<PAGE>
UNITED STATES
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 October 3, 1998
---------------
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
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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 October 3, 1998: 10,320,093
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>
OCTOBER 3, JANUARY 3,
1998 1998
----------- ----------
(Unaudited)
(In thousands)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash $ 2,955 $ 3,399
Accounts receivable, net 38,957 40,387
Inventories 56,897 31,822
Prepaid expenses and other current assets 11,288 9,909
-------- --------
Total Current Assets 110,097 85,517
Property, Plant and Equipment, Net 181,791 142,710
Other Assets 27,562 15,551
-------- --------
TOTAL ASSETS $319,450 $243,778
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $23,098 $22,940
Income taxes 0 0
Other accrued liabilities 29,038 33,748
Current portion of long-term debt 704 718
-------- --------
Total Current Liabilities 52,840 57,406
Deferred Income Taxes 10,815 8,976
Other Long-term Liabilities 8,042 8,011
Long-term Debt 124,925 56,955
-------- --------
Total Liabilities 196,622 131,348
-------- --------
Stockholders' Equity:
Common Stock:
Class A, $.10 par, 20,000,000 shares authorized,
10,383,572 and 10,229,476 shares issued 1,038 1,023
Class B, $.10 par, 6,000,000 shares authorized,
3,555,365 shares issued 356 356
Paid-in capital 20,652 18,276
Retained earnings 102,203 93,708
Foreign currency translation adjustment (625) (137)
-------- --------
123,624 113,226
Less treasury stock, 63,479 Class A shares 796 796
-------- --------
Total Stockholders' Equity 122,828 112,430
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 319,450 $ 243,778
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
---------------------------------------------
(Unaudited)
THIRTEEN WEEKS ENDED
-------------------------------
OCTOBER 3, SEPTEMBER 27,
1998 1997
---------- -------------
(In thousands, except shares
and per share data)
Net Sales $94,252 $76,517
Costs and Expenses:
Cost of sales 68,766 54,105
Selling, general and administrative 22,285 12,928
Interest 1,737 836
------ ------
92,788 67,869
Earnings Before Income Taxes 1,464 8,648
Income Taxes 458 3,369
------ ------
Net Earnings $1,006 $5,279
====== ======
Earnings per Share
Basic $0.07 $0.39
Diluted $0.07 $0.36
Weighted Average Shares Outstanding
Basic 13,875,594 13,526,569
Diluted 14,697,724 14,715,327
See notes to condensed consolidated financial statements.
3
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
---------------------------------------------
(Unaudited)
THIRTY-NINE WEEKS ENDED
-------------------------------
OCTOBER 3, SEPTEMBER 27,
1998 1997
---------- -------------
(In thousands, except shares
and per share data)
Net Sales $300,154 $219,813
Costs and Expenses:
Cost of sales 217,452 151,156
Selling, general and administrative 62,593 40,483
Interest 4,002 2,246
------- -------
284,047 193,885
Earnings Before Income Taxes 16,107 25,928
Income Taxes 5,744 10,201
------- -------
Net Earnings $10,363 $15,727
======= =======
Earnings per Share
Basic $0.75 $1.17
Diluted $0.70 $1.08
Weighted Average Shares Outstanding
Basic 13,806,992 13,390,780
Diluted 14,801,420 14,521,725
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
--------------------------------------
OCTOBER 3, SEPTEMBER 27,
1998 1997
---------- -------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
Net earnings $10,363 $15,727
Adjustment to reconcile:
Depreciation and amortization 9,463 6,234
Deferred income taxes (494) 306
Change in assets and liabilities affecting cash flows:
Accounts receivable 6,107 3,625
Inventories (23,035) (1,223)
Prepaid expenses and other current assets 711 (67)
Accounts payable (3,707) (2,630)
Income taxes 18 213
Other accrued liabilities (8,574) (770)
-------- --------
Net cash provided by (used in) operating activities (9,148) 21,415
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------
Capital expenditures (40,036) (20,065)
Investment in subsidiary (7,000) 0
Increase in other assets (1,440) (2,255)
-------- --------
Net cash used in investing activities (48,476) (22,320)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Repayment of long-term debt (11,265) (46,391)
Proceeds from long-term debt 68,942 47,388
Exercise of stock options by employees 1,373 997
Dividends paid (1,868) (1,408)
-------- --------
Net cash provided by financing activities 57,182 586
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (2) 0
-------- --------
NET DECREASE IN CASH (444) (319)
CASH AT BEGINNING OF PERIOD 3,399 2,810
-------- --------
CASH AT END OF PERIOD $2,955 $2,491
======== ========
</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 October 3, 1998
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 January 3, 1998. 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 January 3, 1998.
