<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 28, 1997
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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
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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
----- -----
Number of shares of Common Stock outstanding as of June 28, 1997: 9,524,877
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 28, DECEMBER 28,
1997 1996
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(Unaudited)
(In thousands)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash $ 2,500 $ 2,810
Accounts receivable 22,348 24,863
Inventories 33,638 26,300
Prepaid expenses and other current
assets 3,903 4,141
-------- --------
Total Current Assets 62,389 58,114
Property, Plant and Equipment, Net 96,102 84,355
Other Assets 10,531 9,995
-------- --------
TOTAL ASSETS $169,022 $152,464
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable 11,082 9,377
Income taxes 488 1,017
Other accrued liabilities 21,960 18,844
Current portion of long-term debt 782 663
-------- --------
Total Current Liabilities 34,312 29,901
Deferred Income Taxes 2,139 1,907
Long-term Debt 37,378 36,339
Stockholders' Equity:
Common Stock:
Class A, $.10 par, 20,000,000 shares
authorized,9,749,842 and 9,650,721
shares issued 975 965
Class B, $.10 par, 6,000,000 shares
authorized, 3,855,365 shares issued 386 386
Paid-in capital 13,663 12,311
Retained earnings 82,990 73,476
-------- --------
98,014 87,138
Less treasury stock, 224,965 Class A shares 2,821 2,821
-------- --------
Total Stockholders' Equity 95,193 84,317
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $169,022 $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
-----------------------------
JUNE 28, JUNE 29,
1997 1996
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(In thousands except shares
and per share data)
<S> <C> <C>
Net Sales $ 72,429 $ 55,199
Costs and Expenses:
Cost of sales 48,705 36,921
Selling, general and administrative 14,431 10,937
Interest 675 495
----------- -----------
63,811 48,353
Earnings Before Income Taxes 8,618 6,846
Income Taxes 3,448 2,570
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Net Earnings $ 5,170 $ 4,276
=========== ===========
Earnings per Share
Primary $ 0.36 $ 0.30
Fully diluted $ 0.36 $ 0.30
Weighted Average Shares Outstanding
Primary 14,479,656 14,168,056
Fully diluted 14,539,745 14,231,187
</TABLE>
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 28, JUNE 29,
1997 1996
----------- -----------
(In thousands except shares
and per share data)
<S> <C> <C>
Net Sales $ 143,296 $ 120,232
Costs and Expenses:
Cost of sales 97,051 81,646
Selling, general and administrative 27,555 23,086
Interest 1,410 848
----------- -----------
126,016 105,580
Earnings Before Income Taxes 17,280 14,652
Income Taxes 6,832 5,575
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Net Earnings $ 10,448 $ 9,077
=========== ===========
Earnings per Share
Primary $ 0.72 $ 0.65
Fully diluted $ 0.72 $ 0.64
Weighted Average Shares Outstanding
Primary 14,415,322 13,938,293
Fully diluted 14,525,033 14,175,596
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
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(Unaudited)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
------------------------
JUNE 28, JUNE 29,
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
Net earnings $ 10,448 $ 9,077
Adjustment to reconcile:
Depreciation and amortization 4,032 2,857
Deferred income taxes 205 (112)
Change in assets and liabilities
affecting cash flows:
Accounts receivable 2,515 26
Inventories (7,338) (10,087)
Prepaid expenses and other
current assets 265 390
Accounts payable 1,705 781
Income taxes (49) (984)
Other accrued liabilities 3,116 1,182
-------- --------
Net cash flow provided by operating
activities 14,899 3,130
CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------
Capital expenditures (15,092) (12,722)
Investment in Subsidiary 0 (827)
Increase in other assets (1,223) (704)
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Net cash used in investing activities (16,315) (14,253)
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Repayment of long-term debt (46,201) (3,150)
Proceeds from long-term debt 47,359 13,102
Exercise of stock options by employees 882 1,639
Dividends paid (934) (433)
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Net cash provided by financing
activities 1,106 11,158
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NET INCREASE (DECREASE) IN CASH (310) 35
CASH AT BEGINNING OF PERIOD 2,810 2,929
-------- --------
CASH AT END OF PERIOD $ 2,500 $ 2,964
======== ========
</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 28, 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 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. Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 28, DECEMBER 28,
1997 1996
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(In thousands)
<S> <C> <C>
Raw material $ 8,702 $ 6,313
Work in progress 3,990 2,745
Finished goods 20,946 17,242
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$33,638 $26,300
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</TABLE>
6
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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 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 28, 1997 of $72,429,000 and record first half sales for the 26 week period
ended June 28, 1997 of $143,296,000. This represents an increase of
$17,230,000, or approximately 31.2%, compared to net sales of $55,199,000 for
the 13 week period ended June 29, 1996 and a first half increase of $23,064,000,
or approximately 19.2%, compared to net sales of $120,232,000 for the 26 week
period ended June 29, 1996. The sales increase was the result of good sell-
through at retail and some major placement of new products with key customers.
