<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 1, 2000

                                      OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to
                               -----------------  -----------------

Commission file number              1-8884
                        -------------------------

                              BUSH INDUSTRIES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                 Delaware                                 16-0837346
---------------------------------------------  ---------------------------------
(State or other jurisdiction of incorporation          (I.R.S. Employer
or organization)                                      Identification No.)

    One Mason Drive, Jamestown, New York                     14702
--------------------------------------------   ---------------------------------
  (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code         (716) 665-2000
                                                   -----------------------------

Securities registered pursuant to Section 12(b) of the Act:


     Title of each class               Name of each exchange on which registered

     Class A Common Stock                         New York Stock Exchange
-------------------------------        -----------------------------------------

           Securities registered pursuant to Section 12(g) of the Act:
                                      None
   --------------------------------------------------------------------------
                                (Title of class)

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
                                                  -----            -----
<PAGE>

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of January 1, 2000, 10,472,543 shares of Class A Common Stock were
outstanding and the aggregate market value (based on the closing price on the
New York Stock Exchange on December 31, 1999 which was $17.19 per share) of the
Class A Common Stock held by non-affiliates was approximately 96,012,000. As
of January 1, 2000, 3,395,365 shares of Class B Common Stock were outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders scheduled to be held on May 11, 2000, are incorporated by
reference into Part III hereof. Certain exhibits listed in Part IV of this
Annual Report on Form 10-K are incorporated by reference from prior filings made
by the Registrant under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934.

                                       2
<PAGE>

                                     PART I
                                     ------

ITEM 1.   BUSINESS
-------   --------

(a)  GENERAL DEVELOPMENT OF BUSINESS
     -------------------------------

     Bush Industries, Inc. and its majority owned subsidiaries (the "Company" or
the "Registrant"), are primarily engaged in the design, manufacture and sale of
ready-to-assemble ("RTA") and set up furniture products for business and
consumer use. The Company was incorporated under the laws of the State of
Delaware on February 5, 1985. The Company was a successor to a corporation of
the same name incorporated under the laws of the State of New York in 1959. The
Company's principal place of business is located at One Mason Drive, Jamestown,
New York 14702.

     The Company completed in 1996, a one million square-foot manufacturing and
distribution facility in Erie, Pennsylvania, which is approximately 50 miles
west of the Company's corporate headquarters in Jamestown, New York. The first
phase of this expansion, approximately 500,000 square feet, replaced the
Company's leased distribution and warehouse facility in Saybrook, Ohio in April
1996. The second phase of the expansion program, consisting of an approximate
500,000 square foot facility, became operational in 1997. During 1998,
construction began on a new approximately 80,000 square foot automated material
handling system. During 1999, the material handling system became operational.
Additional manufacturing capacity, incorporating newly developed advanced
technology, will be added incrementally to this facility as demand requires.

     In 1996, the Company acquired all of the outstanding and issued capital
stock of The ColorWorks, Inc., a North Carolina corporation ("ColorWorks").
ColorWorks, with headquarters located in Greensboro, North Carolina, is a
finishing, design and decorating company which holds the master license to the
"HydroGraFix" film processing technology in the Western Hemisphere, portions of
Central Europe and South Africa.

     In the first quarter of 1997, the Company formed a wholly-owned German
subsidiary, Bush-Viotechnik GmbH ("Bush-Viotechnik"), to service the global
market for advanced "surface technologies" in diverse applications. These
applications include products associated with the furniture, automotive,
electronics, building and construction industries. Bush-Viotechnik has developed
an advanced surface technology manufacturing line which is installed in the
Company's Erie, Pennsylvania facility.

     On June 30, 1997, the Company acquired a 51% interest in the Rohr Gruppe, a
German furniture manufacturer, which name was subsequently changed to Rohr-Bush
GmbH & Co. ("Rohr-Bush"). On February 29, 2000, the Company executed a
definitive agreement with certain members of the Rohr family to acquire the
family's approximately 49% remaining interest in Rohr-Bush. The transaction is
expected to close on or before October 31, 2000.

                                       3
<PAGE>

     On April 22, 1998, the Company acquired all of the issued and outstanding
stock of Fournier Furniture, Inc. ("Fournier"), a Virginia based manufacturer of
RTA furniture.


