<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 June 29, 1996
-------------
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
-------------
BUSH INDUSTRIES, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 16-0837346
------------------------------ ----------------
(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
-----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(716) 665-2000
------------------------------------------------------
(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
------- -------
Number of shares of Common Stock outstanding as of June 29, 1996: 9,352,327
shares of Class A Common Stock and 3,855,365 shares of Class B Common Stock.
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
JUNE 29, DECEMBER 30,
1996 1995
----------- ------------
(Unaudited)
(In thousands)
ASSETS
- - - ------
<S> <C> <C>
Current Assets:
Cash $ 2,964 $ 2,929
Accounts receivable 24,118 22,321
Inventories 32,693 21,582
Prepaid expenses and other current assets 3,520 3,697
-------- --------
Total Current Assets 63,295 50,529
Property, Plant and Equipment, Net 64,546 49,616
Other Assets 7,955 2,461
-------- --------
TOTAL ASSETS $135,796 $102,606
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - - ------------------------------------
Current Liabilities:
Accounts payable 10,261 7,567
Income taxes 430 2,124
Other accrued liabilities 18,573 16,419
Current portion of long-term debt 397 401
-------- --------
Total Current Liabilities 29,661 26,511
Deferred Income Taxes 2,029 1,951
Long-term Debt and other 29,418 15,031
Stockholders' Equity:
Common Stock:
Class A, $.10 par, 20,000,000 shares
authorized,
9,634,571 and 9,441,252 shares issued 963 629
Class B, $.10 par, 6,000,000 shares
authorized,
3,855,365 shares issued 386 257
Paid-in capital 11,447 7,146
Retained earnings 64,985 56,341
-------- --------
77,781 64,373
Less treasury stock, 282,244 and 480,000 Class A 3,093 5,260
shares -------- --------
Total Stockholders' Equity 74,688 59,113
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $135,796 $102,606
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
JUNE 29, JULY 1,
1996 1995
------------- ------------
(In thousands except shares
and per share data)
<S> <C> <C>
Net Sales $ 55,199 $ 45,008
Costs and Expenses:
Cost of sales 36,921 31,593
Selling, general and administrative 10,937 9,818
Interest 495 541
----------- -----------
48,353 41,952
Earnings Before Income Taxes 6,846 3,056
Income Taxes 2,570 1,208
----------- -----------
Net Earnings $ 4,276 $ 1,848
=========== ===========
Earnings per Share
Primary $ 0.30 $ 0.14
Fully diluted $ 0.30 $ 0.14
Weighted Average Shares Outstanding
Primary 14,168,056 13,269,907
Fully diluted 14,231,187 13,269,907
</TABLE>
The July 1, 1995 earnings per share and the number of weighted average Class A
and Class B shares of Common Stock outstanding have been adjusted to reflect the
3-for-2 stock split effectuated in the form of a fifty percent dividend paid on
June 28, 1996 to stockholders of record as of June 14, 1996.
See notes to condensed consolidated financial statements.
3
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
----------------------
JUNE 29, JULY 1,
1996 1995
------------- ------------
(In thousands except shares
and per share data)
<S> <C> <C>
Net Sales $ 120,232 $ 95,181
Costs and Expenses:
Cost of sales 81,646 66,876
Selling, general and administrative 23,086 19,788
Interest 848 1,107
----------- -----------
105,580 87,771
Earnings Before Income Taxes 14,652 7,410
Income Taxes 5,575 2,929
----------- -----------
Net Earnings $ 9,077 $ 4,481
=========== ===========
Earnings per Share
Primary $ 0.65 $ 0.34
Fully diluted $ 0.64 $ 0.34
Weighted Average Shares Outstanding
Primary 13,938,293 13,279,816
Fully diluted 14,175,596 13,279,816
</TABLE>
The July 1, 1995 earnings per share and the number of weighted average Class A
and Class B shares of Common Stock outstanding have been adjusted to reflect the
3-for-2 stock split effectuated in the form of a fifty percent dividend paid on
June 28, 1996 to stockholders of record as of June 14, 1996.
See notes to condensed consolidated financial statements.
