<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 September 30, 2000
------------------
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
----------------------------------------------------
(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 30, 2000:
10,218,299 shares of Class A Common Stock and 3,395,365 shares of Class B Common
Stock.
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BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1,
2000 2000
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(Unaudited)
(In thousands)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash $ 608 $ 2,704
Accounts receivable 30,706 34,585
Inventories 81,754 55,681
Prepaid expenses and other current assets 12,230 11,356
-------- --------
Total Current Assets 125,298 104,326
Property, Plant and Equipment, Net 202,821 198,300
Other Assets 25,786 26,955
-------- --------
TOTAL ASSETS $353,905 $329,581
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 22,245 $ 22,401
Income taxes 1,108 585
Other accrued liabilities 33,695 40,389
Current portion of long-term debt 430 495
-------- --------
Total Current Liabilities 57,478 63,870
Deferred Income Taxes 10,090 8,427
Other Long-term Liabilities 7,142 7,940
Long-term Debt 146,634 124,765
-------- --------
Total Liabilities 221,344 205,002
-------- --------
Stockholders' Equity:
Common Stock:
Class A, $.10 par, 20,000,000 shares authorized,
10,574,046 and 10,554,456 shares issued 1,057 1,055
Class B, $.10 par, 6,000,000 shares authorized,
3,395,365 shares issued 340 340
Paid-in capital 21,016 20,826
Retained earnings 117,234 105,615
Accumulated other comprehensive income 2,070 1,733
-------- --------
141,717 129,569
Less treasury stock, 355,747 and 81,913 Class A shares (5,376) (1,146)
Less notes receivable related to common stock (3,780) (3,844)
-------- --------
Total Stockholders' Equity 132,561 124,579
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $353,905 $329,581
======== ========
</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 30, OCTOBER 2,
2000 1999
------------- -----------
(In thousands, except shares
and per share data)
<S> <C> <C>
Net Sales $ 107,078 $ 107,819
Costs and Expenses:
Cost of sales 71,889 74,720
Selling, general and administrative 21,848 25,068
Interest 3,168 2,547
----------- -----------
96,905 102,335
Earnings Before Income Taxes 10,173 5,484
Income Taxes 3,903 2,319
----------- -----------
Net Earnings $ 6,270 $ 3,165
=========== ===========
Earnings per Share
Basic $ 0.46 $ 0.23
Diluted $ 0.44 $ 0.22
Weighted Average Shares Outstanding
Basic 13,610,933 13,879,105
Diluted 14,121,227 14,391,017
</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 30, OCTOBER 2,
2000 1999
------------- ----------
(In thousands, except shares
and per share data)
<S> <C> <C>
Net Sales $ 334,112 $ 318,277
Costs and Expenses:
Cost of sales 229,130 224,258
Selling, general and administrative 73,698 75,315
Restructuring 0 9,672
Interest 8,706 6,809
----------- -----------
311,534 316,054
Earnings Before Income Taxes 22,578 2,223
Income Taxes 8,897 2,197
----------- -----------
Net Earnings $ 13,681 $ 26
=========== ===========
Earnings per Share
Basic $ 1.00 $ 0.00
Diluted $ 0.96 $ 0.00
Weighted Average Shares Outstanding
Basic 13,699,303 13,877,608
Diluted 14,276,919 14,383,085
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
----------------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
------------- ----------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net earnings $ 13,681 $ 26
Adjustment to reconcile:
Depreciation and amortization 13,288 10,932
Deferred income taxes 1,174 (3,162)
Change in assets and liabilities affecting cash flows:
Accounts receivable 3,426 10,063
Inventories (27,197) 1,724
Prepaid expenses and other current assets (546) (988)
Accounts payable 979 (16,103)
Income taxes 568 2,545
Other accrued liabilities (5,445) 8,936
-------- --------
Net cash (used in) provided by operating activities (72) 13,973
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Capital expenditures (20,898) (24,468)
Increase in other assets (582) (946)
-------- --------
Net cash used in investing activities (21,480) (25,414)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Repayment of long-term debt (389) (604)
Proceeds from long-term debt 26,094 13,499
Purchase of Class A stock for treasury (4,167) 0
Exercise of stock options by employees 149 18
Dividends paid (2,062) (2,082)
-------- --------
Net cash provided by financing activities 19,625 10,831
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (169) 701
-------- --------
NET (DECREASE) INCREASE IN CASH (2,096) 91
CASH AT BEGINNING OF PERIOD 2,704 2,236
-------- --------
CASH AT END OF PERIOD $ 608 $ 2,327
======== ========
</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 30, 2000
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 1, 2000. 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 fiscal year ended January 1, 2000.