(b)  FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
     ---------------------------------------------

     For financial information reporting purposes, the Company is deemed to
engage in one industry segment, the design, manufacture and sale of furniture
products. The Company's geographic operations outside the United States
principally include Germany.


(c)  NARRATIVE DESCRIPTION OF BUSINESS
     ---------------------------------

     The Company is engaged primarily in the design, manufacture and sale of
ready-to-assemble ("RTA") and set up furniture products in various price ranges
for both business and consumer use. The Company's furniture product line,
inclusive of Rohr-Bush, includes audio/video home entertainment centers, home
theater furniture systems, audio cabinets, television/VCR carts, wall units,
bookcases, bedroom and kitchen/utility furniture, computer desks and
workstations, desks, hutches, armoires and file cabinets.

     The Company's diverse RTA furniture product line is designed for ease of
assembly, to ensure that such products can be readily assembled by following
simple, easy to read diagramed instructions, contained with each RTA product
sold. To enhance customer service, the Company maintains a toll free number in
the United States to assist consumers with any questions with respect to the
assembly of Bush products. The Company's diverse set up furniture, primarily
produced and sold by Rohr-Bush, is designed to be a high quality product that
appeals to popular price points. The component parts for the set up furniture
are manufactured using RTA technology and equipment.

     ColorWorks is engaged in the finishing and decoration of various substrate
materials. ColorWorks holds the master license to the "HydroGraFix" film
processing technology in the Western Hemisphere, portions of Central Europe, and
South Africa. This process permits the decoration of a variety of geometric
shapes, including complex three-dimensional parts. Cellular phones, pagers,
firearms, archery equipment and automotive interior components are examples of
major product lines decorated by ColorWorks.

     The objective of Bush-Viotechnik is to service the global market for
advanced "surface technologies" in diverse applications, including the
furniture, automotive, electronics, building and construction industries.
Bush-Viotechnik has developed an advanced surface technology manufacturing line
that is installed in the Company's Erie, Pennsylvania facility. The formation of
Bush-Viotechnik complements the Company's acquisition of ColorWorks.

                                       4
<PAGE>

Marketing and Distribution
     The Company's furniture products, inclusive of Rohr-Bush, are marketed to a
variety of retailers for sale to both business and consumer end-users. The
Company's customers include national chains, electronic and computer
superstores, catalog showrooms, discount mass merchants, warehouse clubs, office
supply superstores, office furniture retailers, home furnishings retailers,
department stores, home improvement centers, furniture stores, buying groups in
Germany, and independent wholesale distributors. The Company's furniture
products, inclusive of Rohr-Bush, are sold both through independent
manufacturers' representatives and directly by the Company's sales personnel.
The Company's furniture products, inclusive of Rohr-Bush, are currently sold to
approximately 2,300 customers, and the Company estimates that its products are
currently carried in approximately 16,800 retail outlets.

     ColorWorks offers finishing and decorating processing services to
manufacturers and end-users of various products. ColorWorks either provides such
services directly or sublicenses the "HydroGraFix" film processing technology to
third parties in varying fields of application and/or geographic areas.

Sources and Availability of Raw Materials
     The Company purchases the raw materials used in the production of its
furniture at each manufacturing location from a variety of sources on a global
basis. The Company believes that none of the materials required for its
furniture manufacturing operations are proprietary in nature and that an
adequate supply of raw materials is available from multiple sources.

Trademarks and Design Patents
     The Company either owns or has applied for various trade names and
trademarks in the United States and abroad, for use with its furniture product
lines. The Company believes that its trade names and trademarks are well
recognized within the furniture industry. The Company also believes that the
loss of any trade name and/or trademark would not have a material adverse effect
on its business operations.

     In addition, the Company owns a variety of patents with respect to surface
technologies and the design and manufacture of certain furniture products. The
Company believes that the loss of any of its patents would not have a material
adverse effect on its business. The Company also relies on trade secrets and
confidentiality to protect the proprietary nature of its technology.

Seasonality
     The nature of the business in which the Company is engaged is not seasonal.

