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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-Q



|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------



| |  | For the quarterly period ended June 28, 2003
| |  | --------------------------------------------



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 incorporation of organization) |  | (I.R.S. Employer Identification No.)



One Mason Drive

P.O. Box 460

Jamestown, New York 14702-0460

(Address of principal executive offices)

(Zip Code)



(716) 665-2000

(Registrants telephone number, including area code)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No ̈



Number of shares of Common Stock outstanding as of June 28, 2003: 10,428,189 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

(Unaudited)



|                                                                          |  | JUNE 28, 2003  |         |   | DECEMBER 28, 2002 |  
|------------------------------------------------------------------------- |  | -------------- | ------- | - | ----------------- | -
|                                                                          |  | (In thousands) |        
|ASSETS                                                                    |  |                |         |   |                   |  
|Current Assets:                                                           |  |                |         |   |                   |  
|Cash                                                                      |  | $              | 4,494   |   |                   | $
|Accounts receivable                                                       |  |                | 10,074  |   |                   |  
|Inventories                                                               |  |                | 53,389  |   |                   |  
|Prepaid expenses and other current assets                                 |  |                | 9,901   |   |                   |  
|                                                                          |  |                |         |   |                   |  
|Total Current Assets                                                      |  |                | 77,858  |   |                   |  
|Property, Plant and Equipment, Net                                        |  |                | 190,174 |   |                   |  
|Other Assets                                                              |  |                | 28,274  |   |                   |  
|                                                                          |  |                |         |   |                   |  
|TOTAL ASSETS                                                              |  | $              | 296,306 |   |                   | $
|                                                                          |  |                |         |   |                   |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                      |  |                |         |   |                   |  
|Current Liabilities:                                                      |  |                |         |   |                   |  
|Accounts payable                                                          |  | $              | 22,390  |   |                   | $
|Other accrued liabilities                                                 |  |                | 20,779  |   |                   |  
|Current portion of long-term debt                                         |  |                | 430     |   |                   |  
|                                                                          |  |                |         |   |                   |  
|Total Current Liabilities                                                 |  |                | 43,599  |   |                   |  
|Deferred Income Taxes                                                     |  |                | 8,376   |   |                   |  
|Other Long-term Liabilities                                               |  |                | 8,180   |   |                   |  
|Long-term Debt                                                            |  |                | 114,453 |   |                   |  
|                                                                          |  |                |         |   |                   |  
|Total Liabilities                                                         |  |                | 174,608 |   |                   |  
|                                                                          |  |                |         |   |                   |  
|Stockholders Equity:                                                     |  |                |         |   |                   |  
|Common Stock:                                                             |  |                |         |   |                   |  
|Class A, $.10 par, 20,000,000 shares authorized, 10,837,983 shares issued |  |                | 1,084   |   |                   |  
|Class B, $.10 par, 6,000,000 shares authorized, 3,395,365 shares issued   |  |                | 340     |   |                   |  
|Paid-in capital                                                           |  |                | 23,633  |   |                   |  
|Retained earnings                                                         |  |                | 105,905 |   |                   |  
|Accumulated other comprehensive (loss) income                             |  |                | (174    | ) |                   |  
|                                                                          |  |                |         |   |                   |  
|                                                                          |  |                | 130,788 |   |                   |  
|Less treasury stock, 409,794 and 393,578 Class A shares                   |  |                | (5,903  | ) |                   |  
|Less notes receivable related to common stock                             |  |                | (3,187  | ) |                   |  
|                                                                          |  |                |         |   |                   |  
|Total Stockholders Equity                                                |  |                | 121,698 |   |                   |  
|                                                                          |  |                |         |   |                   |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                |  | $              | 296,306 |   |                   | $
|                                                                          |  |                |         |   |                   |  



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                            
|----------------------------------- |  | ------------------------------------------------
|                                    |  | JUNE 28, 2003                                   
|                                    |  | (In thousands, except shares and per share data)
|Net Sales                           |  | $                                               
|Costs and Expenses:                 |  |                                                 
|Cost of sales                       |  |                                                 
|Selling, general and administrative |  |                                                 
|Interest expense                    |  |                                                 
|Restructuring (See Note 7)          |  |                                                 
|                                    |  |                                                 
|                                    |  |                                                 
|Earnings Before Income Taxes        |  |                                                 
|Income Taxes                        |  |                                                 
|                                    |  |                                                 
|Net Earnings                        |  | $                                               
|                                    |  |                                                 
|Earnings per Share                  |  |                                                 
|Basic                               |  | $                                               
|Diluted                             |  | $                                               
|Weighted Average Shares Outstanding |  |                                                 
|Basic                               |  |                                                 
|Diluted                             |  |                                                 



