<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 September 27, 1997
------------------
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 or 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 September 27, 1997: 9,997,832
shares of Class A Common Stock and 3,555,365 shares of Class B Common Stock.
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
<S> <C> <C>
(Unaudited)
(In thousands)
ASSETS
- ------
Current Assets:
Cash $ 2,491 $ 2,810
Accounts receivable 35,263 24,863
Inventories 38,280 26,300
Prepaid expenses and other current assets 8,523 4,141
-------- --------
Total Current Assets 84,557 58,114
Property, Plant and Equipment, Net 134,409 84,355
Other Assets 15,966 9,995
-------- --------
TOTAL ASSETS $234,932 $152,464
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable 17,426 9,377
Income taxes 686 1,017
Other accrued liabilities 42,310 18,844
Current portion of long-term debt 2,892 663
-------- --------
Total Current Liabilities 63,314 29,901
Deferred Income Taxes 11,599 1,907
Long-term Debt 55,872 36,339
Stockholders' Equity:
Common Stock:
Class A, $.10 par, 20,000,000 shares authorized,
10,061,311 and 9,650,721 shares issued 1,006 965
Class B, $.10 par, 6,000,000 shares authorized,
3,555,365 and 3,855,365 shares issued 356 386
Paid-in capital 15,785 12,311
Retained earnings 87,796 73,476
-------- --------
104,943 87,138
Less treasury stock, 63,479 and 224,965 Class A shares 796 2,821
-------- --------
Total Stockholders' Equity 104,147 84,317
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $234,932 $152,464
======== ========
</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
----------------------------
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
(In thousands except shares
and per share data)
<S> <C> <C>
Net Sales $ 76,517 $ 63,638
Costs and Expenses:
Cost of sales 54,105 44,433
Selling, general and administrative 12,928 12,385
Interest 836 503
----------- -----------
67,869 57,321
Earnings Before Income Taxes 8,648 6,317
Income Taxes 3,369 2,338
----------- -----------
Net Earnings $ 5,279 $ 3,979
=========== ===========
Earnings per Share
Primary $ 0.36 $ 0.28
Fully diluted $ 0.36 $ 0.28
Weighted Average Shares Outstanding
Primary 14,715,327 14,193,669
Fully diluted 14,776,965 14,193,669
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
----------------------------
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
<S> <C> <C>
(In thousands except shares
and per share data)
Net Sales $ 219,813 $ 183,870
Costs and Expenses:
Cost of sales 151,156 126,079
Selling, general and administrative 40,483 35,471
Interest 2,246 1,351
----------- -----------
193,885 162,901
Earnings Before Income Taxes 25,928 20,969
Income Taxes 10,201 7,913
----------- -----------
Net Earnings $ 15,727 $ 13,056
=========== ===========
Earnings per Share
Primary $ 1.08 $ 0.93
Fully diluted $ 1.07 $ 0.93
Weighted Average Shares Outstanding
Primary 14,521,725 14,025,638
Fully diluted 14,668,666 14,025,638
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
-----------------------------
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net earnings $ 15,727 $ 13,056
Adjustment to reconcile:
Depreciation and amortization 6,234 4,167
Deferred income taxes 306 (333)
Change in assets and liabilities affecting cash flows:
Accounts receivable 3,625 (3,318)
Inventories (1,223) (6,630)
Prepaid expenses and other current assets (67) (7)
Accounts payable (2,630) (458)
Income taxes 213 334
Other accrued liabilities (770) 1,242
-------- --------
Net cash flow provided by operating activities 21,415 8,053
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Capital expenditures (20,065) (24,126)
Investment in Subsidiary 0 (827)
Increase in other assets (2,255) (857)
-------- --------
Net cash used in investing activities (22,320) (25,810)
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Repayment of long-term debt (46,391) (3,225)
Proceeds from long-term debt 47,388 20,861
Purchase of Class A stock for treasury 0 (1,488)
Exercise of stock options by employees 997 1,639
Dividends paid (1,408) (893)
-------- --------
Net cash provided by financing activities 586 16,894
-------- --------
NET DECREASE IN CASH (319) (863)
CASH AT BEGINNING OF PERIOD 2,810 2,929
-------- --------
CASH AT END OF PERIOD $ 2,491 $ 2,066
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
Thirty-nine weeks ended September 27, 1997
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 28, 1996. 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 28, 1996.