                                       5
<PAGE>

Customers
     For the fiscal year ended January 1, 2000, the Company had two customers
which accounted for approximately 21% and 16% of the Company's total gross
sales. No other single customer accounted for more than 10% of the Company's
total gross sales for the fiscal year ended January 1, 2000. While the loss of
any substantial customer could have a material short-term impact on the
Company's business, the Company believes that its diverse furniture distribution
channels would minimize the long-term impact of any such loss.

Backlog
     The Company believes that order backlog at any particular point in time is
not predictive of future sales performance since, as is standard in the
furniture industry, a customer may cancel a product order prior to shipment
without penalty. The Company has historically filled orders within approximately
one to six weeks of the receipt of a purchase order.

Government Contracts
     No material portion of the Company's business is subject to renegotiation
of profits or termination of contracts or subcontracts at the election of the
Government.

Competition
     The Company believes that, based on information reported in furniture trade
publications, it is the second largest United States-based manufacturer of RTA
furniture products (based on consolidated world wide sales) and that Rohr-Bush
is the eighth largest furniture manufacturer in Germany (excluding kitchen
cabinets and upholstered furniture). The furniture market is highly competitive,
and includes numerous entities, some of which may have substantially greater
financial and marketing resources than the Company. The Company believes that
the principal competitive factors in the furniture industry marketplace are
price, quality, function, innovative product design, style, prompt delivery, and
the ability to offer customers a full product line. The Company's varied product
line is designed based on the foregoing factors to achieve customer satisfaction
and, accordingly, the Company believes that its products effectively compete in
such marketplace.

Environmental Compliance
     Environmental aspects of the Company's business are regulated primarily by
federal and state laws and by the ordinances of the localities where the
Company's facilities are located. See Item 3, "Legal Proceedings", for
additional information regarding environmental compliance.

Employees
     As of the 1999 fiscal year end, the Company employed a total of
approximately 3,650 employees. Since Rohr-Bush is an active member of the German
employers' association for the wood and plastics processing industry, it is
governed by the collective bargaining agreements for this industry. There are no
other collective bargaining agreements covering any of the Company's employees.
The Company believes it has good employee relations.

                                       6
<PAGE>

(d)  FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
     ------------------------------------------------
     OPERATIONS AND EXPORT SALES
     ---------------------------

     For the 1999 fiscal year ended January 1, 2000, the Company generated
domestic sales of approximately $358,766,000 (or approximately 81.2% of total
sales) and foreign sales of approximately $82,940,000 (or approximately 18.8% of
total sales). Of the total foreign sales, approximately $11,909,000 (or
approximately 2.7% of total sales) represented products exported by the Company
from the United States. For the 1998 fiscal year ended January 2, 1999 and the
1997 fiscal year ended January 3, 1998, the Company generated domestic sales of
approximately $313,908,000 and $283,019,000, respectively (or approximately
75.9% of total sales for the 1998 fiscal year and approximately 87.0% of total
sales for the 1997 fiscal year). Foreign sales for the fiscal years ended
January 2, 1999 and January 3, 1998, respectively, were approximately
$99,619,000 and $42,270,000 (or approximately 24.1% of total sales for the 1998
fiscal year and approximately 13.0% of total sales for the 1997 fiscal year). Of
such total foreign sales, approximately $14,288,000 and $16,960,000 represented
products exported by the Company from the United States for the fiscal years
ended January 2, 1999 and January 3, 1998, respectively (or approximately 3.5%
for the 1998 fiscal year and 5.2% for the 1997 fiscal year).

                                       7
<PAGE>

ITEM 2.   PROPERTIES
-------   ----------

     The following table summarizes the Company's existing facilities as of
March 1, 2000:

<TABLE>
<CAPTION>
                                                      Approximate
Principal Character and                               Square       Owned/Leased
use of Property               Location                Footage      (Lease Expiration Date)
-----------------------       ----------------        -----------  -----------------------
<S>                           <C>                      <C>         <C>
Manufacturing and
warehouse facility            Erie, PA                 1,115,000   Owned (1)

Manufacturing, warehouse
and office facilities         Mastholte, Germany         815,000   Owned

Manufacturing and             Allen Street
warehouse facility            Jamestown, NY              450,000   Owned

Manufacturing, warehouse
and corporate office          Mason Drive
facilities                    Jamestown, NY              440,000   Owned

Manufacturing and
warehouse facility            St. Paul, VA               285,000   Owned