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                           |           
|------------------------------------------------------------------------------ |  | ------------------------------------------------ | ----------
|                                                                               |  | JUNE 28, 2003                                    |           
|                                                                               |  | (In thousands, except shares and per share data) |           
|Net Sales                                                                      |  | $                                                | 145,693   
|Costs and Expenses:                                                            |  |                                                  |           
|Cost of sales                                                                  |  |                                                  | 117,268   
|Selling, general and administrative                                            |  |                                                  | 35,516    
|Interest                                                                       |  |                                                  | 3,649     
|Restructuring (See Note 7)                                                     |  |                                                  | 8,678     
|                                                                               |  |                                                  |           
|                                                                               |  |                                                  | 165,111   
|(Loss) Earnings Before Income Taxes and Cumulative Effect of Accounting Change |  |                                                  | (19,418   
|Income Tax (Benefit) Expense                                                   |  |                                                  | (6,383    
|                                                                               |  |                                                  |           
|(Loss) Earnings Before Cumulative Effect of Accounting Change                  |  |                                                  | (13,035   
|Cumulative Effect of Accounting Change                                         |  |                                                  | 0         
|                                                                               |  |                                                  |           
|Net Loss                                                                       |  | $                                                | (13,035   
|                                                                               |  |                                                  |           
|Basic (Loss) Earnings per Share:                                               |  |                                                  |           
|Before cumulative effect of accounting change                                  |  | $                                                | (0.94     
|Cumulative effect of accounting change                                         |  |                                                  | 0.00      
|                                                                               |  |                                                  |           
|Net loss                                                                       |  | $                                                | (0.94     
|                                                                               |  |                                                  |           
|Diluted (Loss) Earnings per Share:                                             |  |                                                  |           
|Before cumulative effect of accounting change                                  |  | $                                                | (0.94     
|Cumulative effect of accounting change                                         |  |                                                  | 0.00      
|                                                                               |  |                                                  |           
|Net loss                                                                       |  | $                                                | (0.94     
|                                                                               |  |                                                  |           
|Weighted Average Shares Outstanding:                                           |  |                                                  |           
|Basic                                                                          |  |                                                  | 13,828,377
|Diluted                                                                        |  |                                                  | 13,828,377



See notes to condensed
consolidated financial statements.



4



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BUSH INDUSTRIES, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                          |  | TWENTY-SIX WEEKS ENDED |        
|----------------------------------------------------------------------------------------- |  | ---------------------- | -------
|                                                                                          |  | JUNE 28, 2003          |        
|                                                                                          |  | (In thousands)         |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                     |  |                        |        
|Net loss                                                                                  |  | $                      | (13,035
|Adjustment to reconcile net loss to net cash (used for) provided by operating activities: |  |                        |        
|Depreciation and amortization                                                             |  |                        | 9,599  
|Cumulative effect of accounting change                                                    |  |                        | 0      
|Impairment of idle assets                                                                 |  |                        | 3,896  
|Deferred income taxes                                                                     |  |                        | (6,456 
|Change in assets and liabilities affecting cash flows:                                    |  |                        |        
|Accounts receivable                                                                       |  |                        | 6,786  
|Inventories                                                                               |  |                        | 4,109  
|Prepaid expenses and other current assets                                                 |  |                        | 1,102  
|Accounts payable                                                                          |  |                        | (5,182 
|Income taxes                                                                              |  |                        | 0      
|Other accrued liabilities                                                                 |  |                        | (4,827 
|                                                                                          |  |                        |        
|Net cash (used for) provided by operating activities                                      |  |                        | (4,008 
|                                                                                          |  |                        |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                     |  |                        |        
|Capital expenditures                                                                      |  |                        | (1,314 
|Increase in other assets                                                                  |  |                        | (1,421 
|                                                                                          |  |                        |        
|Net cash used for investing activities                                                    |  |                        | (2,735 
|                                                                                          |  |                        |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                     |  |                        |        
|Repayment of long-term debt                                                               |  |                        | (229   
|Proceeds from long-term debt                                                              |  |                        | 8,386  
|Purchase of Class A Stock for treasury                                                    |  |                        | (54    
|Exercise of stock options by employees                                                    |  |                        | 0      
|Dividends paid                                                                            |  |                        | 0      
|Payments received for notes receivable                                                    |  |                        | 121    
|                                                                                          |  |                        |        
|Net cash provided by (used for) financing activities                                      |  |                        | 8,224  
|                                                                                          |  |                        |        
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                   |  |                        | 284    
|                                                                                          |  |                        |        
|NET INCREASE IN CASH                                                                      |  |                        | 1,765  
|CASH AT BEGINNING OF PERIOD                                                               |  |                        | 2,729  
|                                                                                          |  |                        |        
|CASH AT END OF PERIOD                                                                     |  | $                      | 4,494  
|                                                                                          |  |                        |        



See notes to condensed
consolidated financial statements.



5



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BUSH INDUSTRIES, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Twenty-six weeks ended June 28, 2003

(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 28, 2002. 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 28, 2002.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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. |  | The following tables set forth total comprehensive income (loss) for the 13 week and 26 week periods indicated below.
|-- |  | ---------------------------------------------------------------------------------------------------------------------



|                                              |  | THIRTEEN WEEKS ENDED   |        
|--------------------------------------------- |  | ---------------------- | -------
|                                              |  | JUNE 28, 2003          |        
|                                              |  | (In thousands)         |        
|Net earnings                                  |  | $                      | 101    
|Accumulated other comprehensive loss          |  |                        | (491   
|                                              |  |                        |        
|Total comprehensive (loss) income             |  | $                      | (390   
|                                              |  |                        |        
|                                              | 
|                                              |  | TWENTY-SIX WEEKS ENDED |        
|                                              |  | JUNE 28, 2003          |        
|                                              |  | (In thousands)         |        
|Net loss                                      |  | $                      | (13,035
|Accumulated other comprehensive (loss) income |  |                        | (1,419 
|                                              |  |                        |        
|Total comprehensive loss                      |  | $                      | (14,454
|                                              |  |                        |        