4
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
------------------------
JUNE 29, JULY 1,
1996 1995
------------ ----------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
- - - ------------------------------------
<S> <C> <C>
Net earnings $ 9,077 $ 4,481
Adjustment to reconcile:
Depreciation and amortization 2,857 3,056
Deferred income taxes (112) (235)
Change in assets and liabilities affecting cash
flows:
Accounts receivable 26 5,901
Inventories (10,087) 1,319
Prepaid expenses and other current assets 390 439
Accounts payable 781 (4,879)
Income taxes (984) (474)
Other accrued liabilities 1,182 (2,250)
-------- -------
Net cash flow provided by operating 3,130 7,358
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
- - - ------------------------------------
Capital expenditures (12,722) (5,770)
Investment in Subsidiary (827) 0
Increase in other assets (704) (177)
--------- --------
Net cash used in investing activities (14,253) (5,947)
CASH FLOWS FROM FINANCING ACTIVITIES:
- - - -------------------------------------
Borrowing on line of credit 0 73
Repayment of long-term debt (3,150) (1,951)
Proceeds from long-term debt 13,102 0
Purchase of Class A stock for treasury 0 (931)
Exercise of stock options by employees 1,639 110
Dividends paid (433) (442)
-------- -------
Net cash provided by (used in) financing 11,158 (3,141)
activities -------- -------
NET INCREASE (DECREASE) IN CASH 35 (1,730)
CASH AT BEGINNING OF PERIOD 2,929 4,151
-------- -------
CASH AT END OF PERIOD $ 2,964 $ 2,421
======== =======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
Twenty six weeks ended June 29, 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 condensed 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.
On May 30, 1996 the Company acquired a majority equity interest in The
ColorWorks, Inc. for approximately $5.4 million, paid principally in Bush
Class A Common Stock. As of June 29, 1996, the financial statements of The
ColorWorks, Inc. are consolidated into the Company's financial statements
and any resulting minority interest was deemed not material.
The foregoing financial information reflects all adjustments which are, in
the opinion of management, of 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. In a non cash transaction and as additional consideration for a majority
interest in a new subsidiary, the Company issued 197,753 shares of Class A
Common Stock from its Treasury Stock. Each share of stock was valued at
$23.17 per share for a total consideration of $4,581,000. The afore-
mentioned shares and price per share have been adjusted to reflect the
3-for-2 stock split effectuated in the form of a fifty percent dividend
paid on June 28, 1996 to stockholders of record as of June 14, 1996.
3. Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 29, DECEMBER 30,
1996 1995
-------- ------------
(In thousands)
<S> <C> <C>
Raw material $ 6,432 $ 4,459
Work in progress 2,928 2,324
Finished goods 23,333 14,799
------- -------
$32,693 $21,582
======= =======
</TABLE>
6
<PAGE>
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 contain 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 second quarter sales for the 13 week period
ended June 29, 1996 of $55,199,000 and record first half sales for the 26 week
period ended June 29, 1996 of $120,232,000. This represents an increase of
$10,191,000, or approximately 22.6%, compared to net sales of $45,008,000 for
the 13 week period ended July 1, 1995 and a first half increase of $25,051,000,
or approximately 26.3%, compared to net sales of $95,181,000 for the 26 week
period ended July 1, 1995. The increase in net sales was attributable to strong
sales in the office superstores and consumer electronics distribution channels,
strong new product acceptance by many retailers, an improvement in the overall
retail climate, as compared to the second quarter and first half of the 1995
fiscal year, and a better balanced inventory position at several key accounts as
compared to the second quarter and first half of the 1995 fiscal year.
Cost of sales increased $5,328,000 for the 13 week period ended June 29,
1996, compared to the 13 week period ended July 1, 1995. Cost of sales as an
approximate percentage of net sales decreased by 3.3% from 70.2% in the second
quarter of 1995 to 66.9% in the second quarter of 1996. Cost of sales increased
by $14,770,000 for the 26 week period ended June 29, 1996, compared to the 26
week period ended July 1, 1995. Cost of sales as an approximate percentage of
net sales decreased by 2.4% from 70.3% in the first half of 1995 to 67.9% in the
first half of 1996. The increase in cost of sales was primarily due to higher
sales volumes. However, for the second quarter and first half 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.