Cost of sales increased $11,784,000 for the 13 week period ended June 28,
1997, compared to the 13 week period ended June 29, 1996. Cost of sales as an
approximate percentage of net sales increased by 0.3% from 66.9% in the second
quarter of 1996 to 67.2% in the second quarter of 1997. Cost of sales increased
by $15,405,000 for the 26 week period ended June 28, 1997, compared to the 26
week period ended June 29, 1996. Cost of sales as an approximate percentage of
net sales decreased by 0.2% from 67.9% in the first half of 1996 to 67.7% in the
first half of 1997. The increase in cost of sales was primarily due to higher
sales volumes.
Selling, general and administrative expenses increased $3,494,000 for the 13
week period ended June 28, 1997, compared to the 13 week period ended June 29,
1996. For the 26 week period ended June 28, 1997 selling, general and
administrative expenses increased by $4,469,000 as compared to the 26 week
period ended June 29, 1996. The second quarter of 1997 and first half of 1997
increases in selling, general and administrative expenses 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 increased by 0.1% from 19.8% in the
second quarter of 1996 to 19.9% in the second quarter of 1997 and remained
unchanged at 19.2% for the first half of 1997 as compared to the first half of
1996.
Interest expense for the 13 week period ended June 28, 1997 increased to
$675,000 (or approximately 0.9% of net sales) from $495,000 (or approximately
0.9% of net sales) for the 13 week period ended June 29, 1996. Interest expense
for the 26 week period ended June 28, 1997 increased to $1,410,000 (or
approximately 1.0% of net sales) from $848,000 (or approximately 0.7% of net
sales) for the 26 week period ended June 29, 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 the first half of
1997.
7
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LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
Working capital at first half-end 1997 decreased by $136,000, as compared to
working capital at year-end 1996. Such decreased working capital was due, in
part, to a decrease in accounts receivable and an increase in accounts payable
and other accrued liabilities. Partially offsetting these factors was an
increase in inventories. Total assets at first half-end 1997 increased
$16,558,000 over year-end 1996 primarily as a result of an increase in net
property, plant and equipment associated with the Company's capital
expenditures, and current assets, including inventory (as described above). In
addition, total liabilities increased $5,682,000 at first half-end 1997, due
mostly to an increase in accrued liabilities, accounts payable and long-term
debt.
The Company spent $15,092,000 on capital expenditures during the first half of
1997, which were financed primarily with net cash flow from operating activities
and increased debt. Capital expenditures for fiscal year 1997 are currently
forecasted to be approximately $27 million.
On June 30, 1997, the Company acquired a 51% interest in the Rohr Gruppe, a
German furniture manufacturer with annual sales of over $100 million. The
purchase price consists of $3.0 million in Bush Industries, Inc. Class A Common
Stock and debt financing. 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 will be 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.
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 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
8
<PAGE>
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. Recently 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 proceeds described above. The
Company believes that such agreement would enhance 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.
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 28, 1997.
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 25, 1997 By: /s/ Robert L. Ayres
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(Signature)
Robert L. Ayres
Executive Vice President,
Chief Operating Officer
and Chief Financial Officer
11
<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> MAR-30-1997
<PERIOD-END> JUN-28-1997
<CASH> 2,500
<SECURITIES> 0
<RECEIVABLES> 24,269
<ALLOWANCES> 1,921
<INVENTORY> 33,638
<CURRENT-ASSETS> 62,389
<PP&E> 141,347
<DEPRECIATION> 45,245
<TOTAL-ASSETS> 169,022
<CURRENT-LIABILITIES> 34,312
<BONDS> 37,378
0
0
<COMMON> 1,361
<OTHER-SE> 93,832
<TOTAL-LIABILITY-AND-EQUITY> 169,022
<SALES> 72,429
<TOTAL-REVENUES> 72,429
<CGS> 48,705
<TOTAL-COSTS> 48,705
<OTHER-EXPENSES> 14,356
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 675
<INCOME-PRETAX> 8,618
<INCOME-TAX> 3,448
<INCOME-CONTINUING> 5,170
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,170
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
