<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ________________________
Commission file number 1-8884
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BUSH INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 16-0837346
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(State or other jurisdiction of (I.R.S. Employer
Incorporation of organization) Identification No.)
One Mason Drive
P.O. Box 460
Jamestown, New York 14702-0460
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(Address of principal executive offices)
(Zip Code)
(716) 665-2000
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(Registrant's telephone number, including area code)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Number of shares of Common Stock outstanding as of March 30, 1996: 5,975,956
shares of Class A Common Stock and 2,570,247 shares of Class B Common Stock.
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BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
MARCH 30, DECEMBER 30,
1996 1995
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(Unaudited)
(In thousands)
<S> <C> <C>
ASSETS
- - ------
Current Assets:
Cash $ 2,702 $ 2,929
Accounts receivable 24,582 22,321
Inventories 22,352 21,582
Prepaid expenses and other current assets 3,921 3,697
-------- --------
Total Current Assets 53,557 50,529
Property, Plant and Equipment, Net 53,587 49,616
Other Assets 2,558 2,461
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TOTAL ASSETS $109,702 $102,606
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current Liabilities:
Accounts payable 7,346 7,567
Income taxes 3,975 2,124
Other accrued liabilities 16,888 16,419
Current portion of long-term debt 360 401
-------- --------
Total Current Liabilities 28,569 26,511
Deferred Income Taxes 1,990 1,951
Long-term Debt 15,434 15,031
Stockholders' Equity:
Common Stock:
Class A, $.10 par, 20,000,000 shares authorized,
6,295,956 and 6,294,168 shares issued 630 629
Class B, $.10 par, 6,000,000 shares authorized,
2,570,247 shares issued 257 257
Paid-in capital 7,154 7,146
Retained earnings 60,928 56,341
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68,969 64,373
Less treasury stock, 320,000 Class A shares 5,260 5,260
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Total Stockholders' Equity 63,709 59,113
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $109,702 $102,606
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
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BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------------
MARCH 30, APRIL 1,
1996 1995
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(In thousands except shares
and per share data)
<S> <C> <C>
Net Sales $ 65,033 $ 50,173
Costs and Expenses:
Cost of sales 44,725 35,283
Selling, general and administrative 12,149 9,970
Interest 353 566
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57,227 45,819
Earnings Before Income Taxes 7,806 4,354
Income Taxes 3,005 1,721
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Net Earnings $ 4,801 $ 2,633
========== ==========
Earnings per Share
Primary $ 0.53 $ 0.30
Fully diluted $ 0.52 $ 0.30
Weighted Average Shares Outstanding
Primary 9,073,733 8,869,356
Fully diluted 9,219,500 8,869,356
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
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(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
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MARCH 30, APRIL 1,
1996 1995
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(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- - -------------------------------------
Net earnings $ 4,801 $ 2,633
Adjustment to reconcile:
Depreciation and amortization 1,452 1,529
Deferred income taxes (60) (138)
Change in assets and liabilities affecting cash flows:
Accounts receivable (2,261) 5,944
Inventories (770) 265
Prepaid expenses and other current assets (125) 672
Accounts payable (221) (3,957)
Income taxes 1,853 1,719
Other accrued liabilities 469 (2,485)
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Net cash provided by operating activities 5,138 6,182
CASH FLOWS FROM INVESTING ACTIVITIES:
- - -------------------------------------
Capital expenditures (5,292) (1,399)
Increase in other assets (228) (101)
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Net cash used in investing activities (5,520) (1,500)
CASH FLOWS FROM FINANCING ACTIVITIES:
- - -------------------------------------
Pay down of line of credit 0 (2,595)
Repayment of long-term debt (118) (890)
Proceeds from long-term debt 480 0
Exercise of stock options by employees 6 104
Dividends paid (213) (221)
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Net cash provided by (used in) financing activities 155 (3,602)
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NET INCREASE (DECREASE) IN CASH (227) 1,080
CASH AT BEGINNING OF PERIOD 2,929 4,151
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CASH AT END OF PERIOD $ 2,702 $ 5,231
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</TABLE>
See notes to condensed consolidated financial statements.
