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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 June 29, 2002
-------------
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.
------------------------------------------------------
(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
------------------------------------------------------
(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 29, 2002: 10,446,579
shares of Class A Common Stock and 3,395,365 shares of Class B Common Stock.
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Unaudited)
JUNE 29, DECEMBER 29,
2002 2001
-------- ------------
(In thousands)
ASSETS
- ------
Current Assets:
Cash $ 2,115 $ 1,589
Accounts receivable 14,901 16,872
Inventories 58,103 55,297
Prepaid expenses and other current assets 8,542 11,491
-------- --------
Total Current Assets 83,661 85,249
Property, Plant and Equipment, Net 200,892 207,334
Other Assets 29,267 28,594
-------- --------
TOTAL ASSETS $313,820 $321,177
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 22,668 $ 17,184
Income taxes 466 43
Other accrued liabilities 18,834 24,052
Current portion of long-term debt 455 447
-------- --------
Total Current Liabilities 42,423 41,726
Deferred Income Taxes 11,821 11,123
Other Long-term Liabilities 7,460 7,237
Long-term Debt 111,121 121,118
-------- --------
Total Liabilities 172,825 181,204
-------- --------
Stockholders' Equity:
Common Stock:
Class A, $.10 par, 20,000,000 shares authorized,
10,837,983 and 10,768,243 shares issued 1,084 1,077
Class B, $.10 par, 6,000,000 shares authorized,
3,395,365 shares issued 340 340
Paid-in capital 23,637 22,916
Retained earnings 123,417 123,164
Accumulated other comprehensive income 1,703 1,666
-------- --------
150,181 149,163
Less treasury stock, 391,404 and 388,400 Class A shares (5,814) (5,775)
Less notes receivable related to common stock (3,372) (3,415)
-------- --------
Total Stockholders' Equity 140,995 139,973
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $313,820 $321,177
======== ========
See notes to condensed consolidated financial statements.
2
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
THIRTEEN WEEKS ENDED
----------------------------------
JUNE 29, JUNE 30,
2002 2001
-------- --------
(In thousands, except shares
and per share data)
Net Sales $ 78,929 $ 75,614
Costs and Expenses:
Cost of sales 56,449 53,125
Selling, general and administrative 19,688 17,743
Interest expense 1,861 2,310
----------- -----------
77,998 73,178
Earnings Before Income Taxes 931 2,436
Income Taxes 390 1,015
----------- -----------
Net Earnings $ 541 $ 1,421
=========== ===========
Earnings per Share
Basic $ 0.04 $ 0.10
Diluted $ 0.04 $ 0.10
Weighted Average Shares Outstanding
Basic 13,821,388 13,690,455
Diluted 14,120,256 14,210,248
See notes to condensed consolidated financial statements.
3
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
TWENTY-SIX WEEKS ENDED
----------------------------------
JUNE 29, JUNE 30,
2002 2001
-------- --------
(In thousands, except shares
and per share data)
Net Sales $ 167,261 $ 180,242
Costs and Expenses:
Cost of sales 120,124 125,982
Selling, general and administrative 40,782 40,228
Interest expense 3,586 4,935
----------- ------------
164,492 171,145
Earnings Before Income Taxes 2,769 9,097
Income Tax Expense 1,135 3,763
----------- ------------
Net Earnings $ 1,634 $ 5,334
=========== ============
Earnings per Share
Basic $ 0.12 $ 0.39
Diluted $ 0.12 $ 0.38
Weighted Average Shares Outstanding
Basic 13,799,416 13,679,517
Diluted 14,100,538 14,183,954
See notes to condensed consolidated financial statements.
4
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
TWENTY-SIX WEEKS ENDED
----------------------------------
JUNE 29, JUNE 30,
2002 2001
-------- --------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net earnings $ 1,634 $ 5,334
Adjustment to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 9,944 9,607
Deferred income taxes 721 693
Change in assets and liabilities affecting cash flows:
Accounts receivable 1,991 15,332
Inventories (2,723) 115
Prepaid expenses and other current assets 2,977 (220)
Accounts payable 5,440 (9,137)
Income taxes 529 (2,639)
Other accrued liabilities (5,010) (17,138)
-------- --------
Net cash provided by operating activities 15,503 1,947
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Capital expenditures (3,112) (8,073)
Increase in other assets (871) (401)
-------- --------
Net cash used for investing activities (3,983) (8,474)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Repayment of long-term debt (10,272) (215)
Proceeds from long-term debt 0 8,172
Exercise of stock options by employees 621 291
Dividends paid (1,381) (1,368)
Payments received for notes receivable 4 0
-------- --------
Net cash (used for) provided by financing activities (11,028) 6,880
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 34 369
-------- --------
NET INCREASE IN CASH 526 722
CASH AT BEGINNING OF PERIOD 1,589 1,225
-------- --------
CASH AT END OF PERIOD $ 2,115 $ 1,947
======== ========
See notes to condensed consolidated financial statements.