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. On February 29, 2000, the Company executed a definitive agreement with
certain members of the Rohr family to acquire the family's approximately
49% interest in Rohr-Bush GmbH & Co., a German furniture manufacturer. The
transaction closed in October 2000.
3. During the first quarter of 1999, the Company finalized plans to
restructure certain of its operations, resulting in non-recurring
restructuring costs amounting to $9,672,000 being charged to expense in
1999. As of January 1, 2000, all components of the restructuring were
complete and the only liability remaining for the restructuring was
$1,685,000 for severance to terminated employees. Cash paid to severed
employees totaled $1,685,000 in the first half of fiscal year 2000,
resulting in no liability at the end of the second quarter of fiscal year
2000.
4. The following tables set forth total comprehensive income for the 13
week and 39 week periods indicated below.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
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(In thousands)
<S> <C> <C>
Net income $6,270 $3,165
Accumulated other comprehensive loss (122) (207)
------ ------
Total comprehensive income $6,148 $2,958
====== ======
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
---------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
------------- ----------
(In thousands)
<S> <C> <C>
Net income $13,681 $ 26
Accumulated other comprehensive income 337 1,352
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Total comprehensive income $14,018 $1,378
======= ======
</TABLE>
5. Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1,
2000 2000
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(In thousands)
<S> <C> <C>
Raw material $20,836 $16,533
Work in progress 5,885 7,077
Finished goods 55,033 32,071
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$81,754 $55,681
======= =======
</TABLE>
6. Segment Reporting
The Company operates and manages its business in two reportable industry
segments; Furniture and Surface Technologies. Furniture is the design,
manufacture and sale of both RTA (ready to assemble) and set-up furniture
for the home and office. Surface Technologies provides finishing, design,
and decorating services utilizing "surface technologies" in diverse
applications.
The Company evaluates performance of the segments based on earnings before
income taxes. For purposes of segment reporting, intercompany sales
transfers between segments are not material. The accounting policies of
the segments are the same as those described and referenced in Note 1.
7
<PAGE>
The following tables set forth reportable segment data for the periods indicated
below.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
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(In thousands)
<S> <C> <C>
Net Sales:
Furniture $ 96,684 $104,311
Surface Technologies 10,394 3,508
-------- --------
Consolidated Net Sales $107,078 $107,819
======== ========
Earnings Before Income Taxes:
Furniture $ 7,185 $ 5,332
Surface Technologies 2,988 152
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Consolidated Earnings Before Income Taxes $ 10,173 $ 5,484
======== ========
</TABLE>
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
----------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
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(In thousands)
<S> <C> <C>
Net Sales:
Furniture $314,888 $306,408
Surface Technologies 19,224 11,869
-------- --------
Consolidated Net Sales $334,112 $318,277
======== ========
Earnings Before Income Taxes:
Furniture Without Restructuring $ 17,947 $ 10,468
Furniture Restructuring (Note 3) 0 (9,672)
Surface Technologies 4,631 1,427
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Consolidated Earnings Before Income Taxes $ 22,578 $ 2,223
======== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1,
2000 2000
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(In thousands)
<S> <C> <C>
Total Assets
Furniture $335,367 $314,888
Surface Technologies 18,538 14,693
-------- --------
Consolidated Total Assets $353,905 $329,581
======== ========
</TABLE>
8
<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 Report on Form 10-Q are forward-looking statements, and are