Manufacturing facility        Mantinghausen,             208,000   Owned
                              Germany

Manufacturing and             Tiffany Street
warehouse facility            Jamestown, NY              145,000   Owned

Manufacturing facility        Tijuana, Mexico            135,000   Leased (September 2002)

Warehouse facility            Jamestown, NY              100,000   Leased (December 2000)

Manufacturing facility        Little Valley, NY           78,000   Owned

Manufacturing facility        Greensboro, NC              67,000   Owned

Manufacturing facility        Rutherfordton, NC           26,000   Owned

Showroom                      High Point, NC              13,000   Leased (April 2002)

Regional service center       Erie, PA                     8,000   Leased (June 2001)

Regional service center       Lakewood, NY                 4,000   Leased (December 2000)

Sales office and
design studio                 Ft. Myers, FL                5,000   Leased (February 2002)
</TABLE>

----------
(1)  Legal title to the facility is in EIDCO, Inc. in accordance with the terms
     of low interest financing being provided by the Commonwealth of
     Pennsylvania.

                                       8
<PAGE>

ITEM 3.   LEGAL PROCEEDINGS
-------   -----------------

     On June 17, 1996, an approximate five-mile long area in Little Valley, New
York was added to the federal Superfund national priorities list, and with
respect thereto, the Company is not aware of any potentially responsible parties
having been identified as of the date hereof. In December 1996, the Company
responded to a request for information from the United States Environmental
Protection Agency (the "EPA"), relating to the Company's Little Valley, New York
property. No assurance can be given that the Company's response will be
sufficient for the EPA, or that the EPA will not pursue further inquiries. The
Company understands that EPA has provided the New York State Department of
Environmental Conservation ("DEC") with comments on the investigatory work
developed and implemented by the Company with respect to a DEC Order on Consent,
as more fully described below. Previously, in November 1995, the Company was
notified by the DEC of an alleged violation of a certain environmental
regulation concerning the presence of contaminates in the groundwater, including
trichloroethene, beneath the Company's property located in Little Valley, New
York.

     Between November 1995 and March 1999, the Company and DEC had discussions
concerning the scope of a work plan to conduct a subsurface investigation at the
property. Those discussions resulted in the Company entering into an Order on
Consent with DEC to perform investigatory work as set forth in a work plan. As a
result of the implementation of the work under the DEC Order on Consent, a
groundwater evaluation report was submitted to DEC on July 6, 1999. The Company
received comments on the groundwater evaluation from DEC on or about September
30, 1999, which included a request for additional information and investigatory
work. During November and December 1999, the Company's consultant implemented
that additional investigatory work, and submitted a revised groundwater
evaluation report to DEC on February 21, 2000. Upon approval of the revised
groundwater evaluation report, the Order on Consent requires the submittal of a
remediation report, which will evaluate the potential for unacceptable risk to
human health or the environment, and evaluate remedial alternatives, including a
no action alternative, and will recommend a course of action with supporting
rationale. The Company is awaiting DEC's approval of the revised groundwater
evaluation report. Although no assurance can be given, the Company believes that
its financial statements will not be materially adversely affected by the
foregoing.

     The Company has also become aware of the possible presence of certain
levels of contaminates on the Greensboro, North Carolina property owned by
ColorWorks, of which the Company became the sole stockholder in September 1996.
The Company has been indemnified to a certain extent by the former shareholders
of ColorWorks, and has procured a $20,000,000 environmental insurance policy
relating thereto. In the unlikely event any such environmental costs are not
covered by such indemnification or insurance, the Company may be responsible for
certain costs. However, based on an initial assessment of the situation, the
Company believes, although no assurance can be given, that the Company's
financial statements will not be materially adversely affected by the foregoing.

     The Company has also become aware of the presence of certain levels of
contaminates on property located in Germany and owned by Rohr-Bush, of which the
Company became a 51%

                                       9
<PAGE>

stockholder on June 30, 1997. The associated liability, the quantification of
which was based on the assessment of outside consultants, was recorded in the
allocation of the purchase price to the acquired assets and liabilities as of
June 30, 1997. Accordingly, the Company believes, although no assurance can be
given, that the Company's financial statements will not be materially adversely
affected by the foregoing.