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 March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128 "Earnings per Share". The
new standard requires dual presentation of basic and diluted earnings per
share (EPS) on the face of the earnings statement and requires a
reconciliation of the numerators and denominators of basic and diluted EPS
calculations. The statement will be effective for the Company's 1997
fiscal year. The Company does not believe that the difference between
basic EPS and currently presented primary EPS will be materially different.
3. In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 130 "Reporting Comprehensive
Income", and No. 131 "Disclosures about Segments of an Enterprise and
Related Information". Both statements will be adopted as required during
the Company's 1998 fiscal year. Currently, the Company does not expect to
have any material differences between net income as currently reported and
comprehensive income as required to be reported under SFAS 130. Management
is evaluating whether or not the Company operates in more than one
operating segment as defined in SFAS 131. Certain financial data in
connection with operating segments, if any, and certain enterprise wide
disclosures about foreign and domestic operations and revenues from major
customers will be reported upon adoption of SFAS 131 by the Company.
6
<PAGE>
4. On June 30, 1997, the Company acquired a 51% interest in the Rohr
Gruppe, a German furniture manufacturer. The purchase price consisted of
$3.0 million in Bush Industries, Inc. Class A Common Stock and additional
debt capacity was made available. The Rohr Gruppe consisted of limited
partnerships and corporate entities, which were reorganized prior to the
Company's acquisition into a limited partnership, which name was
subsequently changed to Rohr-Bush GmbH & Co. ("Rohr-Bush"). Rohr-Bush has a
fiscal year end of October 31, and as such, one month of its operations
have been included in the Company's third quarter 1997 results and three
months of its operations will be included in the Company's fourth quarter
1997 results. The acquisition of Rohr-Bush has been accounted for using the
purchase method of accounting and accordingly, the operating results of
Rohr-Bush have been included in the condensed consolidated financial
statements of the Company since the June 30, 1997 acquisition. The Company
is in the process of finalizing the $3.0 million purchase price allocation
to the acquired assets and liabilities as of June 30, 1997.
5. Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 27, DECEMBER 28,
1997 1996
------------- ------------
(In thousands)
<S> <C> <C>
Raw material $13,957 $ 6,313
Work in progress 6,990 2,745
Finished goods 17,333 17,242
------- -------
$38,280 $26,300
======= =======
</TABLE>
7
<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 third quarter sales for the 13 week period
ended September 27, 1997 of $76,517,000 and record sales for the 39 week period
ended September 27, 1997 of $219,813,000. This represents an increase of
$12,879,000, or approximately 20.2%, compared to net sales of $63,638,000 for
the 13 week period ended September 28, 1996 and an increase of $35,943,000, or
approximately 19.5%, for the 39 week period ended September 27, 1997 as compared
to net sales of $183,870,000 for the same period last year. The sales increase
was primarily the result of good sales momentum at retail outlets and continued
placement of new products with key customers. The impact of Rohr-Bush on sales
was minimal, since only one month of Rohr-Bush results was included in the
Company's third quarter 1997 financial statements, as described in the notes to
the condensed consolidated financial statements.
Cost of sales increased $9,672,000 for the 13 week period ended September
27, 1997, compared to the 13 week period ended September 28, 1996. Cost of
sales as an approximate percentage of net sales increased by 0.9% from 69.8% in
the third quarter of 1996 to 70.7% in the third quarter of 1997. Cost of sales
increased by $25,077,000 for the 39 week period ended September 27, 1997,
compared to the 39 week period ended September 28, 1996. Cost of sales as an
approximate percentage of net sales increased by 0.2% from 68.6% in the first 39
week period of 1996 to 68.8% in the first 39 week period of 1997. The increase
in cost of sales was primarily due to higher sales volumes. The increase in cost
of sales as a percentage of sales for both the 13 week and 39 week period ended
September 27, 1997 reflects costs associated with the integration of the
Company's two new operations in Europe, certain new product roll-outs, and the
impact of escalating production requirements at the Company's Erie, Pennsylvania
facility.