6



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|3. |  | Inventories consist of the following:
|-- |  | -------------------------------------



|                 |  | JUNE 28, 2003  |        | DECEMBER 28, 2002
|---------------- |  | -------------- | ------ | -----------------
|                 |  | (In thousands)
|Raw material     |  | $              | 14,206 |                  
|Work in progress |  |                | 6,240  |                  
|Finished goods   |  |                | 32,943 |                  
|                 |  |                |        |                  
|                 |  | $              | 53,389 |                  
|                 |  |                |        |                  



|4. |  | Segment Reporting
|-- |  | -----------------



The Company operates its business in three reportable segments: (1) Bush Furniture North America, which focuses on furniture sales in the North American
market; (2) Bush Furniture Europe, which sells commercial, home office and other furnishings in the European market; and (3) 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 28, 2003       
|                                   |  | (In thousands)      
|Net Sales from External Customers: |  |                     
|Bush Furniture North America       |  | $                   
|Bush Furniture Europe              |  |                     
|Bush Technologies                  |  |                     
|                                   |  |                     
|Consolidated Net Sales             |  | $                   
|                                   |  |                     
|Inter-segment Sales:               |  |                     
|Bush Furniture North America       |  | $                   
|Bush Furniture Europe              |  |                     
|Bush Technologies                  |  |                     
|                                   |  |                     
|Total                              |  | $                   
|                                   |  |                     



7



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|                                                                                            |  | THIRTEEN WEEKS ENDED   |        
|------------------------------------------------------------------------------------------- |  | ---------------------- | -------
|                                                                                            |  | JUNE 28, 2003          |        
|                                                                                            |  | (In thousands)         |        
|Segment Earnings (Loss) Before Income Tax:                                                  |  |                        |        
|Bush Furniture North America                                                                |  | $                      | 666    
|Bush Furniture Europe                                                                       |  |                        | 557    
|Bush Technologies                                                                           |  |                        | (343   
|                                                                                            |  |                        |        
|                                                                                            |  | $                      | 880    
|Restructuring                                                                               |  |                        | (725   
|                                                                                            |  |                        |        
|Consolidated Earnings Before Income Taxes                                                   |  | $                      | 155    
|                                                                                            |  |                        |        
|                                                                                            | 
|                                                                                            |  | TWENTY-SIX WEEKS ENDED |        
|                                                                                            |  | JUNE 28, 2003          |        
|                                                                                            |  | (In thousands)         |        
|Net Sales from External Customers:                                                          |  |                        |        
|Bush Furniture North America                                                                |  | $                      | 104,558
|Bush Furniture Europe                                                                       |  |                        | 32,201 
|Bush Technologies                                                                           |  |                        | 8,934  
|                                                                                            |  |                        |        
|Consolidated Net Sales                                                                      |  | $                      | 145,693
|                                                                                            |  |                        |        
|Inter-segment Sales:                                                                        |  |                        |        
|Bush Furniture North America                                                                |  | $                      | 0      
|Bush Furniture Europe                                                                       |  |                        | 2,815  
|Bush Technologies                                                                           |  |                        | 0      
|                                                                                            |  |                        |        
|Total                                                                                       |  | $                      | 2,815  
|                                                                                            |  |                        |        
|Segment (Loss) Earnings Before Income Taxes and Cumulative Effect of Accounting Change:     |  |                        |        
|Bush Furniture North America                                                                |  | $                      | (1,598 
|Bush Furniture Europe                                                                       |  |                        | (198   
|Bush Technologies                                                                           |  |                        | (1,488 
|                                                                                            |  |                        |        
|                                                                                            |  |                        | (3,284 
|Inventory Write Down Charge                                                                 |  |                        | (7,456 
|Restructuring                                                                               |  |                        | (8,678 
|                                                                                            |  |                        |        
|Consolidated (Loss) Earnings Before Income Taxes and Cumulative Effect of Accounting Change |  | $                      | (19,418
|                                                                                            |  |                        |        



8



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|                             |  | JUNE 28, 2003  |         | DECEMBER 28, 2002
|---------------------------- |  | -------------- | ------- | -----------------
|                             |  | (In thousands)
|Total Assets:                |  |                |         |                  
|Bush Furniture North America |  | $              | 205,980 |                  
|Bush Furniture Europe        |  |                | 67,528  |                  
|Bush Technologies            |  |                | 22,798  |                  
|                             |  |                |         |                  
|Consolidated Total Assets    |  | $              | 296,306 |                  
|                             |  |                |         |                  



|5. |  | Earnings per share (EPS)
|-- |  | ------------------------



Basic EPS excludes dilution and is computed by dividing net income by the weighted average number of shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The dilutive effect of outstanding options issued by the Company are reflected in diluted EPS
using the treasury stock method. Under the treasury stock method, options will only have a dilutive effect when the average market price of common stock during the period exceeds the exercise price of the options. Excluded from the computation of
diluted earnings per share due to their antidilutive effect were 1,381,543 and 1,385,941 stock options for the 13 week and 26 week periods ending June 28, 2003, respectively, and 205,000 stock options for both the 13 week and 26 week periods ending
June 29, 2002. For periods that result in a loss from continuing operations, potential dilutive securities are excluded from the computation of diluted EPS.



|6. |  | Stock-based compensation
|-- |  | ------------------------



In 2002, the Company adopted Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based CompensationTransition and
Disclosure. This standard provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. Additionally, the standard also requires prominent disclosures in
the Companys financial statements about the method of accounting used for stock-based employee compensation, and the effect of the method used when reporting financial results.



The Company accounts for stock-based compensation in accordance with Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS No. 123). As permitted in that standard, the Company has elected to continue to follow the recognition provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations in accounting for employee stock-based compensation. No employee stock-based compensation expense was recorded in the first half of fiscal years 2003 and 2002.