     As of January 1, 2000, the Company is a party to various other legal
proceedings arising in the ordinary course of business. The Company believes
that these pending actions would not materially adversely affect the Company's
financial statements.

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

     No matters were submitted to a vote of the stockholders of the Company
during the fourth quarter of the fiscal year ended January 1, 2000.

                                      10
<PAGE>

                                     PART II
                                     -------

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
-------    ---------------------------------------------
           RELATED STOCKHOLDER MATTERS
           ---------------------------

     (a) Market Information.  The Company's Class A Common Stock is traded on
         ------------------
the New York Stock Exchange. The Company's Class B Common Stock is not publicly
traded.

     The following table sets forth the high and low sales prices of the
Company's Class A Common Stock, as reported on the New York Stock Exchange for
the periods indicated:

Quarter                                      High                        Low
--------------------------------           --------                    --------
January 1, 1998 - March 31, 1998            $29.31                      $24.13
April 1, 1998 - June 30, 1998               $30.63                      $21.75
July 1, 1998 - September 30, 1998           $23.25                      $13.63
October 1, 1998 - December 31, 1998         $18.25                      $12.00

January 1, 1999 - March 31, 1999            $14.75                      $10.00
April 1, 1999 - June 30, 1999               $16.63                      $12.31
July 1, 1999 - September 30, 1999           $16.50                      $11.63
October 1, 1999 - December 31, 1999         $18.19                      $12.81

     (b) Holders. As of January 1, 2000, the number of holders of record of the
         -------
Company's Class A Common Stock was approximately 530. The Company believes that
there are approximately an additional 2,000 holders who own shares of the
Company's Class A Common Stock in street name. As of the same date, there were
approximately 13 holders of record of the Company's Class B Common Stock.

     (c) Dividends. The Company instituted a quarterly cash dividend for holders
         ---------
of Class A and Class B Common Stock during the fourth quarter of 1992. Dividends
have been declared and paid for each succeeding quarter. Effective with the May
1998 dividend payment the Company increased the quarterly cash dividend from
$0.035 to $0.05 per share.

     The determination as to the payment and the amount of future cash dividends
will depend upon the Company's then current financial condition, capital
requirements, results of operations and other factors deemed relevant by the
Company's Board of Directors. In addition, a certain loan agreement to which the
Company is a party limits the amount of cash dividends that the Company can
declare, and also imposes certain conditions with respect thereto. The Company's
Certificate of Incorporation, as amended, also provides that any dividends paid
on Class A Common Stock must be at least equal to the dividends paid on the
Company's Class B Common Stock on a per share basis. Moreover, no dividend may
be paid to Class B stockholders without first being paid to Class A
stockholders.

                                      11
<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA
-------   -----------------------

     The following selected financial data of the Company for the 1995 through
1999 fiscal years has been derived from the Consolidated Financial Statements of
the Company. This selected financial data should be read in conjunction with the
Consolidated Financial Statements and notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
                                                                (In Thousands, except share and per share data)
                                                                -----------------------------------------------
                                                  1999              1998              1997              1996              1995
                                                 ------            ------            ------            ------            -----
<S>                                          <C>                <C>                <C>                <C>                <C>

Earnings Data (1)
-------------------------------------
Net Sales ...........................        $   441,706        $   413,527        $   325,289        $   256,332        $   220,014

Earnings Before
Income Taxes ........................        $    11,856        $    18,361        $    34,978        $    29,344        $    20,744

Net Earnings ........................        $     5,762        $    11,482        $    22,120        $    18,487        $    12,550

Earnings Per Share
     Basic ..........................        $      0.42        $      0.83        $      1.64        $      1.42        $      0.95

     Diluted ........................        $      0.40        $      0.78        $      1.52        $      1.31        $      0.95

Number of Weighted
Average Class A and
Class B Shares
Outstanding
     Basic ..........................         13,878,060         13,824,331         13,464,479         13,064,736         13,147,451

     Diluted ........................         14,412,660         14,747,523         14,523,356         14,073,381         13,270,544


Balance Sheet Data
-------------------------------------
Working Capital .....................        $    40,456        $    40,046        $    28,111        $    28,213        $    24,018

Total Assets ........................        $   329,581        $   329,130        $   243,778        $   152,464        $   102,606