Selling, general and administrative expenses increased $543,000 for the 13
week period ended September 27, 1997, compared to the 13 week period ended
September 28, 1996. For the 39 week period ended September 27, 1997, selling,
general and administrative expenses increased by $5,012,000 as compared to the
39 week period ended September 28, 1996. Increases in selling, general and
administrative expenses for both the third quarter of 1997 and the first 39
weeks of 1997 were 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 2.6% from 19.5% in the third quarter of 1996 to 16.9% in the third quarter of
1997 and decreased by 0.9% from 19.3% for the first 39 weeks of 1996 to 18.4%
for the first 39 weeks of 1997.
8
<PAGE>
Interest expense for the 13 week period ended September 27, 1997 increased
to $836,000 (or approximately 1.1% of net sales) from $503,000 (or approximately
0.8% of net sales) for the 13 week period ended September 28, 1996. Interest
expense for the 39 week period ended September 27, 1997 increased to $2,246,000
(or approximately 1.0% of net sales) from $1,351,000 (or approximately 0.7% of
net sales) for the 39 week period ended September 28, 1996. The increase in
interest expense was primarily due to an increase in average debt primarily
related to the Company's capital expenditures in fiscal year 1996 and 1997 and
debt maintained by Rohr-Bush.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
Working capital at third quarter-end 1997 decreased by $6,970,000, as
compared to working capital at year-end 1996. Such decreased working capital
was primarily due to the inclusion of Rohr-Bush in the Company's financial
statements. Total assets at third quarter-end 1997 increased $82,468,000 over
year-end 1996 primarily as a result of the inclusion of Rohr-Bush in the
Company's financial statements and an increase in net property, plant and
equipment associated with the Company's capital expenditures. In addition,
total liabilities increased $62,638,000 at third quarter-end 1997, primarily as
a result of the inclusion of Rohr-Bush in the Company's financial statements.
The Company spent approximately $20 million on capital expenditures during
the first 39 weeks of 1997, which were financed primarily with net cash flow
from operating activities. Capital expenditures for fiscal year 1997 are
currently forecasted to be approximately $25 million.
On June 30, 1997, the Company acquired a 51% interest in the Rohr Gruppe,
a German furniture manufacturer. The purchase price consisted of $3.0 million in
Bush Industries, Inc. Class A Common Stock and additional debt capacity was made
available. The Rohr Gruppe consisted of limited partnerships and corporate
entities, which were reorganized prior to the Company's acquisition into a
limited partnership, which name was subsequently changed to Rohr-Bush GmbH & Co.
("Rohr-Bush"). Rohr-Bush has a fiscal year end of October 31, and as such, one
month of its operations have been included in the Company's third quarter 1997
results and three months of its operations will be included in the Company's
fourth quarter 1997 results. The acquisition of Rohr-Bush has been accounted for
using the purchase method of accounting and accordingly, the operating results
of Rohr-Bush have been included in the condensed consolidated financial
statements of the Company since the June 30, 1997 acquisition. The Company is in
the process of finalizing the $3.0 million purchase price allocation to the
acquired assets and liabilities as of June 30, 1997.
In the first quarter of 1997, the Company formed a wholly-owned German
subsidiary, Bush-Viotechnik GmbH. The objective of this business venture is to
service the European market for advanced surface technologies in diverse
applications, including the furniture, automotive, electronics, building and
construction industries. Bush-Viotechnik GmbH has under development two
advanced surface technology manufacturing lines which are scheduled for
completion in early 1998. One line is planned to be installed in Germany and the
other line is planned to be located in
9
<PAGE>
the Company's Erie, Pennsylvania facility. The formation of Bush-Viotechnik GmbH
complements the Company's acquisition last year of The ColorWorks, Inc.
In 1996, the Company obtained low interest rate financing from the
Commonwealth of Pennsylvania in the aggregate principal amount of $4,500,000.
Such loans bear interest at the annual rate of 3%, and were used to partially
finance the first phase of the Erie facility and to partially finance the
purchase of equipment. In addition, during the first quarter of 1997, the
Company secured low interest rate financing from the Commonwealth of
Pennsylvania in the aggregate principal amount of $2,000,000, which loan bears
interest at the annual rate of 3.75%, and which loan was used to partially
finance the second phase of the Erie facility.