Selling, general and administrative expenses increased $1,119,000 for the
13 week period ended June 29, 1996, compared to the 13 week period ended July 1,
1995. For the 26 week period ended June 29, 1996 selling, general and
administrative expenses increased by $3,298,000 as compared to the 26 week
period ended July 1, 1995. The second quarter of 1996 and first half of 1996
increases in selling, general and administrative expenses were primarily a
result of increases in variable selling expenses (such as commissions, marketing
and promotional incentives) and other administrative costs associated with the
Company's increased sales volumes. Selling, general and administrative expenses
as an approximate percentage of net sales decreased by 2.0% from 21.8% in the
second quarter of 1995 to 19.8% in the second quarter of 1996 and decreased by
1.6% from 20.8% in the first half of 1995 to 19.2% in the first half of 1995.
Interest expense for the 13 week period ended June 29, 1996 decreased to
$495,000 (or
7
<PAGE>
approximately 0.9% of net sales) from $541,000 (or approximately 1.2% of net
sales) for the 13 week period ended July 1, 1995. Interest expense for the 26
week period ended June 29, 1996 decreased to $848,000 (or approximately 0.7% of
net sales) from $1,107,000 (or approximately 1.2% of net sales) for the 26 week
period ended July 1, 1995. The decrease in interest expense, for both the
second quarter of 1996 and first half of 1996, is due primarily to lower
interest rates (resulting from the refinancing of the Company's debt and lower
LIBOR and prime rates). 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 debt (with generally higher interest
rates), was paid off. Partially offsetting the reduction in interest rates in
both the second quarter 1996 and the first half 1996 was an increase in average
debt.
LIQUIDITY AND CAPITAL RESOURCES:
- - - --------------------------------
On May 30, 1996 the Company acquired a majority equity interest in The
ColorWorks, Inc. for approximately $5.4 million, paid 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. As of
June 29, 1996, the financial statements of The ColorWorks, Inc. are consolidated
into the Company's financial statements and any resulting minority interest was
deemed not material.
Working capital at second quarter end 1996 increased by $9,616,000 as
compared to working capital at year end 1995, primarily because of an increase
in inventories and accounts receivable and a decrease in income taxes.
Partially offsetting these factors was a increase in accounts payable and other
accrued liabilities. Total assets at second quarter end increased by
$33,190,000 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 at second quarter end 1996 increased $17,615,000 over year end
1995, due mostly to an increase in long-term debt and current liabilities.
The Company spent $12,722,000 on capital expenditures during the first half
of 1996 (which included construction costs associated with both the first and
second phases of the Erie facility, as described below), which were financed
primarily with increased debt and net cash flow from operating activities.
Capital expenditures for the 1996 fiscal year are currently forecasted to be in
the $35 to $40 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 completed
and, in April 1996, 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, commenced in the
second quarter of 1996 and is scheduled to be completed late in 1996.
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.
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
8
<PAGE>
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
$75,000,000 maximum amount of borrowing permitted under the unsecured credit
facility.
The line of credit agreement provides for achieving certain ratios,
including total funded debt (net of cash) to capital and total funded debt (net
of cash) to earnings before interest and tax, 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 currently
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.
9
<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 June 29, 1996.
10
<PAGE>
SIGNATURES
----------
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: July 31, 1996 By: /s/Robert L. Ayres
--------------- ----------------------------
(Signature)
Robert L. Ayres
Executive Vice President,
Chief Operating Officer
and Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> MAR-31-1996
<PERIOD-END> JUN-29-1996
<CASH> 2,964
<SECURITIES> 0
<RECEIVABLES> 25,154
<ALLOWANCES> 1,036
<INVENTORY> 32,693
<CURRENT-ASSETS> 63,295
<PP&E> 103,385
<DEPRECIATION> 38,839
<TOTAL-ASSETS> 135,796
<CURRENT-LIABILITIES> 29,661
<BONDS> 29,418
0
0
<COMMON> 1,349
<OTHER-SE> 73,339
<TOTAL-LIABILITY-AND-EQUITY> 135,796
<SALES> 55,199
<TOTAL-REVENUES> 55,199
<CGS> 36,921
<TOTAL-COSTS> 36,921
<OTHER-EXPENSES> 10,905
<LOSS-PROVISION> 32
<INTEREST-EXPENSE> 495
<INCOME-PRETAX> 6,846
<INCOME-TAX> 2,570
<INCOME-CONTINUING> 4,276
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,276
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