Long-term Debt ......................        $   124,765        $   121,054        $    56,955        $    36,339        $    15,031

Stockholders' Equity ................        $   124,579        $   123,619        $   112,430        $    84,317        $    59,113

</TABLE>

-------------------
(1)  Effective for the year ended January 3, 1998, the Company adopted SFAS No.
     128, "Earnings per Share". In accordance with SFAS No. 128, the basic and
     diluted EPS and weighted average shares outstanding have been restated for
     all periods presented. Earnings per share and the number of weighted
     average Class A and Class B Shares of Common Stock outstanding have been
     adjusted to reflect the 3-for-2 stock split effectuated in the form of a
     fifty percent dividend paid on June 28, 1996 to stockholders of record as
     of June 14, 1996, and the 5-for-4 stock split effectuated in the form of a
     twenty-five percent dividend paid on January 20, 1995 to stockholders of
     record as of January 6, 1995.


                                      12
<PAGE>

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
------     -------------------------------------------------
           CONDITION AND RESULTS OF OPERATIONS
           -----------------------------------

General
     The domestic ready-to-assemble ("RTA") furniture market has experienced
significant growth over the past several years and has emerged as a key
component of the overall U.S. home and office furnishings industry. The growing
popularity and acceptance of RTA furniture products at both the retail and
consumer levels are the result, in the opinion of the Company, of basic
structural changes in the retail channels of distribution and increased demand
engendered by fundamental demographic trends.

     In recent years, the Company has committed substantial resources to the
development and implementation of a diversified sales, marketing, and product
strategy in order to capitalize on growth opportunities presented by emerging
retail channels of distribution and changes in consumer demographics and
preferences. Accordingly, the Company has structured its business to offer a
wide variety of RTA furniture products through increasingly popular retail
distribution channels, including electronics superstores, office superstores,
discount mass merchants, home improvement centers and home furnishings
retailers. The Company continues to strive towards building long-term
relationships with quality retailers in existing and emerging high-growth
distribution channels to develop and sustain its future growth.

     Beginning in 1998 and continuing in 1999, the Company was involved in
advancing several strategic business initiatives, including integration of the
newly acquired Virginia facility (Fournier), the launching of new surface
technology, a facility expansion to automate the warehouse operation at the
Erie, Pennsylvania facility and the adaptation of Rohr-Bush manufacturing. The
Company is continually monitoring these initiatives in an effort to reduce costs
and enhance profitability.

     On April 22, 1998, the Company acquired all of the issued and outstanding
stock of Fournier Furniture, Inc. ("Fournier"), a Virginia based manufacturer of
RTA furniture, for a purchase price of $7.0 million in cash. Substantially all
of Fournier's debt that existed on April 22, 1998 has been repaid utilizing the
Company's existing credit facility. The acquisition of Fournier has been
accounted for using the purchase method of accounting and accordingly, the
operating results of Fournier have been included in the consolidated financial
statements of the Company from the date of acquisition.

     On June 30, 1997, the Company acquired a 51% interest in the Rohr Gruppe, a
German furniture manufacturer, which name was subsequently changed to Rohr-Bush
GmbH & Co. ("Rohr-Bush"). On February 29, 2000, the Company executed a
definitive agreement with certain members of the Rohr family to acquire the
family's approximately 49% remaining interest in Rohr-Bush. The transaction is
expected to close on or before October 31, 2000.

     In the first quarter of 1997, the Company formed a wholly-owned German
subsidiary, Bush-Viotechnik GmbH ("Bush-Viotechnik"), to service the global
market for advanced "surface

                                      13
<PAGE>

technologies" in diverse applications. These applications include products
associated with the furniture, automotive, electronics, building and
construction industries. Bush-Viotechnik has developed an advanced surface
technology manufacturing line which is completed and installed in the Company's
Erie, Pennsylvania facility.

     The Company did not experience any material operational disruptions due to
the Year 2000 computer software date rollover issue. The Company is continuing
to proactively monitor both internal systems as well as external vendors for any
potential residual Year 2000 issues. However, there can be no assurance that
residual Year 2000 issues will not have a material adverse effect on the
Company's financial position. The Company did not separately track the internal
costs incurred on the Year 2000 project. Such costs were principally payroll and
related costs for its internal information technology personnel. Certain
mainframe computer software upgrades necessary to become Year 2000 compliant
were not an incremental expense, as the software upgrade was provided as part of
the Company's software maintenance agreement. The total cost of the Year 2000
project, excluding the above items, was approximately $500,000.