On June 27, 1997, the Company replaced its then existing $85,000,000 credit
facility with a new $155,000,000 credit facility with The Chase Manhattan Bank,
Mellon Bank, N.A. and other lending institutions. The credit facility provides
for revolving credit loans, swing line loans and multicurrency loans, within the
parameters described below. This loan is due June 25, 2002 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, as there are no
required principal payments due within the next 12 months. At the Company's
option, borrowings may be effectuated, subject to certain conditions, on a NYBOR
rate, a eurocurrency rate for dollars, an applicable eurocurrency rate for
certain foreign currencies, a money market rate, or an alternative base rate.
Alternative base rate loans currently bear interest at the prime rate as
announced by The Chase Manhattan Bank, and eurocurrency loans bear interest at
the then current applicable LIBOR rate, plus an applicable margin. The
applicable margin, which pertains only to LIBOR and NYBOR rate loans, varies
from 0.375% to 1.00%, 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 $20,000,000 in letters of
credit, which issuance will be deemed part of the $155,000,000 maximum amount of
borrowing permitted under the unsecured credit facility.
The line of credit agreement provides for achieving certain consolidated
cash flow coverage and leverage 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 has in the past maintained "key man" life insurance in the
amount of approximately $11.4 million on the life of Mr. Paul S. Bush, the
Chairman of the Board, President and Chief Executive Officer of the Company.
The Company increased the amount of this insurance to approximately $21.4
million by purchasing an additional $10 million life insurance policy. Effective
July 1997, the Company entered into a stock redemption agreement with Mr. Paul
S. Bush, which provides that upon Mr. Paul S. Bush's demise the Company may be
required to redeem a portion of the Company's capital stock then owned by Mr.
Paul S. Bush's estate, at the then market price based upon a thirty day average
prior to the closing of any stock redemption. The amount of the redemption is
limited to the approximately $21.4 million in life insurance proceeds described
above. The Company believes that the redemption agreement would protect
stockholder valuation, by providing a mechanism for the orderly liquidation of a
portion of the estate's equity holdings in the Company, if the estate is then
required to sell such stock, for among other reasons, to satisfy, in whole or in
part, then current estate tax obligations.
10
<PAGE>
Part II. OTHER INFORMATION
------------------------------
ITEM 6. EXHIBITS AND REPORTS ON 8-K
- ------- ---------------------------
(a) Exhibits: None
(b) Reports on Form 8-K:
During the third quarter (13 weeks) ended September 27, 1997, an
8-K was filed on September 10, 1997 regarding the Rohr Gruppe
acquisition.
During the third quarter (13 weeks) ended September 27, 1997, an
8-K was filed on September 10, 1997 regarding the new
$155,000,000 credit facility with The Chase Manhattan Bank,
Mellon Bank, N.A. and other lending institutions and the stock
redemption agreement with Mr. Paul S. Bush.
11
<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: November 10, 1997 By: /s/Robert L. Ayres
----------------- ---------------------------
(Signature)
Robert L. Ayres
Executive Vice President,
Chief Operating Officer
and Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INCOME
STATEMENT AND 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> JAN-03-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> SEP-27-1997
<CASH> 2,491
<SECURITIES> 0
<RECEIVABLES> 37,406
<ALLOWANCES> 2,143
<INVENTORY> 38,280
<CURRENT-ASSETS> 84,557
<PP&E> 181,781
<DEPRECIATION> 47,372
<TOTAL-ASSETS> 234,932
<CURRENT-LIABILITIES> 63,314
<BONDS> 55,872
0
0
<COMMON> 1,362
<OTHER-SE> 102,785
<TOTAL-LIABILITY-AND-EQUITY> 234,932
<SALES> 76,517
<TOTAL-REVENUES> 76,517
<CGS> 54,105
<TOTAL-COSTS> 54,105
<OTHER-EXPENSES> 12,714
<LOSS-PROVISION> 214
<INTEREST-EXPENSE> 836
<INCOME-PRETAX> 8,648
<INCOME-TAX> 3,369
<INCOME-CONTINUING> 5,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,279
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
