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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 July 1, 2000
------------
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
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Number of shares of Common Stock outstanding as of July 1, 2000: 10,210,297
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>
JULY 1, JANUARY 1,
2000 2000
--------------- --------------
(Unaudited)
(In thousands)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash $2,826 $2,704
Accounts receivable 43,702 34,585
Inventories 73,806 55,681
Prepaid expenses and other current assets 12,967 11,356
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Total Current Assets 133,301 104,326
Property, Plant and Equipment, Net 203,040 198,300
Other Assets 26,005 26,955
------- -------
TOTAL ASSETS $362,346 $329,581
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $21,741 $22,401
Income taxes 0 585
Other accrued liabilities 36,461 40,389
Current portion of long-term debt 427 495
------ ------
Total Current Liabilities 58,629 63,870
Deferred Income Taxes 8,383 8,427
Other Long-term Liabilities 6,980 7,940
Long-term Debt 161,368 124,765
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Total Liabilities 235,360 205,002
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Stockholders' Equity:
Common Stock:
Class A, $.10 par, 20,000,000 shares authorized,
10,566,044 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 20,909 20,826
Retained earnings 111,645 105,615
Accumulated other comprehensive income 2,192 1,733
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136,143 129,569
Less treasury stock, 355,747 and 81,913 Class A shares (5,377) (1,146)
Less notes receivable related to common stock (3,780) (3,844)
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Total Stockholders' Equity 126,986 124,579
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $362,346 $329,581
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
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BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
THIRTEEN WEEKS ENDED
------------------------------
JULY 1, JULY 3,
2000 1999
------- -------
(In thousands, except shares
and per share data)
Net Sales $104,868 $98,873
Costs and Expenses:
Cost of sales 72,508 68,206
Selling, general and administrative 24,170 24,289
Interest 2,812 2,228
------ ------
99,490 94,723
Earnings Before Income Taxes 5,378 4,150
Income Taxes 1,969 1,849
----- -----
Net Earnings $3,409 $2,301
====== ======
Earnings per Share
Basic $0.25 $0.17
Diluted $0.24 $0.16
Weighted Average Shares Outstanding
Basic 13,679,958 13,876,860
Diluted 14,317,991 14,468,594
See notes to condensed consolidated financial statements.
3
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BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
TWENTY-SIX WEEKS ENDED
------------------------------
JULY 1, JULY 3,
2000 1999
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(In thousands, except shares
and per share data)
Net Sales $227,034 $210,458
Costs and Expenses:
Cost of sales 157,241 149,538
Selling, general and administrative 51,850 50,247
Restructuring 0 9,672
Interest 5,538 4,262
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214,629 213,719
Earnings (Loss) Before Income Taxes 12,405 (3,261)
Income Tax Expense (Benefit) 4,994 (122)
------ --------
Net Earnings (Loss) $7,411 ($3,139)
====== ========
Earnings (Loss) per Share
Basic $0.54 ($0.23)
Diluted $0.52 ($0.23)
Weighted Average Shares Outstanding
Basic 13,743,488 13,876,860
Diluted 14,348,461 13,876,860
See notes to condensed consolidated financial statements.
4
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BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
-------------------------------
JULY 1, JULY 3,
2000 1999
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(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net earnings (loss) $7,411 ($3,139)
Adjustment to reconcile:
Depreciation and amortization 8,342 7,716
Deferred income taxes 64 (3,670)
Change in assets and liabilities affecting cash flows:
Accounts receivable (9,666) 9,138
Inventories (19,342) (4,153)
Prepaid expenses and other current assets (1,915) (803)
Accounts payable 659 (5,227)
Income taxes (611) 1,615
Other accrued liabilities (2,721) 8,684
-------- --------
Net cash (used in) provided by operating activities (17,779) 10,161
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CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Capital expenditures (17,011) (15,661)
Increase in other assets (432) (754)
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Net cash used in investing activities (17,443) (16,415)
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CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Repayment of long-term debt (283) (427)
Proceeds from long-term debt 41,317 8,161
Purchase of Class A stock for treasury (4,167) 0
Exercise of stock options by employees 85 0
Dividends paid (1,382) (1,388)
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Net cash provided by financing activities 35,570 6,346
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (226) 603
----- ---
NET INCREASE IN CASH 122 695
CASH AT BEGINNING OF PERIOD 2,704 2,236
------ ------
CASH AT END OF PERIOD $2,826 $2,931
====== ======
</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 July 1, 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 is expected to close on or before October 31, 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 July 1, 2000.