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activity", which is required to be adopted by the
Company in 2001. The Statement will require the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
of underlying transactions must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of derivatives will either be offset against the change in fair value of
the hedged assets, liabilities or firm commitment through earnings or recognized
in other comprehensive income until the hedged item is recognized in earnings.
The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. Management has not yet determined the effect
SFAS No. 133 will have, if any, on the Company's consolidated financial
position, results of operations or cash flows.

     Except for the historical information contained herein, the matters
discussed in this Annual Report on Form 10-K are forward-looking statements, and
are identified by words such as "may", "will", "should", "expect", "scheduled",
"plan", "intend", "contemplate", "believe", "anticipate", or the negative of
such words or other similar words. Forward looking statements involve risks and
uncertainties, including, but not limited to, economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and prices, and other factors discussed in the
Company's filings with the Securities and Exchange Commission.

                                      14
<PAGE>

Results of Operations

     The following table shows the approximate percentage of certain items
included in the Consolidated Statements of Earnings relative to net sales for
the fiscal years indicated:

                                                 Percentage of Net Sales
                                             -------------------------------
                                                 1999       1998      1997
                                                 ----       ----      ----
Net Sales                                      100.0%     100.0%    100.0%
Cost of Sales                                   70.1%      72.8%     70.2%
                                                -----      -----     -----
     Gross Profit                               29.9%      27.2%     29.8%

Selling, General and Administrative Expenses    22.9%      21.3%     17.9%
Restructuring                                    2.2%         0%        0%
                                               ------    -------   -------
     Operating Income                            4.8%       5.9%     11.9%

Interest Expense                                 2.1%       1.4%      1.1%
                                                -----     ------    ------
Earnings Before Income Taxes                     2.7%       4.5%     10.8%

Income Taxes                                     1.4%       1.7%      4.0%
                                               ------     ------    ------
     Net Earnings                                1.3%       2.8%      6.8%
                                               ======     ======    ======

     The following paragraphs provide an analysis of the changes in net sales,
selected cost and expense items, and earnings for fiscal years 1997 through
1999.

Results of Operations: Fiscal 1999 Compared to Fiscal 1998
     The Company's net sales for the 1999 fiscal year compared to the 1998
fiscal year increased $28,179,000, or approximately 6.8%, to $441,706,000. The
increase in net sales was attributable to good sales momentum at the retail
level, primarily from new product placements at several key major retail
customers. Revenues were, however, partially offset by lower sales in the
European operation which was part of the planned downsizing of operations made
during the first quarter of 1999.

     The Company's cost of sales increased by $8,662,000 in 1999, as compared to
1998, primarily as a result of higher sales volumes. The cost of sales as an
approximate percentage of net sales decreased by 2.7% from 72.8% in 1998 to
70.1% in 1999. The decrease in cost of sales as a percentage of net sales was
primarily a result of improved operating performance.

     For 1999, selling, general and administrative expenses increased by
$12,817,000 compared to 1998. The increase in selling, general and
administrative expenses was primarily a result of higher variable selling
expenses, both in general and as a result of a mix of sales into certain
customers. Selling, general and administrative expenses increased as an
approximate percentage of net sales from 21.3% in 1998 to 22.9% in 1999.

     Interest expense increased to $9,430,000 in 1999 (or approximately 2.1% of
net sales) from $5,897,000 in 1998 (or approximately 1.4% of net sales). The
increase in interest expense was

                                      15
<PAGE>

primarily due to both an increase in average debt, primarily related to the
Company's capital expenditures and an increase in average inventory levels, and
higher average interest rates paid on the Company's revolving credit facility.

     The Company's overall effective federal, state and local tax rate increased
from 37.5% in 1998 to 51.4% in 1999. The variance in rates is primarily related
to the impact of the lower deferred tax rates attributable to the 51% owned
Rohr-Bush subsidiary and the relationship of the Rohr-Bush operating loss to
consolidated income.