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. In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." SFAS
130 requires disclosure of total non-stockholder changes in equity in
interim periods and additional disclosures of the components of
non-stockholder changes in equity on an annual basis. Total non-stockholder
changes in equity includes all changes in equity during a period except
those resulting from investments by and distributions to stockholders. The
following tables set forth total comprehensive income for the 13 week and
39 week periods indicated below.
THIRTEEN WEEKS ENDED
-------------------------------------
OCTOBER 3, SEPTEMBER 27,
1998 1997
---------- -------------
(In thousands)
Net income $1,006 $5,279
Foreign currency translation loss (290) 0
------ ------
Total comprehensive income $716 $5,279
====== ======
THIRTY-NINE WEEKS ENDED
-------------------------------------
OCTOBER 3, SEPTEMBER 27,
1998 1997
---------- -------------
(In thousands)
Net income $10,363 $15,727
Foreign currency translation loss (488) 0
------- -------
Total comprehensive income $9,875 $15,727
======= =======
6
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3. In 1998, the Company will adopt SFAS No. 131 "Disclosures about Segments of
an Enterprise and Related Information." SFAS 131 establishes standards for
the way that public business enterprises report information about operating
segments. 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.
Such disclosure will be included in the Company's consolidated financial
statements for the fiscal year ending January 2, 1999.
4. In 1998, the Company will adopt SFAS No. 132 "Employers' Disclosures about
Pensions and Other Postretirement Benefits - an amendment of SFAS
Statements No. 87, 88, and 106." SFAS No. 132 requires revised disclosures
about pensions and other postretirement benefit plans. The Company does not
expect that adoption of the disclosure requirements of this pronouncement
will have a material impact on its financial statements. Such disclosure,
if any, will be included in the Company's financial statements for the
fiscal year ending January 2, 1999.
5. On April 22, 1998, the Company acquired all of the issued and outstanding
stock of Fournier Furniture, Inc.("Fournier"), a Virginia based
manufacturer of ready-to-assemble ("RTA") furniture, for a purchase price
of $7.0 million in cash. Substantially all of Fournier's debt that existed
on April 22, 1998 has been repaid utilizing the Company's existing credit
facility. The acquisition of Fournier has been accounted for using the
purchase method of accounting and accordingly, the operating results of
Fournier have been included in the condensed consolidated financial
statements of the Company since the April 22, 1998 acquisition. The Company
is in the process of finalizing the $7.0 million purchase price allocation
to the acquired assets and liabilities as of April 22, 1998.