9



---

Pro forma information regarding net earnings (loss) and earnings (loss) per share is required by SFAS No.
123 and has been determined as if the Company had accounted for its employee stock options and awards under the fair value method of that standard. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to
expense over the options vesting period.



The
Companys net earnings (loss) and earnings (loss) per share as if the fair value based method had been applied to all outstanding and unvested awards in each period is as follows (in thousands except per share data):



|                                                                                                                           |  | THIRTEEN WEEKS ENDED   |        
|-------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | -------
|                                                                                                                           |  | JUNE 28, 2003          |        
|Net earnings as reported                                                                                                   |  | $                      | 101    
|Less total stock-based employee compensation expense determined under fair value based method, net of related tax
effects. |  |                        | (9     
|                                                                                                                           |  |                        |        
|                                                                                                                           |  |                       
|Pro forma net earnings                                                                                                     |  | $                      | 92     
|                                                                                                                           |  |                       
|Earnings per share                                                                                                         |  |                        |        
|Basicas reported                                                                                                          |  | $                      | 0.01   
|Basicpro forma                                                                                                            |  | $                      | 0.01   
|                                                                                                                           |  |                       
|Dilutedas reported                                                                                                        |  | $                      | 0.01   
|Dilutedpro forma                                                                                                          |  | $                      | 0.01   
|                                                                                                                           | 
|                                                                                                                           |  | TWENTY-SIX WEEKS ENDED |        
|                                                                                                                           |  | JUNE 28, 2003          |        
|Net loss as reported                                                                                                       |  | $                      | (13,035
|Less total stock-based employee compensation expense determined under fair value based method, net of related tax
effects. |  |                        | (21    
|                                                                                                                           |  |                        |        
|                                                                                                                           |  |                       
|Pro forma net loss                                                                                                         |  | $                      | (13,056
|                                                                                                                           |  |                       
|Loss per share                                                                                                             |  |                        |        
|Basicas reported                                                                                                          |  | $                      | (0.94  
|Basicpro forma                                                                                                            |  | $                      | (0.94  
|                                                                                                                           |  |                       
|Dilutedas reported                                                                                                        |  | $                      | (0.94  
|Dilutedpro forma                                                                                                          |  | $                      | (0.94  



10



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|7. |  | Restructuring
|-- |  | -------------



On February 27, 2003, the Company approved plans to restructure certain of its operations. Such plans included closing the Companys St. Paul,
Virginia manufacturing facility, closing three of its retail outlet stores, expediting the sale of excess inventory (which, among other things, will create space in the Companys Erie, Pennsylvania facility to launch new production strategies),
and the termination of production and management level employees in various locations. The Company incurred a pre-tax restructuring charge of $725,000 in the accompanying 2003 condensed consolidated statements of operations associated with
implementing these plans during the second quarter of 2003 and $16,134,000 through the end of the second quarter of fiscal year 2003. Included in the $16,134,000 year-to-date charge is $7,456,000 associated with an inventory write down which is
included in cost of sales and $8,678,000 which is classified as a restructuring expense. Included in the restructuring expense of $8,678,000 is an asset impairment charge of $3,896,000.



The Company expects this action to be substantially completed by the end of fiscal year 2003. The liability incurred for the
thirteen and twenty-six week periods ended June 28, 2003 totaled $725,000 and $4,782,000, respectively, and relates primarily to severance cost, contract and lease termination costs and other expenses. The Company paid cash totaling $1,715,000 and
$2,048,000 related to these items in the thirteen and twenty-six week periods ended June 28, 2003, respectively, resulting in a remaining liability for these items totaling $2,734,000 as of June 28, 2003. For a more detailed analysis of the
restructuring initiative, please refer to Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.



In addition to the items discussed above and in conjunction with the Companys 2003 strategic plan cost reduction implementation strategy, in the
third quarter of 2003 the Company approved an additional restructuring charge of approximately $1.2 million at Bush Furniture Europe. This additional restructuring will primarily consist of severance charges in the second half of fiscal year 2003.



|8. |  | Goodwill
|-- |  | --------



Pursuant to Statement of Financial Accounting Standards (SFAS) No. 142, goodwill is no longer being amortized and must be periodically tested for impairment. Upon adoption of SFAS No. 142 in fiscal year
2002, the Company concluded that goodwill related to the Bush Furniture Europe segment was impaired. As a result, effective December 30, 2001 (the first day of fiscal year 2002), the Company recorded a non-cash charge for goodwill impairment of
$2,398,000 as a cumulative effect of accounting change (or $0.17 basic and diluted loss per share).



11



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|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------



Except for the historical information contained herein, the matters
discussed in this 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, prices, changes in estimates regarding the
Companys future contractual obligations and other factors discussed in the Companys filings with the Securities and Exchange Commission.



RESULTS OF OPERATIONS:



On February 27, 2003, the Company approved plans to restructure certain of its operations. Such plans included closing the Companys St. Paul,
Virginia manufacturing facility, closing three of its retail outlet stores, expediting the sale of excess inventory (which, among other things, will create space in the Companys Erie, Pennsylvania facility to launch new production strategies),
and the termination of production and management level employees in various locations. The Company incurred a pre-tax restructuring charge of $725,000 in the accompanying 2003 condensed consolidated statements of operations associated with
implementing these plans during the second quarter of 2003 and $16,134,000 through the end of the second quarter of fiscal year 2003. Included in the $16,134,000 year-to-date charge is $7,456,000 associated with an inventory write down which is
included in cost of sales and $8,678,000 which is classified as a restructuring expense. Included in the restructuring expense of $8,678,000 is an asset impairment charge of $3,896,000.