4
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BUSH INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Thirteen weeks ended March 30, 1996
1. The accounting policies used in preparing these statements are the same
as those used in preparing the Company's consolidated financial statements
for the year ended December 30, 1995. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report to
stockholders for the year ended December 30, 1995.
The foregoing financial information reflects all adjustments which are, in
the opinion of management, of a normal recurring nature and necessary for a
fair presentation. The interim results are not necessarily indicative of
the results which may be expected for a full year.
2. Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 30, DECEMBER 30,
1996 1995
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(In thousands)
<S> <C> <C>
Raw material $ 4,894 $ 4,459
Work in progress 2,420 2,324
Finished goods 15,038 14,799
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$22,352 $21,582
======= =======
</TABLE>
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Except for the historical information contained herein, the matters
discussed in this 10-Q are forward-looking statements which involve risks and
uncertainties, including, but not limited to, economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and prices, and other factors discussed in the
Company's filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS:
- - ----------------------
The Company achieved record first quarter sales for the 13 week period
ended March 30, 1996 of $65,033,000. This represented an increase of
$14,860,000, or approximately 29.6%, compared to net sales of $50,173,000 for
the 13 week period ended April 1, 1995. The increase in net sales was
attributable to strong sales in the office superstores and consumer electronics
distribution channels, overall strong new product acceptance by many retailers,
an improvement in the overall retail climate, as compared to the first quarter
of the 1995 fiscal year, and a better balanced inventory position at several
key accounts as compared to the first quarter of 1995.
Cost of sales increased $9,442,000 for the 13 week period ended March 30,
1996, compared to the 13 week period ended April 1, 1995. Cost of sales as an
approximate percentage of net sales decreased by 1.5% from 70.3% in the first
quarter of 1995 to 68.8% in the first quarter of 1996, and correspondingly gross
profit as an approximate percentage of net sales increased by 1.5% from 29.7% in
the first quarter of 1995 to 31.2% in the first quarter of 1996. The increase
in cost of sales was primarily due to higher sales volumes. However, in the
first quarter of 1996, improved manufacturing performance and increased
production volume (which results in better absorption of manufacturing overhead)
were instrumental in lowering cost of sales as a percentage of net sales.
While net sales increased by approximately 29.6% for the 13 week period
ended March 30, 1996, compared to the 13 week period ended April 1, 1995,
selling, general and administrative expenses increased by approximately 21.9%
(or by $2,179,000) during the same period. The increase in selling, general and
administrative expenses was primarily a result of increases in variable selling
expenses such as commissions, marketing and promotional incentives necessary to
support the Company's increased sales volumes. Selling, general and
administrative expenses declined as an approximate percentage of net sales from
19.9% in the first quarter of 1995 to 18.7% in the first quarter of 1996.
Interest expense for the 13 week period ended March 30, 1996 decreased to
$353,000 (or approximately 0.5% of net sales) from $566,000 (or approximately
1.1% of net sales) for the period ended April 1, 1995. The decrease in interest
expense is due primarily to lower interest rates (resulting from the refinancing
of the Company's debt and lower LIBOR and prime rates) and lower average debt.
As a result of a refinancing of the Company's debt on July 26, 1995, the
applicable margin on LIBOR based borrowings was lowered and, with the exception
of the Industrial Development Revenue Bonds and a capitalized lease, all other
then existing long-term
6
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debt (with generally higher interest rates), was paid off.
LIQUIDITY AND CAPITAL RESOURCES:
- - --------------------------------
Working capital at first quarter end 1996 increased by $970,000, as
compared to working capital at year-end 1995, primarily because of an increase
in accounts receivable, inventories, and prepaid expenses and other current
assets and a decrease in accounts payable and the current portion of long-term
debt. Partially offsetting these factors was a decrease in cash and an increase
in income taxes and other accrued liabilities. Total assets at first quarter
end 1996 increased $7,096,000 over year-end 1995 primarily as a result of an
increase in net property, plant and equipment, current assets and other assets.
In addition, total liabilities increased $2,500,000 at first quarter end 1996,
due mostly to an increase in income taxes, other accrued liabilities, long-term
debt and deferred income taxes, partially offset by a decrease in accounts
payable and the current portion of long-term debt.