6. Inventories consist of the following:
OCTOBER 3, JANUARY 3,
1998 1998
---------- ----------
(In thousands)
Raw material $16,393 $9,762
Work in progress 10,988 7,362
Finished goods 29,516 14,698
------- -------
$56,897 $31,822
======= =======
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 October 3, 1998 of $94,252,000 and record sales for the 39 week period
ended October 3, 1998 of $300,154,000. This represents an increase of
$17,735,000, or approximately 23.2%, compared to net sales of $76,517,000 for
the 13 week period ended September 27, 1997 and an increase of $80,341,000, or
approximately 36.5%, for the 39 week period ended October 3, 1998, as compared
to net sales of $219,813,000 for the same period last year. The increase in
sales for both the 13 week and 39 week period ended October 3, 1998 was
primarily due to the addition of sales from the Company's majority owned German
subsidiary, Rohr-Bush GmbH & Co. ("Rohr-Bush") which was acquired on June 30,
1997, the addition of sales from the Company's wholly owned subsidiary, Fournier
Furniture, Inc. ("Fournier") which was acquired on April 22, 1998 and good
seasonal sell-through at retail. (Rohr-Bush has a fiscal year end of October 31,
and as such, only one month of its operations was included in the Company's
third quarter 1997 results.) Revenues were, however, impacted by new product
introduction delays until the fourth quarter, which occurred as a result of the
assignment of substantial internal resources to more quickly advance recent
strategic business initiatives. These initiatives, which have been developed to
enhance the Company's current product offerings and position the Company for
anticipated future growth, include: the integration of Fournier and Rohr-Bush;
the launching of new surface technology equipment at the Company's Erie
facility; the adaptation of Rohr-Bush manufacturing to support commercial office
products; the nationwide roll out of the Company's delivery and assembly service
company, TASC; and the completion of a permanent showroom in Germany.
Cost of sales increased $14,661,000 for the 13 week period ended October 3,
1998, compared to the 13 week period ended September 27, 1997. Cost of sales as
an approximate percentage of net sales increased by 2.3% from 70.7% in the third
quarter of 1997 to 73.0% in the third quarter of 1998. Cost of sales increased
by $66,296,000 for the 39 week period ended October 3, 1998, compared to the 39
week period ended September 27, 1997. Cost of sales as an approximate percentage
of net sales increased by 3.6% from 68.8% for the first 39 weeks of 1997 to
72.4% for the first 39 weeks of 1998. The increase in cost of sales was
primarily due to higher sales volumes. The cost of sales increased as a
percentage of sales for both the 13 and 39 week period ended October 3, 1998,
primarily as a result of the increased costs associated with the business
initiatives described above.
Selling, general and administrative expenses increased $9,357,000 for the
13 week period ended October 3, 1998, compared to the 13 week period ended
September 27, 1997. For the 39 week period ended October 3, 1998, selling,
general and administrative expenses increased by
8
<PAGE>
$22,110,000, as compared to the 39 week period ended September 27, 1997. The
increase in selling, general and administrative expenses for both the 13 week
and 39 week period ended October 3, 1998 was primarily due to the inclusion of
Rohr-Bush and Fournier in the Company's financial statements and the costs
associated with the business initiatives described above. Selling, general and
administrative expenses as an approximate percentage of net sales increased by
6.7% from 16.9% in the third quarter of 1997 to 23.6% in the third quarter of
1998 and increased by 2.5% from 18.4% in the first 39 weeks of 1997 to 20.9% in
the first 39 weeks of 1998.
Interest expense for the 13 week period ended October 3, 1998 increased to
$1,737,000 (or approximately 1.8% of net sales) from $836,000 (or approximately
1.1% of net sales) for the 13 week period ended September 27, 1997. Interest
expense for the 39 week period ended October 3, 1998 increased to $4,002,000 (or
approximately 1.3% of net sales) from $2,246,000 (or approximately 1.0% of net
sales) for the 39 week period ended September 27, 1997. The increase in interest
expense was primarily due to an increase in average debt related to the
Company's capital expenditures, inventory growth and acquisitions.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
On April 22, 1998, the Company acquired all of the issued and outstanding
stock of Fournier Furniture, Inc. ("Fournier"), a Virginia based manufacturer of
ready-to-assembly ("RTA") furniture, for a purchase price of $7.0 million in
cash. Substantially all of Fournier's debt that existed on April 22, 1998 has
been repaid utilizing the Company's existing credit facility. The acquisition of
Fournier has been accounted for using the purchase method of accounting and
accordingly, the operating results of Fournier have been included in the
condensed consolidated financial statements of the Company since the April 22,
1998 acquisition. The Company is in the process of finalizing the $7.0 million
purchase price allocation to the acquired assets and liabilities as of April 22,
1998.