identified by words such as "may", "will", "should", "expect", "scheduled",
"plan", "intend", "contemplate", "believe", "anticipate", or the negative of
such words or other similar words. Forward looking statements 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:
----------------------
Third quarter sales for the 13 week period ended September 30, 2000 were
$107,078,000 and sales for the 39 week period ended September 30, 2000 were
$334,112,000. This represents a decrease of $741,000, or approximately 0.7%,
compared to net sales of $107,819,000 for the 13 week period ended October 2,
1999 and a 39 week period increase of $15,835,000, or approximately 5.0%,
compared to net sales of $318,277,000 for the 39 week period ended October 2,
1999. Sales for the quarter ended September 30, 2000 were slightly below those
for the similar period of a year ago due primarily to both a general softening
of the economy, which has created a sluggish retail sales environment, and
inventory adjustments from several of our larger customers, partially offset by
strong sales gains achieved in the surface technologies segment. Sales for the
39 week period ended September 30, 2000 reflect the sales increase obtained in
the first half of fiscal year 2000, which had resulted from new product
placements and improved product sell-through at several key U.S. retail
customers.
Cost of sales decreased $2,831,000 for the 13 week period ended September
30, 2000, compared to the 13 week period ended October 2, 1999. Cost of sales as
an approximate percentage of net sales decreased by 2.2% from 69.3% in the third
quarter of 1999 to 67.1% in the third quarter of 2000. Cost of sales increased
by $4,872,000 for the 39 week period ended September 30, 2000, compared to the
39 week period ended October 2, 1999. Cost of sales as an approximate percentage
of net sales decreased by 1.9% from 70.5% in the first 39 weeks of 1999 to 68.6%
in the first 39 weeks of 2000. Cost of sales as a percentage of net sales was
favorably impacted by stronger sales volumes and margins in the surface
technologies segment.
Selling, general and administrative expenses decreased $3,220,000 for the
13 week period ended September 30, 2000, compared to the 13 week period ended
October 2, 1999. For the 39 week period ended September 30, 2000, selling,
general and administrative expenses decreased by $1,617,000, as compared to the
39 week period ended October 2, 1999. Selling, general and administrative
expenses as an approximate percentage of net sales decreased by 2.9% from 23.3%
in the third quarter of 1999 to 20.4% in the third quarter of 2000 and decreased
by 1.6%
9
<PAGE>
from 23.7% in the first 39 weeks of 1999 to 22.1% in the first 39 weeks of 2000.
Interest expense for the 13 week period ended September 30, 2000 increased
to $3,168,000 (or approximately 3.0% of net sales) from $2,547,000 (or
approximately 2.4% of net sales) for the 13 week period ended October 2, 1999.
Interest expense for the 39 week period ended September 30, 2000 increased to
$8,706,000 (or approximately 2.6% of net sales) from $6,809,000 (or
approximately 2.1% of net sales). The increase in interest expense was primarily
due to both an increase in average debt, primarily related to the Company's
capital expenditures and an increase in average inventory levels, and higher
average interest rates paid on the Company's revolving credit facility.
The consolidated effective income tax rate for the 13 and 39 week periods
ended September 30, 2000 was 38.4% and 39.4%, respectively. The tax rates for
the comparable periods in 1999 were 42.3% and 98.8%, respectively. The variance
in rates is primarily related to the impact of the lower deferred tax rates
attributable to the 51% owned Rohr-Bush subsidiary.
During the first quarter of 1999, the Company finalized plans to
restructure certain of its operations, resulting in non-recurring restructuring
costs amounting to $9,672,000 being charged to expense in 1999. As of January 1,
2000, all components of the restructuring were complete and the only liability
remaining for the restructuring was $1,685,000 for severance to terminated
employees. Cash paid to severed employees totaled $1,685,000 in the first half
of fiscal year 2000, resulting in no liability at the end of the second quarter
of fiscal year 2000.