5
BUSH INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Twenty-six weeks ended June 29, 2002
(Unaudited)
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 fiscal year ended December 29, 2001. 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 December 29, 2001.
The foregoing financial information reflects all adjustments which are, in
the opinion of management, of a normal and 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. Earnings per share
The number of stock options excluded from the computation of diluted
earning per share due to their antidilutive effect were approximately
205,000 for both the thirteen and twenty-six weeks ended June 29, 2002 and
approximately 91,000 and 91,880 for the thirteen and twenty-six weeks ended
June 30, 2001, respectively.
3. The following tables set forth total comprehensive income for the 13 week
and 26 week periods indicated below.
THIRTEEN WEEKS ENDED
-------------------------
JUNE 29, JUNE 30,
2002 2001
-------- --------
(In thousands)
Net earnings $541 $1,421
Accumulated other comprehensive (loss) income (64) 49
---- ------
Total comprehensive income $477 $1,470
==== ======
TWENTY-SIX WEEKS ENDED
-------------------------
JUNE 29, JUNE 30,
2002 2001
-------- --------
(In thousands)
Net earnings $1,634 $5,334
Accumulated other comprehensive income (loss) 37 (159)
------ ------
Total comprehensive income $1,671 $5,175
====== ======
6
4. Inventories consist of the following:
JUNE 29, DECEMBER 29,
2002 2001
-------- ------------
(In thousands)
Raw material $14,585 $16,137
Work in progress 6,178 5,570
Finished goods 37,340 33,590
------- -------
$58,103 $55,297
======= =======
5. Segment Reporting
The Company operates its business in four reportable segments: (1) Bush
Business Furniture, which concentrates on the business office and the home
office markets with sales to the office superstore and dealer channels; (2)
Bush Furniture, which focuses on home entertainment, home office and other
home furnishings products; (3) Bush Furniture Europe, which sells
commercial, home office and other furnishings in the European market; and
(4) Bush Technologies, which is focused on the cell phone accessories
after-market, as well as the utilization of surface technologies in
automotive interiors, cosmetics, sporting goods and consumer electronics.
The Company evaluates performance of the segments based on earnings before
income taxes. The accounting policies of the segments are the same as those
described and referenced in Note 1.
The following tables set forth reportable segment data for the periods
indicated below.
THIRTEEN WEEKS ENDED
------------------------
JUNE 29, JUNE 30,
2002 2001
-------- --------
(In thousands)
Net Sales from External Customers:
Bush Business Furniture $38,206 $28,231
Bush Furniture 22,121 25,099
Bush Furniture Europe 14,567 15,646
Bush Technologies 4,035 6,638
------- -------
Consolidated Net Sales $78,929 $75,614
======= =======
Inter-segment Sales:
Bush Business Furniture $ 0 $ 0
Bush Furniture 0 0
Bush Furniture Europe 123 632
Bush Technologies 0 44
------- -------
Total $ 123 $ 676
======= =======
7
THIRTEEN WEEKS ENDED
-----------------------
JUNE 29, JUNE 30,
2002 2001
-------- --------
(In thousands)
Earnings (Loss) Before Income Taxes:
Bush Business Furniture $ 2,739 $ 956
Bush Furniture 502 (790)
Bush Furniture Europe (1,096) 84
Bush Technologies (1,214) 2,186
-------- --------
Consolidated Earnings Before Income Taxes $ 931 $ 2,436
======== ========
TWENTY-SIX WEEKS ENDED
-----------------------
JUNE 29, JUNE 30,
2002 2001
-------- --------
(In thousands)
Net Sales from External Customers:
Bush Business Furniture $ 78,550 $ 74,466
Bush Furniture 51,448 56,156
Bush Furniture Europe 28,543 31,857
Bush Technologies 8,720 17,763
-------- --------
Consolidated Net Sales $167,261 $180,242
======== ========
Inter-segment Sales:
Bush Business Furniture $ 0 $ 0
Bush Furniture 0 0
Bush Furniture Europe 750 2,379
Bush Technologies 0 44
-------- --------
Total $ 750 $ 2,423
======== ========
Earnings (Loss) Before Income Taxes:
Bush Business Furniture $ 4,439 $ 2,659
Bush Furniture 1,449 (581)
Bush Furniture Europe (1,595) 279
Bush Technologies (1,524) 6,740
-------- ---------
Consolidated Earnings Before Income Taxes $ 2,769 $ 9,097
======== =========
8
JUNE 29, DECEMBER 29,
2002 2001
-------- ------------
(In thousands)
Total Assets:
Bush Business Furniture and Bush Furniture (*) $231,543 $243,383
Bush Furniture Europe 57,502 56,054
Bush Technologies 24,775 21,740
-------- --------
Consolidated Total Assets $313,820 $321,177
======== ========
(*) The Company's North American furniture segments, Bush Business
Furniture and Bush Furniture, share certain productive assets.