The Company spent $5,292,000 on capital expenditures during the first
quarter of 1996 (a portion of which were construction costs associated with the
first phase of the Erie facility, as described below), which were financed
primarily with net cash flow from operating activities. Capital expenditures for
fiscal year 1996 are currently forecasted to be in the $29 to $34 million range,
including the cost of completing the new manufacturing and distribution facility
located in Erie, Pennsylvania. The first phase of this expansion, approximately
500,000 square feet, is now completed and has replaced the Company's leased
distribution and warehouse facility in Saybrook, Ohio. Construction of the
second phase of the expansion program, for an additional approximately 500,000
square feet, will commence in the second quarter of 1996 and is scheduled to be
completed late in the year. Manufacturing capacity, incorporating newly
developed advanced technology, will be added incrementally to this facility as
demand requires, with the first equipment installation scheduled for 1996.
As of May 8, 1996, the Company was still negotiating the purchase of a
majority interest in The ColorWorks, Inc. (the consummation or final terms of
which no assurance can be given) for approximately $5.5 million, payable
principally in Bush Class A Common Stock. The ColorWorks, Inc., a North
Carolina based finishing and decorating firm, holds the master license to the
"HydroGraFix" film processing technology in North and South America, Central
Europe and South Africa.
The Company has an unsecured $75,000,000 credit facility with Mellon Bank,
N.A. and other lending institutions. This loan is due July 31, 2000 with a
balloon payment of the then remaining principal and accrued interest. The
Company has classified all of this line of credit as long-term debt. At the
Company's option, borrowings may be effectuated, subject to certain conditions,
on a base rate or euro-rate option. Base rate loans bear interest at the prime
rate as announced by Mellon Bank, N.A. from time to time, and euro-rate loans
bear interest at the then current LIBOR rate, plus an applicable margin. The
applicable margin which pertains only to LIBOR rate loans varies from .50% to
.95%, depending upon the Company's ability to satisfy certain quarterly
financial tests. In addition, the credit agreement permits the Company to
request the issuance of up to a maximum of $15,000,000 in letters of credit,
which issuance will be deemed part of the
7
<PAGE>
$75,000,000 maximum amount of borrowing permitted under the unsecured credit
facility.
The line of credit agreement provides for achieving total funded debt (net
of cash) to capital and total funded debt (net of cash) to earnings before
interest and tax ratios, prescribes minimum tangible net worth requirements,
limits capital expenditures and new leases and provides for certain other
affirmative and restrictive covenants. The Company is in compliance with all of
these requirements. The Company believes that current unused balances available
under the existing credit agreements, along with net cash flow generated from
operating activities, will be adequate to fund the Company's operations in 1996.
8
<PAGE>
Part II. OTHER INFORMATION
------------------------------
ITEM 6. EXHIBITS AND REPORTS ON 8-K
- - ------- ---------------------------
(a) Exhibits: None
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter
(13 weeks) ended March 30, 1996.
9
<PAGE>
SIGNATURES
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Pursuant to the requirements 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.
BUSH INDUSTRIES, INC.
----------------------------
(Registrant)
Date: May 10, 1996 By: /s/Robert L. Ayres
-------------- ----------------------------
(Signature)
Robert L. Ayres
Executive Vice President,
Chief Operating Officer
and Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INCOME
STATEMENT BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> MAR-30-1996
<CASH> 2,702
<SECURITIES> 0
<RECEIVABLES> 25,610
<ALLOWANCES> 1,028
<INVENTORY> 22,352
<CURRENT-ASSETS> 53,557
<PP&E> 91,087
<DEPRECIATION> 37,500
<TOTAL-ASSETS> 109,702
<CURRENT-LIABILITIES> 28,569
<BONDS> 15,434
0
0
<COMMON> 887
<OTHER-SE> 62,822
<TOTAL-LIABILITY-AND-EQUITY> 109,702
<SALES> 65,033
<TOTAL-REVENUES> 65,033
<CGS> 44,725
<TOTAL-COSTS> 44,725
<OTHER-EXPENSES> 12,119
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 353
<INCOME-PRETAX> 7,806
<INCOME-TAX> 3,005
<INCOME-CONTINUING> 4,801
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,801
<EPS-PRIMARY> .53
<EPS-DILUTED> .52
</TABLE>
