Europe remained challenging
during the quarter, our efforts are focused on maintaining and improving our
profitability and operating margins through a combination of above-market
revenue growth, continued emphasis on the value-added portions of our
business, gross margin improvement, control of operating expenses and asset
management."

"We continue to focus on our mission of being a differentiated, worldwide
leader in the value-added distribution of storage and computer systems
solutions. We believe we will achieve this position by continuing to expand
our alliances with the industry leaders, and by adding significant value to
these products for our customers. Our goal is to improve our return on
investment and create increased value for our shareholders, customers, vendor
partners, and employees."

Conference Call on the Web
Bell Microproducts will host a conference call to discuss second quarter
2005 results at 4:30 PM Eastern on Wednesday, July 27, 2005. A live Internet
broadcast of the Company's conference call will be available via the Company's
web site at www.bellmicro.com.

About Bell Microproducts
Bell Microproducts is an international, value-added provider of a wide
range of high-technology products, solutions, and services to the industrial
and commercial markets. The Company's offering includes semiconductors,
computer platforms, peripherals, and storage products of various types
including desktop, high-end computer and storage subsystems, fibre channel
connectivity products, RAID, NAS and SAN storage systems and back-up products.
Bell Microproducts is an industry-recognized specialist in storage products
and is one of the world's largest storage-centric value-added distributors.

The Company's products are available at any level of integration, from
components to subsystem assemblies and fully-integrated, tested and certified
system solutions. The Company adds value with a broad range of services
including system design, integration, installation, maintenance, and other
consulting services. Trained and certified technical personnel provide these
services at Bell Microproducts' ISO 9001:2000 facilities. Bell Microproducts
markets and distributes more than 140 brand name product lines, as well as its
own Rorke Data storage products and Markvision memory modules, to original
equipment manufacturers (OEMs), contract electronic manufacturing services
(CEMS) customers, value-added resellers (VARs) and system integrators in the
Americas and Europe. More information can be found in the Company's SEC
filings, or by visiting the Bell Microproducts Web site at www.bellmicro.com.

Safe Harbor Statement
This release may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements, which reflect the Company's current views of our expected growth
rates, profitability and other future events and financial performance,
involve known and unknown risks and uncertainties which could cause actual
results or facts to differ materially from such statements for a variety of
reasons including, but not limited to: changing industry and economic
conditions; changes in product supply, pricing, and customer demand;
competition; other vagaries in the computer and electronic components markets;
effects of acquisitions and restructuring initiatives; changes in
relationships with key suppliers; availability of financing; foreign currency
fluctuations and the other risks described from time to time in the Company's
reports to the Securities and Exchange Commission (including the Company's
Annual Report on Form 10-K). Investors should take such risks into account
when making investment decisions. Shareholders and other readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date on which they are made. The Company undertakes no
obligation to update publicly or revise any forward-looking statements.

BELL MICROPRODUCTS INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

June 30, December 31,
2005 2004
ASSETS
Current assets:
Cash $23,010 $13,294
Accounts receivable, net 376,886 376,017
Inventories 266,953 271,797
Prepaid expenses and other current assets 25,754 24,676
Total current assets 692,603 685,784

Property and equipment, net 38,428 42,805
Goodwill and other intangibles 99,231 102,012
Other assets 9,386 9,988
Total assets $839,648 $840,589

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $300,146 $307,373
Borrowings under lines of credit 17,814 17,577
Short-term note payable and current portion
of long-term notes payable 12,893 12,183
Other accrued liabilities 58,051 72,164
Total current liabilities 388,904 409,297

Borrowings under lines of credit 65,228 42,686
Long-term notes payable 156,204 160,905
Other long-term liabilities 4,218 5,011
Total liabilities 614,554 617,899

Shareholders' equity:
Common Stock 170,824 167,705
Retained earnings 39,725 32,174
Cumulative translation adjustment 14,545 22,811
Total shareholders' equity 225,094 222,690

Total liabilities and shareholders' equity $839,648 $840,589

BELL MICROPRODUCTS INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004

Net sales $788,471 $630,288 $1,592,419 $1,290,619
Cost of sales 731,341 581,220 1,477,990 1,192,264
Gross profit 57,130 49,068 114,429 98,355

Selling, general and
administrative expenses 46,463 43,191 91,908 85,922

Income from operations 10,667 5,877 22,521 12,433
Interest expense (5,562) (3,830) (10,380) (7,668)

Income before income taxes 5,105 2,047 12,141 4,765
Provision for income taxes 1,930 996 4,590 2,002
Net income $3,175 $1,051 $7,551 $2,763

Earnings per share
Basic $0.11 $0.04 $0.26 $0.10
Diluted $0.11 $0.04 $0.25 $0.10

Shares used in per share
calculation
Basic 28,999 27,194 28,897 27,131
Diluted 29,696 27,659 29,665 27,869

For further information: Rob Damron, Investor Relations Representative
of Bell Microproducts Inc., +1-414-224-1668 or ir@bellmicro.com
/Web site: http://www.bellmicro.com