The Company expects this action to be substantially completed by the end of fiscal year 2003. The liability incurred for the
thirteen and twenty-six week periods ended June 28, 2003 totaled $725,000 and $4,782,000, respectively, and relates primarily to severance cost, contract and lease termination costs and other expenses. The Company paid cash totaling $1,715,000 and
$2,048,000 related to these items in the thirteen and twenty-six week periods ended June 28, 2003, respectively, resulting in a remaining liability for these items totaling $2,734,000 as of June 28, 2003.



The Company intends to sell the St. Paul, Virginia manufacturing facility and
certain



12



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equipment located and used in that operation. In accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, a write down of property and equipment (to reduce the carrying value of the assets to estimated net realizable value less cost of disposition) in the amount of $3,896,000 was recognized as a restructuring charge
in the Companys first quarter 2003 condensed consolidated statement of operations. The St. Paul impairment charge relates to the Bush Furniture North America segment.



In accordance with Statement of Financial Accounting Standards No. 146 Accounting for Costs Associated with Exit or
Disposal Activities, the following charges were recognized as a restructuring charge in the Companys condensed consolidated statement of operations for the thirteen and twenty-six week periods ending June 28, 2003:



| | 1.) |  | severance benefits of $499,000 and $4,269,000 recognized for the thirteen and twenty-six week periods ended June 28, 2003, respectively; the liability balance for this charge as of
June 28, 2003 is $2,653,000 ($4,269,000 total charge less costs paid of $1,616,000); and the Company currently expects to incur total severance charges in fiscal year 2003 of approximately $4,408,000; and
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2.) |  | other restructuring charges, which include contract and lease termination costs, equipment and manufacturing relocation costs, and St. Paul carrying costs of $226,000 and $513,000
recognized for the thirteen and twenty-six week periods ended June 28, 2003, respectively; the liability balance as of June 28, 2003 for this charge is $81,000 ($513,000 total charge less costs paid of $432,000); and the Company currently expects
these costs to total approximately $807,000 in fiscal year 2003.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For the thirteen and twenty-six week periods ended June 28, 2003, respectively, the costs relating to the above two items amounted to $725,000 and $4,782,000 (Bush Furniture North America $696,000 and $2,940,000, Bush
Furniture Europe $0 and $1,543,000 and Bush Technologies $29,000 and $299,000) and the expected total charges for fiscal year 2003 are approximately $5,215,000 (Bush Furniture North America $3,280,000, Bush Furniture Europe $1,543,000 and Bush
Technologies $392,000).



As a result of the Companys plan
to sell slow moving inventory in a more efficient manner and to eliminate unprofitable product lines, inventory was marked down $7,456,000 (Bush Furniture North America $4,272,000, Bush Furniture Europe $522,000 and Bush Technologies $2,662,000) and
recognized as an expense in the first quarter of 2003. In accordance with Emerging Issues Task Force No. 96-9, Classification of Inventory Markdowns and Other Costs Associated with a Restructuring, such expense was recognized in cost of
sales. Such inventory may be sold to third party liquidators.



In addition to the items discussed above and in conjunction with the Companys 2003 strategic plan cost reduction implementation strategy, in the third quarter of 2003 the Company approved an additional restructuring charge of
approximately $1.2 million at Bush Furniture



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Europe. This additional restructuring will primarily consist of severance charges in the second half of fiscal year 2003.



Second quarter sales for the 13 week period ended June 28, 2003 were
$70,831,000 and first half sales for the 26 week period ended June 28, 2003 were $145,693,000. This represents a decrease of $8,098,000, or approximately 10.3%, compared to net sales of $78,929,000 for the 13 week period ended June 29, 2002, and a
first half decrease of $21,568,000, or approximately 12.9%, compared to net sales of $167,261,000 for the 26 week period ended June 29, 2002. The sales decrease primarily reflects decreases in Bush Furniture North America, particularly in sales to
the electronic superstores. The current economic slowdown in both North America and Germany continues to create a challenging environment in which to maintain and grow sales and exerts a downward pressure on prices. While the European economy
remains soft, continued gains in the European office superstores and from new floor placements are partially offsetting the slow economic conditions, especially in Germany. In addition, competition from imports using alternative materials, including
metal and glass, and competition from imported assembled furniture are pressuring the markets in which the Company competes.



Cost of sales decreased $4,473,000 for the 13 week period ended June 28, 2003, compared to the 13 week period ended June 29, 2002 and decreased by
$2,856,000 ($10,312,000 decrease without the impact of the $7,456,000 inventory write down taken in the first quarter of fiscal year 2003) for the 26 week period ended June 28, 2003, compared to the 26 week period ended June 29, 2002. The decrease
in cost of sales for the 13 and 26 week periods ended June 28, 2003 primarily reflects the decrease in sales volumes as compared to the prior year, partially offset by increases in the cost of sales as a percentage of net sales.



Cost of sales as an approximate percentage of net sales increased by 1.9
percentage points from 71.5% in the second quarter of 2002 to 73.4% in the second quarter of 2003. For the 26 week period ended June 28, 2003, cost of sales as an approximate percentage of net sales increased by 8.7 percentage points from 71.8% in
the first half of 2002 to 80.5% in the first half of 2003. Of the 8.7 percentage point increase in the first half of fiscal year 2003, approximately 5.1 percentage points reflects the impact of the $7,456,000 inventory write down taken in the first
quarter of fiscal year 2003. The remaining 3.6 percentage points of the increase for the 26 week period ended June 28, 2003 and the 1.9 percentage point increase for the 13 week period ended June 28, 2003 primarily reflects the impact of lower gross
margins (exclusive of the inventory write-down) in the North American Furniture segment.