These productive assets manufacture components for both Bush
Business Furniture and Bush Furniture products. As a result,
identifiable assets are not allocated between Bush Business
Furniture and Bush Furniture.
6. Goodwill
Effective December 30, 2001 (the first day of fiscal 2002), the Company
adopted Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" ("SFAS No. 142"). Under SFAS No. 142, goodwill is
no longer amortized, but reviewed for impairment annually, or more
frequently if certain indicators arise. A requirement of SFAS No. 142 is to
complete the initial step of a transitional goodwill impairment test within
six months of adoption of SFAS No. 142 and to complete the final step of
the transitional impairment test by the end of the fiscal year. Any
goodwill impairment loss resulting from the transitional impairment test
will be recorded as a cumulative effect of a change in accounting principle
no later than the end of fiscal year 2002. Subsequent impairment losses
will be reflected in operating income or loss in the consolidated
statements of operations.
The Company has completed the initial step of the transitional evaluation
to determine whether there has been an indication of goodwill impairment.
As a result of this transitional evaluation, the Company may record a
non-cash charge for goodwill impairment of up to approximately $2.4 million
in the second half of fiscal year 2002 as a cumulative effect of a change
in accounting principle. The potential impairment is related to the Bush
Furniture Europe segment.
Goodwill and other intangible assets subject to SFAS No. 142 were
approximately $15 million as of June 29, 2002. For the thirteen and
twenty-six week periods ended June 29, 2002 there was no goodwill
amortization expense and there were no changes in the carrying amount of
goodwill.
Actual results of operations for the thirteen and twenty-six weeks ended
June 29, 2002 and June 30, 2001 and as adjusted results of operations for
the thirteen and twenty-six weeks ended June 30, 2001 had the
non-amortization provisions of SFAS No. 142 been applied in those periods
are as follows:
9
THIRTEEN WEEKS ENDED
------------------------
JUNE 29, JUNE 30,
2002 2001
-------- --------
(in thousands, expect per share amounts)
Net earnings:
As reported $ 541 $1,421
Goodwill amortization, net of income taxes 0 277
----- ------
As adjusted $ 541 $1,698
===== ======
Basic earnings per share:
As reported $0.04 $ 0.10
As adjusted $0.04 $ 0.12
Diluted earnings per share:
As reported $0.04 $ 0.10
As adjusted $0.04 $ 0.12
TWENTY-SIX WEEKS ENDED
------------------------
JUNE 29, JUNE 30,
2002 2001
-------- --------
(in thousands, expect per share amounts)
Net earnings:
As reported $1,634 $5,334
Goodwill amortization, net of income taxes 0 554
------ ------
As adjusted $1,634 $5,888
====== ======
Basic earnings per share:
As reported $ 0.12 $ 0.39
As adjusted $ 0.12 $ 0.43
Diluted earnings per share:
As reported $ 0.12 $ 0.38
As adjusted $ 0.12 $ 0.42
10
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 Quarterly Report on Form 10-Q constitute "forward-looking
statements" within the meaning of the Federal Private Securities Litigation
Reform Act of 1995. Forward-looking statements involve known and unknown risks
and uncertainties, which may cause the Company's actual results in future
periods to differ materially from forecasted results. Forward-looking statements
include statements regarding the intent, belief, projected or current
expectations of the Company or its Officers (including statements preceded by,
followed by or including forward-looking terminology such as "may," "will,"
"should," "believe," "expect," "anticipate," "estimate," "continue" or similar
expressions or comparable terminology), with respect to various matters. The
Company cannot guarantee future results, levels of activity, performance or
achievements. Factors that could cause or contribute to such differences
include, but are 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 June 29, 2002 were
$78,929,000 and first half sales for the 26 week period ended June 29, 2002 were
$167,261,000. This represents a increase of $3,315,000, or approximately 4.4%,
compared to net sales of $75,614,000 for the 13 week period ended June 30, 2001,
and a first half decrease of $12,981,000, or approximately 7.2%, compared to net
sales of $180,242,000 for the 26 week period ended June 30, 2001. The sales
increase for the 13 period ended June 29, 2002 primarily reflects an increase in
Bush Business Furniture sales, partially offset by decreases in the Company's
other segments. The sales decrease for the 26 week period ended June 29, 2002
primarily reflects an increase in Bush Business Furniture sales being more than
offset by decreases in the Company's other segments. The sales decreases
primarily reflects the continuing difficult economic conditions in the markets
served by the Company's products in both North America and Europe.