On February 29, 2000, the Company executed a definitive agreement with
certain members of the Rohr family to acquire the family's approximately 49%
interest in Rohr-Bush GmbH & Co., a German furniture manufacturer. The
transaction closed in October 2000.
LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
Working capital at third quarter-end 2000 increased by $27,364,000, as
compared to working capital at year-end 1999. Such increased working capital was
due, in part, to an increase in inventories, put in place to ensure satisfactory
serviceability to the Company's customers and a decrease in other accrued
liabilities, partially offset by a decrease in accounts receivable and cash.
Total assets at third quarter-end 2000 increased $24,324,000 over year-end 1999
primarily as a result of a increase in inventories and property, plant and
equipment, partially offset by decreases in accounts receivable and cash. In
addition, total liabilities increased $16,342,000 at third quarter-end 2000 as
compared to year-end 1999, due mostly to an increase in long-term debt,
partially offset by decreases in current liabilities.
The Company spent $20,898,000 on capital expenditures during the first
three quarters of 2000, which were financed primarily with increased debt.
Capital expenditures for fiscal year 2000 are currently forecasted to be
approximately $30 to $35 million.
10
<PAGE>
The Company has a revolving credit facility, initially effective as of June
27, 1997 and as amended, with The Chase Manhattan Bank, Mellon Bank, N.A. and
other lending institutions. The amendments that the Company entered into in 2000
are summarized as follows. The Company entered into a fourth amendment, dated as
of February 29, 2000, that permitted, based on certain financial tests, the
applicable margin to be reduced earlier than provided for in the existing credit
facility, as previously amended. The Company entered into a fifth amendment,
dated as of May 2, 2000, that modified the amount of money the Company can
borrow from an aggregate $175,000,000 to an aggregate $210,000,000.
The credit facility provides for revolving credit loans, swing line loans
and multi-currency loans, within the parameters described below. The loan is due
June 30, 2003 with a balloon payment of the then remaining principal and any
accrued interest. 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 0.5% to 1.50%,
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 $210,000,000 maximum amount of borrowing permitted
under the credit facility.
The line of credit agreement, as amended, provides for achieving certain
consolidated cash flow coverage and leverage ratios, prescribes minimum
consolidated 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. In addition, the credit
agreement limits the amount of cash dividends that the Company can declare, and
also imposes certain conditions with respect thereto.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS:
-----------------------------------------------
In the first quarter of 2001, the Company plans to adopt Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This standard, as amended, will require the
Company to recognize all derivative financial instruments on the balance sheet
at fair value with changes in fair value recorded to the statement of operations
or comprehensive income, depending on the nature of the investment. The Company
has not yet determined the effect that this standard will have, if any, on the
Company's consolidated financial position, results of operations and cash flows.
In September 2000, the Financial Accounting Standards Board issued SFAS No.
140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities,"
11
<PAGE>
which replaces SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." This standard is effective
for transfers occurring after March 31, 2001, with certain disclosure
requirements effective for the year ending December 30, 2000. The Company does
not believe the adoption of this standard will have a significant impact on the
Company's consolidated financial position, results of operations or cash flows.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. SAB 101, as
amended, is required to be adopted by the Company no later than the fourth
quarter of fiscal year 2000. Although the Company has not fully assessed the
implications of SAB 101, management does not believe the adoption of SAB 101
will have a significant impact on the Company's consolidated financial position,
results of operations or cash flows.
12
<PAGE>
Part II. OTHER INFORMATION
------------------------------
ITEM 6. EXHIBITS AND REPORTS ON 8-K
------- ---------------------------
(a) Exhibits:
(27) Financial Date Schedule
(b) Reports on Form 8-K:
None.
13
<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 8, 2000 By: /s/ Robert L. Ayres
------------------------ --------------------------------
(Signature)
Robert L. Ayres
Executive Vice President,
Chief Operating Officer
and Chief Financial Officer
14