4. The following tables set forth total comprehensive income for the 13 week
and 26 week periods indicated below.
THIRTEEN WEEKS ENDED
---------------------------
JULY 1, JULY 3,
2000 1999
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(In thousands)
Net income $3,409 $2,301
Accumulated other comprehensive income 419 768
------ ------
Total comprehensive income $3,828 $3,069
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6
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TWENTY-SIX WEEKS ENDED
----------------------------
JULY 1, JULY 3,
2000 1999
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(In thousands)
Net income (loss) $7,411 ($3,139)
Accumulated other comprehensive income 459 1,559
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Total comprehensive income (loss) $7,870 ($1,580)
====== ========
5. Inventories consist of the following:
JULY 1, JANUARY 1,
2000 2000
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(In thousands)
Raw material $20,564 $16,533
Work in progress 6,821 7,077
Finished goods 46,421 32,071
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$73,806 $55,681
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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. Until the second quarter of 2000, Surface Technologies did
not meet the requirements as a separate reportable segment in accordance
with Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information." Prior period
segment information has been restated to reflect the newly reportable
segment.
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.
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The following tables set forth reportable segment data for the periods
indicated below.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------------
JULY 1, JULY 3,
2000 1999
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(In thousands)
<S> <C> <C>
Net Sales:
Furniture $99,302 $94,079
Surface Technologies 5,566 4,794
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Consolidated Net Sales $104,868 $98,873
======== =======
Earnings Before Income Taxes:
Furniture $4,000 $3,236
Surface Technologies 1,378 914
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Consolidated Earnings Before Income Taxes $5,378 $4,150
====== ======
<CAPTION>
TWENTY-SIX WEEKS ENDED
---------------------------
JULY 1, JULY 3,
2000 1999
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(In thousands)
<S> <C> <C>
Net Sales:
Furniture $218,204 $202,097
Surface Technologies 8,830 8,361
-------- --------
Consolidated Net Sales $227,034 $210,458
======== ========
Earnings (Loss) Before Income Taxes:
Furniture Without Restructuring $10,762 $5,136
Furniture Restructuring (Note 3) 0 (9,672)
Surface Technologies 1,643 1,275
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Consolidated Earnings (Loss) Before Income Taxes $12,405 ($3,261)
======= ========
<CAPTION>
JULY 1, JANUARY 1,
2000 2000
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(In thousands)
<S> <C> <C>
Total Assets
Furniture $346,238 $314,888
Surface Technologies 16,108 14,693
-------- --------
Consolidated Total Assets $362,346 $329,581
======== ========
</TABLE>
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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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:
----------------------
Second quarter sales for the 13 week period ended July 1, 2000 were
$104,868,000 and first half sales for the 26 week period ended July 1, 2000 were
$227,034,000. This represents an increase of $5,995,000, or approximately 6.1%,
compared to net sales of $98,873,000 for the 13 week period ended July 3, 1999
and a first half increase of $16,576,000, or approximately 7.9%, compared to
net sales of $210,458,000 for the 26 week period ended July 3, 1999. The sales
increase for the 13 and 26 week periods ended July 1, 2000 resulted from new
product placements and improved product sell-through at several key U.S. retail
customers.
Cost of sales increased $4,302,000 for the 13 week period ended July 1,
2000, compared to the 13 week period ended July 3, 1999. Cost of sales as an
approximate percentage of net sales increased by 0.1% from 69.0% in the second
quarter of 1999 to 69.1% in the second quarter of 2000. Cost of sales increased
by $7,703,000 for the 26 week period ended July 1, 2000, compared to the 26 week
period ended July 3, 1999. Cost of sales as an approximate percentage of net
sales decreased by 1.8% from 71.1% in the first half of 1999 to 69.3% in the
first half of 2000. The change in cost of sales as a percentage of net sales
for both the 13 and 26 week period ended July 1, 2000 was primarily due to
operating performance offset by certain increases in raw material costs.
Selling, general and administrative expenses decreased $119,000 for the 13
week period ended July 1, 2000, compared to the 13 week period ended July 3,
1999. For the 26 week period ended July 1, 2000, selling, general and
administrative expenses increased by $1,603,000 as compared to the 26 week
period ended July 3, 1999. The first half of 2000 increases in selling, general
and administrative expenses were primarily a result of increased costs
associated with the Company's higher sales volumes. Selling, general and
administrative expenses as an approximate percentage of net sales decreased by
1.6% from 24.6% in the second quarter of 1999 to 23.0% in the second quarter of
2000 and decreased by 1.1% from 23.9% in the first half of 1999 to 22.8% in the
first half of 2000.