Working capital at third quarter-end 1998 increased by $29,146,000, as
compared to working capital at year-end 1997. Such increased working capital was
primarily due to an increase in inventories. Total assets at third quarter-end
1998 increased $75,672,000 over year-end 1997, primarily as a result of an
increase in net property, plant and equipment, other assets, and inventory.
Additional inventory was put in place primarily to enable the Company to improve
its serviceability to its customers. In addition, total liabilities increased
$65,274,000 at third quarter-end 1998 as compared to year-end 1997, due mostly
to an increase in long-term debt associated with the Company's capital
expenditures, inventory growth and the acquisition of Fournier. Working capital,
total assets and total liabilities were all impacted as the result of the
inclusion of the Fournier acquisition in the Company's financial statements.
During the first three quarters of 1998, the Company spent $40,036,000 on
capital expenditures and $7,000,000 for the purchase of Fournier, which were
financed primarily with increased debt. Capital expenditures for fiscal year
1998 are currently forecasted to be approximately $45 million.
9
<PAGE>
The Company entered into an amendment, dated as of August 17, 1998 to its
existing credit facility with The Chase Manhattan Bank, Mellon Bank, N.A. and
other lending institutions. The amendment modifies the amount of money the
Company can borrow from an aggregate $155,000,000 to an aggregate $175,000,000.
In addition, the term of the credit facility was extended until June 30, 2003,
certain covenants were amended, and borrowings were permitted under the
anticipated single currency of participating member states of the European
Union. The credit facility provides for revolving credit loans, swing line loans
and multi-currency loans, within the parameters described below. A balloon
payment of the then remaining principal and accrued interest is due on the
termination date of the loan. The Company has classified all of the 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, an eurocurrency rate for
dollars, an applicable eurocurrency rate for certain foreign currencies, a money
market rate, or an alternative base rate. 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 $175,000,000 maximum amount of
borrowing permitted under the credit facility.
The line of credit agreement provides for achieving certain consolidated
cash flow coverage and leverage ratios, prescribes minimum 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
- ------ ----------------------------------------------
MARKET RISK
-----------
Not Applicable
10
<PAGE>
Part II. OTHER INFORMATION
--------------------------
ITEM 6. EXHIBITS AND REPORTS ON 8-K
- ------- ---------------------------
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K:
During the third quarter (13 weeks) ended October 3, 1998,
an 8-K was filed on September 14, 1998 regarding an
amendment to the Company's existing credit facility with
The Chase Manhattan Bank, Mellon Bank, N.A. and other
lending institutions.
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 9, 1998 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>
<CIK> 0000758604
<NAME> BUSH INDUSTRIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JUL-05-1998
<PERIOD-END> OCT-03-1998
<CASH> 2,955
<SECURITIES> 0
<RECEIVABLES> 40,404
<ALLOWANCES> 1,447
<INVENTORY> 56,897
<CURRENT-ASSETS> 110,097
<PP&E> 275,946
<DEPRECIATION> 94,155
<TOTAL-ASSETS> 319,450
<CURRENT-LIABILITIES> 52,840
<BONDS> 124,925
0
0
<COMMON> 1,394
<OTHER-SE> 121,434
<TOTAL-LIABILITY-AND-EQUITY> 319,450
<SALES> 94,252
<TOTAL-REVENUES> 94,252
<CGS> 68,766
<TOTAL-COSTS> 68,766
<OTHER-EXPENSES> 22,435
<LOSS-PROVISION> (150)
<INTEREST-EXPENSE> 1,737
<INCOME-PRETAX> 1,464
<INCOME-TAX> 458
<INCOME-CONTINUING> 1,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,006
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