Selling, general and administrative expenses decreased $3,599,000 for the 13 week period ended June 28, 2003, compared to the 13 week period ended June 29, 2002. For the 26 week period ended June 28, 2003, selling,
general and administrative expenses decreased by $5,266,000, as compared to the 26 week period ended June 29, 2002. Selling, general and administrative expenses as an approximate percentage of net sales decreased by 2.2 percentage points from 24.9%
in the second quarter of 2002 to 22.7% in the second quarter of 2003 and the first half of fiscal year 2003 was 24.4%, the same as the first half of fiscal year 2002. The decrease in selling, general and administrative expenses was primarily the
result of a reduction in



14



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various variable selling expenses such as commissions, marketing and promotional incentives. The decrease in selling, general and administrative expenses as
an approximate percentage of net sales for the 13 weeks ended June 28, 2003 primarily reflects reduction in various variable selling expenses such as commissions, marketing and promotional incentives.



Interest expense for the 13 week period ended June 28, 2003 increased to
$1,886,000 (or approximately 2.7% of net sales) from $1,861,000 (or approximately 2.4% of net sales) for the 13 week period ended June 29, 2002. Interest expense for the 26 week period ended June 28, 2003 increased to $3,649,000 (or approximately
2.5% of net sales) from $3,586,000 (or approximately 2.1% of net sales).



Pursuant to Statement of Financial Accounting Standards (SFAS) No. 142, goodwill is no longer being amortized and must be periodically tested for impairment. Upon adoption of SFAS No. 142 in fiscal year
2002, the Company concluded that goodwill related to the Bush Furniture Europe segment was impaired. As a result, effective December 30, 2001 (the first day of fiscal year 2002), the Company has recorded a non-cash charge for goodwill impairment of
$2,398,000 as a cumulative effect of accounting change (or $0.17 basic and diluted loss per share).



The consolidated effective income tax rates for the 13 and 26 week periods ended June 28, 2003 were 34.8% and 32.9%, respectively. The tax rates for the
same periods in 2002 were 41.9% and 41.0%, respectively. In the first half of fiscal year 2003, the federal and state tax savings on the first half losses are partially offset by the tax impact for permanent non-deductible items and fixed taxes.
Since the tax savings are partially offset by a tax expense, the effective overall tax rate is lower than the basic statutory federal and state tax rates.



LIQUIDITY AND CAPITAL RESOURCES:



Working capital at June 28, 2003 decreased $542,000 over fiscal year end 2002. Decreases in accounts receivable, inventories and prepaid expenses and
other current assets were mostly offset by decreases in accounts payable and other accrued liabilities and an increase in cash. The decrease in inventories was impacted by the restructuring initiative described above and accounts receivable and
accounts payable were impacted by the lower sales levels in the second quarter of fiscal year 2003, as compared to the fourth quarter of fiscal year 2002. Total assets at June 28, 2003 decreased $13,799,000 over fiscal year end 2002, primarily as a
result of a decrease in property, plant and equipment and in inventories, both of which were impacted by the restructuring initiative described above and a decrease in accounts receivable and prepaid expenses and other current assets, partially
offset by an increase in cash and other assets. Total liabilities at June 28, 2003 increased by $588,000, as compared to fiscal year end 2002. Increases in long-term debt and other long-term liabilities were mostly offset by decreases in deferred
income taxes, accounts payable and other accrued liabilities. The decrease in deferred income taxes primarily reflects the result of tax savings recorded on the loss in the first half of fiscal year 2003.



15



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At the end of the second fiscal quarter of 2003, the U.S. dollar was weaker than at the end of fiscal
year 2002. This resulted in euro denominated assets and liabilities increasing in U.S. dollar terms. The approximate impact of the weaker U.S. dollar on the items discussed above is as follows: current assets, $2.7 million; net property, plant and
equipment, $4.9 million; other assets, $0.3 million; current liabilities, $1.8 million; long term debt, $6.6 million and other long term liabilities $0.9 million.



Net cash used in operating activities for the first half ended June 29, 2003 was $4,008,000, resulting primarily from the
net loss and the decreases in deferred income taxes, accounts payable and other accrued liabilities partially offset by depreciation and amortization, decreases in accounts receivable and inventories, the impairment charge on idle assets and a
decrease in prepaid expenses and other current assets.



During
the first half of fiscal year 2003, the Company expended $1,314,000 on capital expenditures versus $3,112,000 in the first half of the previous fiscal year. Capital expenditures for 2003 are currently forecasted to be approximately $5 to $7 million.
Cash flows of $1,421,000 were used for other assets in the first half of fiscal year 2003, primarily as a result of costs associated with amending the Companys credit agreement and an increase in the cash surrender value of insurance policies.
Cash flows used for operating activities and the cash used for investing activities were primarily financed by an increase in the principal amount of long-term debt.



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 the first quarter of fiscal year 2003 the Company entered into a seventh amendment, dated as of February 28, 2003. This amendment, among other things, modified certain covenants under the credit facility, evidenced
the lenders consent to certain transactions, including the restructuring effectuated by the Company in the first quarter of 2003, prohibits the payment of cash dividends by the Company and modified the amount of money the Company can borrow
under the credit facility from an aggregate $173,000,000 to an aggregate $163,000,000. Additionally, the seventh amendment granted a security interest in the Companys real property in Jamestown, NY, Erie, PA and Greensboro, NC, which is in
addition to the security interest in all domestic tangible personal property and intangible assets of the Company granted in the sixth amendment dated as of December 28, 2001.