Cost of sales increased $3,324,000 for the 13 week period ended June 29,
2002, compared to the 13 week period ended June 30, 2001. Cost of sales as an
approximate percentage of net sales increased by 1.2 percentage points from
70.3% in the second quarter of 2001 to 71.5% in the second quarter of 2002. Cost
of sales decreased by $5,858,000 for the 26 week period ended June 29, 2002,
compared to the 26 week period ended June 30, 2001. Cost of sales as an
approximate percentage of net sales increased by 1.9 percentage points from
69.9% in the first half of 2001 to 71.8% in the first half of 2002. The increase
in cost of sales for the 13 week period ended June 29, 2002 and the decrease in
cost of sales for the 26 week period ended June 29, 2002 primarily reflects the
change in sales volumes as compared to the prior year. The increase in cost of
sales as a percentage of net sales for both the 13 and 26 week periods ended
June 29, 2002 primarily reflects a change in the mix of sales as compared to the
prior year and
11
the lower absorption of manufacturing overhead as a result of decreased
production volumes.
Selling, general and administrative expenses increased $1,945,000 for the
13 week period ended June 29, 2002, compared to the 13 week period ended June
30, 2001. For the 26 week period ended June 29, 2002, selling, general and
administrative expenses increased by $554,000, as compared to the 26 week period
ended June 30, 2001. The increase in selling, general and administrative
expenses was primarily the result of an increase in various marketing expenses
and promotional incentives. Selling, general and administrative expenses as an
approximate percentage of net sales increased by 1.4 percentage points from
23.5% in the second quarter of 2001 to 24.9% in the second quarter of 2002 and
increased by 2.1 percentage points from 22.3% in the first half of 2001 to 24.4%
in the first half of 2002.
Interest expense for the 13 week period ended June 29, 2002 decreased to
$1,861,000 (or approximately 2.4% of net sales) from $2,310,000 (or
approximately 3.1% of net sales) for the 13 week period ended June 30, 2001.
Interest expense for the 26 week period ended June 29, 2002 decreased to
$3,586,000 (or approximately 2.1% of net sales) from $4,935,000 (or
approximately 2.7% of net sales). The decrease in interest expense was primarily
due to a reduction in the Company's long-term debt.
The consolidated effective income tax rates for the 13 and 26 week periods
ended June 29, 2002 were 41.9% and 41.0%, respectively. The tax rates for the
same periods in 2001 were 41.7% and 41.4%, respectively.
LIQUIDITY AND CAPITAL RESOURCES:
Working capital at June 29, 2002 decreased by $2,285,000, as compared to
working capital at year-end 2001. Such decreased working capital was due, in
part, to a decrease in prepaid expenses and other current assets, accounts
receivable and an increase in accounts payable, partially offset by a increase
in inventories and a decrease in other accrued liabilities. The decrease in
prepaid expenses and other current assets primarily reflects an overpayment of
income taxes in fiscal year 2001 that was refunded in the first quarter of
fiscal year 2002. The decrease in accounts receivable and the increase in
accounts payable reflect actions taken to reduce working capital requirements.
Total assets at June 29, 2002 decreased by $7,357,000 over year-end 2001
primarily due to decreases in prepaid expenses and other current assets,
property, plant and equipment and accounts receivable partially offset by an
increase in inventories, other assets and cash. The decrease in property, plant
and equipment primarily reflects capital expenditures that are less than the
level of depreciation. In addition, total liabilities decreased by $8,379,000 at
June 29, 2002, as compared to year-end 2001, due mostly to a decrease in
long-term debt and other accrued liabilities, partially offset by an increase in
accounts payable, deferred income taxes and income taxes.