Interest expense for the 13 week period ended July 1, 2000 increased to
$2,812,000 (or approximately 2.7% of net sales) from $2,228,000 (or
approximately 2.3% of net sales) for the 13 week period ended July 3, 1999.
Interest expense for the 26 week period ended July 1, 2000
9
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increased to $5,538,000 (or approximately 2.4% of net sales) from $4,262,000 (or
approximately 2.0% of net sales). The increase in interest expense was primarily
due to an increase in average debt and increases in LIBOR rates.
The consolidated effective income tax rate for the 13 and 26 week periods
ended July 1, 2000 was 36.6% and 40.3%, respectively. The tax rates for the same
periods in 1999 were 44.6% and 3.7%, 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 July 1, 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 is expected to close on or before October 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
Working capital at first half-end 2000 increased by $34,216,000, as
compared to working capital at year-end 1999. Such increased working capital was
due, in part, to a increase in inventories, put in place to ensure satisfactory
serviceability to the Company's customers, an increase in accounts receivable,
due to the timing of payments from a major customer, and a decrease in other
accrued liabilities. Total assets at first half-end 2000 increased $32,765,000
over year-end 1999 primarily as a result of a increase in inventories and
accounts receivable, as discussed above, and an increase in property, plant and
equipment associated with capital expenditures in excess of depreciation. In
addition, total liabilities increased $30,358,000 at first half-end 2000, due
mostly to an increase in long-term debt, partially offset by decreases in
current liabilities and other long-term liabilities.
The Company spent $17,011,000 on capital expenditures during the first half
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.
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
10
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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 2.00%,
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 $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.
11
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Part II. OTHER INFORMATION
--------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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A. At the Annual Meeting of Stockholders held on May 11, 2000, the
following matters were submitted to a vote of the stockholders, and
the results of their vote is noted. The Class A Directors were
elected solely by the Class A stockholders and the Class B Directors
were elected solely by the Class B stockholders. With respect to
other matters, the shares of Class A Common Stock and the shares of
Class B Common Stock vote as a single class, with each share of
Class A Common Stock having one-tenth vote per share, and each share
of Class B Common Stock having one vote per share.
1. Class A Directors Elected.
Paul A. Benke: 8,182,514 shares for; 987,356 shares withheld
Jerald D. Bidlack: 8,186,780 shares for; 983,090 shares withheld
David G. Dawson: 8,184,286 shares for; 985,584 shares withheld
Robert E. Hallagan: 8,185,955 shares for; 983,915 shares
withheld
Erland E. Kailbourne: 8,187,585 shares for; 982,285 shares
withheld
2. Class B Directors Elected
Paul S. Bush
Robert L. Ayres
Lewis H. Aronson
Douglas S. Bush
Gregory P. Bush
Donald F. Hauck
David G. Messinger
For all of the above: 3,389,205 shares for; 0 shares withheld
3. Approval of the proposal to ratify an amendment to the Company's
1995 Stock Plan to increase the number of shares of Class A
Common Stock subject to such plan by an aggregate 250,000 shares
of Class A Common Stock.
4,130,085 votes for; 171,884 votes against, 4,223 votes abstain
12
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4. Approval of a motion from the floor to increase the number of
shares of Class A Common Stock subject to the Company's 1995
Stock Plan by an additional 250,000 shares of Class A Common
Stock, bringing the cumulative increase of Class A Common Stock
under the Plan to a total of 500,000 shares of Class A Common
Stock.
4,306,192 votes for; 0 votes against, 0 votes abstain
5. Ratification of the appointment by the Board of Directors of
Deloitte & Touche LLP, as the Company's independent auditors
for the fiscal year ended December 30, 2000.
4,303,904 votes for; 1,576 votes against; 713 votes abstain
ITEM 6. EXHIBITS AND REPORTS ON 8-K
------- ---------------------------
(a) Exhibits: None
(b) Reports on Form 8-K:
During the second quarter of 2000, an 8-K was filed on June 5,
2000 regarding the fifth amendment, dated May 2, 2000, to the
Company's existing credit facility with The Chase Manhattan
Bank, N.A. and other lending institutions.
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: August 2, 2000 By: /s/ Robert L. Ayres
---------------------- ----------------------------
(Signature)
Robert L. Ayres
Executive Vice President,
Chief Operating Officer
and Chief Financial Officer
14