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 debt, because as of June 28, 2003 there are no required
principal payments due within the next year. 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, which varies from 2.0% to 3.5%, depending upon the Companys



16



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ability to satisfy certain quarterly financial tests. Alternative base rate loans generally bear interest at the prime rate, plus an applicable margin, which
varies from 0.0% to 0.75% 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 $163,000,000 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. As of June 28, 2003, the Company was in compliance with all of these requirements.



As of June 28, 2003, the Company had approximately $115 million in
outstanding debt; with a balloon payment due under the Companys revolving credit facility on June 30, 2004. The ability of the Company to service its debt on a timely basis, and satisfy its bank ratios and covenants under its revolving credit
facility, as amended, is dependent upon the Companys results of operations. In the event the Company is unable in the future to satisfy the financial covenants and/or ratios under the revolving credit facility the lenders may deem the Company
in default under the revolving credit facility, which would materially adversely affect the Company and its operations. The Company is currently seeking financing alternatives to satisfy the balloon payment due on June 30, 2004, the success of which
no assurance can be given.



CRITICAL
ACCOUNTING POLICIES



The policies identified below are
important to the Companys business operations and the understanding of its results of operations. The listing is not intended to be a comprehensive list of all of the Companys accounting policies. In many cases, the accounting treatment
of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for managements judgment in their application. In other cases, management is required to exercise judgment in
the application of accounting principles with respect to particular transactions. For a summary of all of the Companys accounting policies, including the accounting policies discussed below, see Note 1 to the Notes to Consolidated Financial
Statements contained in the Companys Form 10-K for the fiscal year ending December 28, 2002. The preparation of this Quarterly Report on Form 10-Q requires the Company to make estimates and assumptions that affect the reported amount of assets
and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ
from those estimates.



Revenue Recognition and Accounts Receivable



Revenues are recognized when products are shipped.
Provisions for discounts, rebates to customers, returns and other adjustments are provided for in the same period that related sales



17



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are recorded. The recording of these provisions requires the use of estimates, and future periods will be impacted if the actual costs differ from the
estimated amounts. For all sales, the Company uses purchase orders from the customer, whether written, oral or electronically transmitted, as evidence of the transaction. Collateral is generally not requested from customers.



The Company performs periodic credit evaluations of its customers. The
Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon the Companys historical experience and any specific customer collection issues that it has identified.
While such credit losses have historically been within the Companys expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has experienced in the past.
In addition, in part, to limit credit risk on occasion and to accelerate collections of certain outstanding accounts receivables, the Company has sold certain accounts receivables, without recourse to it in the event of non-payment, to certain third
parties. The Companys accounts receivable balance was $10.1 million, net of allowance for doubtful accounts of $1.1 million as of June 28, 2003 and $16.5 million, net of allowance for doubtful accounts of $0.9 as of December 28, 2002.



Inventories



Inventories, consisting of raw materials, work-in-progress and finished
goods, are stated at the lower of cost or market as determined by the first-in, first-out method. Inventories that the Company estimates as either obsolete or unmarketable are written down based upon the difference between the cost of the inventory
and its estimated market value. The Companys estimates as to such value are based, in part, on projected future demand and market conditions. If these estimates or related projections change in the future, additional write-downs may be
required. Obsolete and slow moving inventory reserves were approximately $8.1 million and $4.8 million at June 28, 2003 and December 28, 2002, respectively. This increase in reserves since December 28, 2002 was primarily as a result of the inventory
write-down associated with the restructuring initiative of the Company, as previously described in this Form 10-Q .



Property, Plant and Equipment



Property, plant and equipment is carried at cost. Depreciation is computed by the straight-line method over the estimated useful lives of the assets,
which are as follows: buildings and improvements 10-50 years; machinery and equipment 3-20 years; transportation equipment 3-7 years; office equipment 3-10 years; and leasehold improvements 3-10 years or the lease term, if less.



The cost of repairs and maintenance is charged to expense as incurred.
Renewals and betterments are capitalized. Upon retirement or sale of an asset, its cost and related accumulated depreciation or amortization are removed from the accounts and any gain or loss is recorded in income or expense. The Company continually
reviews property, plant and equipment to determine that the carrying values have not been impaired by estimating the future undiscounted cash flows expected to result from the use of the property, plant and equipment.



18



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Other Assets/Goodwill



Other assets consist primarily of goodwill, cash value of life insurance policies, advances on split dollar insurance arrangements prior to July 30, 2002,
an investment at cost, and other intangible assets. The Company tests long-lived assets, exclusive of goodwill, for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. An impairment
loss shall be recognized if the carrying amount of long-lived assets, to be held and used is not recoverable and exceeds its fair value based on the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the
asset. In the Companys review of such assets, it is required to make certain estimates and projections. If these estimates or related projections change in the future, the Company may be required to record impairment charges for these assets.



At least annually and whenever events and changes in
circumstances warrant, the Company compares the fair value of the reporting unit to its carrying amount to determine if there is potential impairment of goodwill. If the fair value of the reporting unit is less than its carrying value, an impairment
loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than their carrying value. Fair values for goodwill are determined based on discounted cash flows, market multiples or appraised values as
appropriate. The conditions that would trigger an impairment assessment of goodwill include a significant negative trend in the Companys operating results or cash flows, a decrease in demand for the Companys products, a change in the
competitive environment and other industry and economic factors.