The Company spent $3,112,000 on capital expenditures during the first half
of 2002, which were financed primarily with cash flows from operating
activities. Capital expenditures for
12
fiscal year 2002 are currently forecasted to be approximately $7 million.
The Company has a revolving credit facility, initially dated as of June 26,
1997 and as amended, with JPMorgan Chase Bank and other lending institutions. In
fiscal year 2001 the Company entered into a sixth amendment, dated as of
December 28, 2001. This amendment modified certain covenants of the Company
under the credit facility, modified the pricing grid to reflect the newly
permitted ratios, granted a security interest in all domestic tangible personal
property and intangible assets of the Company, extended the maturity date of the
loan from June 30, 2003 to June 30, 2004 and modified the amount of money the
Company can borrow under the credit facility from an aggregate $210,000,000 to
an aggregate $173,000,000.
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, 2004 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, as there are no required principal payments due until June 30, 2004.
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 1.5% to 3.5%, 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 $173,000,000 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 July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
(SFAS No. 141), and Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" (SFAS No. 142). The FASB also issued
Statement of Financial Accounting Standards No. 143, "Accounting for Obligations
Associated with the Retirement of Long-Lived Assets" (SFAS No. 143), and
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144), in August and
October 2001, respectively.
13
SFAS No. 141 requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminates the
pooling-of-interest method. The adoption of SFAS No. 141 had no material impact
on the Company's consolidated financial statements.
Effective December 30, 2001 (the first day of fiscal 2002), the Company
adopted SFAS No. 142. Under SFAS No. 142, goodwill is no longer amortized, but
reviewed for impairment annually, or more frequently if certain indicators
arise. A requirement of SFAS No. 142 is to complete the initial step of a
transitional goodwill impairment test within six months of adoption of SFAS No.
142 and to complete the final step of the transitional impairment test by the
end of the fiscal year. Any goodwill impairment loss resulting from the
transitional impairment test will be recorded as a cumulative effect of a change
in accounting principle no later than the end of fiscal year 2002. Subsequent
impairment losses will be reflected in operating income or loss in the
consolidated statements of operations.
The Company has completed the first step of the transitional evaluation to
determine whether there has been an indication of goodwill impairment. As a
result of this transitional evaluation, the Company may record a non-cash charge
for goodwill impairment of up to approximately $2.4 million in the second half
of fiscal year 2002 as a cumulative effect of a change in accounting principle.
The potential impairment is related to the Bush Furniture Europe segment.
Additionally, as a result of the adoption of SFAS 142, a substantial amount
of the Company's intangible assets will no longer be amortized. Goodwill and
other intangible assets subject to SFAS No. 142 were approximately $15 million
as of December 29, 2001 and the associated pre-tax amortization was
approximately $1.4 million in fiscal year 2001.
SFAS No. 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective in fiscal years beginning after June 15, 2002, with early adoption
permitted. The Company expects that the provisions of SFAS No. 143 will not have
a material impact on its consolidated results of operations and financial
position upon adoption. The Company plans to adopt SFAS No. 143 effective
December 29, 2002 (the first day of fiscal 2003).
SFAS No. 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS No. 144
superseded Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS No. 121), and APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions". The provisions of
SFAS No. 144 are effective in fiscal years beginning after December 15, 2001,
with early adoption permitted, and in general are to be applied prospectively.
Effective December 30, 2001 (the first day of fiscal 2002), the Company adopted
SFAS No. 144. The adoption of SFAS No. 144 had no material impact on Company's
consolidated financial statements.
14
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Market risk represents the risk of loss that may impact the consolidated
financial position, results of operations or cash flows of the Company. The
Company is exposed to market risk in the areas of interest rates and foreign
currency exchange rates.
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's revolving credit facility due to its variable LIBOR
pricing. Based on the outstanding balance of long-term debt at the end of the
second quarter of fiscal year 2002, a one percentage point change in interest
rates would result in annual interest expense fluctuating approximately $1.1
million.
The Company's exposure to foreign currency exchange risk relates primarily
to the cost of imported supplies and the cost/profitability of exported items,
the income statement and cash flow impact of converting foreign currency
denominated profit/loss into U.S. dollars and the balance sheet impact of
converting foreign currency denominated assets and liabilities into U.S.
dollars.
15
Part II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
None
16
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 30, 2002 By: /s/ Neil Frederick
------------- ---------------------------------
(Signature)
Neil Frederick
Chief Financial Officer and
Treasurer
17