Accounting
for Income Taxes



As part of the process of preparing the
consolidated financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. This process involves the Company estimating its actual current tax exposure together with assessing temporary
differences resulting from differing treatment of items, for tax and book purposes. These differences result in deferred tax assets and liabilities, which are included within the Companys consolidated balance sheet. The Company must then
assess the likelihood that its deferred tax assets will be recovered from future taxable income and to the extent the Company believes that recovery is not likely, it must establish a valuation allowance. To the extent the Company establishes a
valuation allowance or increases this allowance in a period, the Company must include an expense within the tax provision in the statement of operations. Significant management judgment is required in determining the provision for income taxes, the
deferred tax assets and liabilities and any valuation allowance recorded against the net deferred tax assets. In the event that actual results differ from the Companys estimates or it adjusts these estimates in future periods, the Company may
need to establish an additional valuation allowance which could impact its financial position and results of operations.



IMPACT OF RECENTLY ADOPTED ACCOUNTING STANDARDS:



In August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 143,
Accounting for Obligations Associated with the



19



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Retirement of Long-Lived Assets (SFAS No. 143). 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 adopted the provisions of SFAS No. 143 on December 29, 2002 (the first day of fiscal 2003) which did not have a material impact on its consolidated financial statements.



|ITEM 3. |  | 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 2003, 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. The Company believes the primary impact on the Company of a reasonably possible change of 10% in any foreign currency exchange rate would be an increase or
decrease of approximately $6 million in the US dollar equivalent in foreign currency denominated debt.



|ITEM 4. |  | CONTROLS AND PROCEDURES
|------- |  | -----------------------



The Companys Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Companys disclosure controls
and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)), have concluded that as of June 28, 2003, the Companys disclosure controls and procedures were effective and designed to ensure that
material information relating to the Company and its consolidated subsidiaries is recorded, processed, summarized and reported in a timely manner.



Changes in internal controls. There has been no change in the Companys internal control over financial reporting during the quarter ended June 28,
2003 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



20



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Part II. OTHER INFORMATION



|ITEM 4. |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- |  | ---------------------------------------------------



| | A. |  | At the Annual Meeting of Stockholders held on May 15, 2003, 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, each share of Class A Common Stock has one-tenth vote per share, and each share of
Class B Common Stock has one vote per share.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



1. Class A Directors Elected.



Paul A. Benke: 7,396,201 shares for; 1,337,859 shares withheld



Jerald D. Bidlack: 7,402,548 shares for; 1,331,512 shares withheld



David G. Dawson: 6,299,086 shares for; 2,434,974 shares withheld



William M. Hogan, III: 7,398,347 shares for; 1,335,713 shares withheld



Messrs. Paul A. Benke, Jerald D. Bidlack and David G. Dawson are incumbent
Class A Directors and Mr. William M. Hogan, III is a newly elected Class A Director.



2. Class B Directors Elected.



Paul S. Bush

Robert L. Ayres

Lewis H. Aronson

Gregory P. Bush

Neil A. Frederick



For all of the above: 3,342,609 shares for; 0 shares withheld



Messrs. Paul S. Bush, Robert L. Ayres, Lewis H. Aronson, Gregory P. Bush, and Neil A. Frederick are incumbent Class B Directors.



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| | 3. |  | Ratification of the appointment by the Audit Committee of Deloitte & Touche LLP, as the Companys independent accountants for the fiscal year ending January 3, 2004.
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



4,187,874 votes for; 27,557 votes against; 584
votes abstain



| | 4. |  | Proposal to adjourn the annual meeting if there are not sufficient votes to approve one or more matters.
| | -- |  | --------------------------------------------------------------------------------------------------------



3,836,883 votes for; 275,238 votes against; 103,894 votes abstain



|ITEM 6. |  | EXHIBITS AND REPORTS ON FORM 8-K
|------- |  | --------------------------------



| | (a) |  | Exhibits:
| | --- |  | ---------



| | 10.1 |  | Mortgage, Security Agreement, Fixture Filing and Assignment of Leases and Rents, dated as of April 29, 2003.*
| | ---- |  | -------------------------------------------------------------------------------------------------------------



| | 10.2 |  | Third Open-End Fee and Leasehold Mortgage, Security Agreement, Fixture Filing and Assignment of Leases and Rents, dated as of April 25, 2003.*
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| | 10.3 |  | Deed of Trust, Security Agreement and Assignment of Leases and Rents, dated as of April 29, 2003.*
| | ---- |  | --------------------------------------------------------------------------------------------------



| | 10.4 |  | Agreement, dated as of May 23, 2003, by and between the Company and Gregory P. Bush.*
| | ---- |  | -------------------------------------------------------------------------------------



| | 31.1 |  | Certification of Chief Executive Officer Pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------



| | 31.2 |  | Certification of Chief Financial Officer Pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------



| | 32.1 |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| | 32.2 |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



---

* Incorporated by reference to
the Registrants Form 8-K, filled on August 6, 2003.



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| | (b) |  | Reports on Form 8-K:
| | --- |  | --------------------

During the second quarter of fiscal
year 2003, an 8-K was furnished on May 9, 2003 with respect to certain financial information of the Company pursuant to Items 7 and 12 of Form 8-K.



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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.



|                     |  |  |  |    
|-------------------- |  |  |  | ---
|                     |  |  |  |    
|                     |  |  |  |    
|                     |  |  | 
|Date: August 6, 2003 |  |  |  | By:
|                     |  |  |  |    
|                     |  |  |  |    
|                     |  |  |  |    



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