     During the first quarter of 1999, the Company finalized plans to
restructure certain of its operations resulting in non-recurring restructuring
costs amounting to $9,672,000 being charged to expense in 1999. Restructuring
costs include employee termination costs of approximately $7,800,000 related to
terminating approximately 305 employees based on cost reduction programs
implemented by the Company on a worldwide basis. The remaining components of the
restructuring costs include primarily asset write-downs ($300,000), lease
termination costs and other commitments ($900,000) and various other charges
($672,000). As of January 1, 2000 all components of the restructuring are
complete. Cash payments made during 1999 to the terminated employees totaled
approximately $6,115,000 resulting in a remaining liability for severance to
terminated employees of $1,685,000, as of January 1, 2000. This liability, which
is the only liability remaining for the restructuring, is included in other
accrued liabilities as of January 1, 2000.

     For 1999, the Company generated net earnings after taxes of $5,762,000 (or
$0.42 basic earnings per share and $.40 diluted earnings per share), as compared
to $11,482,000 (or $.83 basic earnings per share and $.78 diluted earnings per
share) for 1998. This was an approximate 49.8% decrease in net earnings. The
decrease in net earnings is primarily due to the restructuring initiative
described above.

Results of Operations: Fiscal 1998 Compared to Fiscal 1997
     The Company's net sales for the 1998 fiscal year compared to the 1997
fiscal year increased $88,238,000, or approximately 27.1%, to $413,527,000. The
increase in net sales was attributable to the inclusion of a full year of sales
from the Company's majority owned German subsidiary, Rohr-Bush (only four
months of Rohr-Bush sales were included in fiscal year 1997) and good sales
momentum at the retail level. Revenues were, however, negatively impacted by new
product introduction delays which occurred as a result of the assignment of
substantial internal resources to advance recent strategic business initiatives.
These initiatives included the integration of the newly acquired Virginia
facility (Fournier), the launching of new surface technology, a facility
expansion to automate the warehouse operation at the Erie facility and the
adaptation of Rohr-Bush manufacturing.

     The Company's cost of sales increased by $72,627,000 in 1998, as compared
to 1997, primarily as a result of higher sales volumes. The cost of sales as an
approximate percentage of net sales increased by 2.6% from 70.2% in 1997 to
72.8% in 1998. Higher cost of sales as a percentage of net sales was primarily
the result of increased costs associated with the business initiatives described



                                       16
<PAGE>

above.

     For 1998, selling, general and administrative expenses increased by
$29,873,000 compared to 1997. The increase in selling, general and
administrative expenses was primarily due to the inclusion of a full year of
Rohr-Bush and approximately eight months of Fournier in the Company's
consolidated financial statements, the costs associated with the business
initiatives described above, increased variable selling expenses (such as
commissions, marketing and promotional incentives), and other administrative
costs associated with the Company's higher sales volumes. Selling, general and
administrative expenses increased as an approximate percentage of net sales from
17.9% in 1997 to 21.3% in 1998.

     Interest expense increased to $5,897,000 in 1998 (or approximately 1.4% of
net sales) from $3,542,000 in 1997 (or approximately 1.1% of net sales). The
increase in interest expense was primarily due to an increase in average debt
related to the Company's capital expenditures, inventory growth and
acquisitions.

     The Company's overall effective federal, state and local tax rate increased
from 36.8% in 1997 to 37.5% in 1998. The exercise of stock options during 1998
resulted in a tax benefit amounting to $1,011,000, which has been credited
directly to paid-in capital and is not reflected in 1998's provision for taxes.

     For 1998, the Company generated net earnings after taxes of $11,482,000 (or
$0.83 basic earnings per share and $.78 diluted earnings per share), as compared
to $22,120,000 (or $1.64 basic earnings per share and $1.52 diluted earnings per
share) for 1997. This was an approximate 48.1% decrease in net earnings. The
decrease in net earnings is primarily due to increased costs associated with the
business initiatives described above.

Liquidity and Capital Resources
     Working capital at fiscal year end 1999 was virtually unchanged over fiscal
year end 1998, increasing by $410,000. Decreases in accounts payable and the
current portion of long-term debt and an increase in prepaid expenses and other
current assets and cash was almost equally offset by decreases in inventories,
accounts receivable and increases in other accrued liabilities and income taxes.
Total assets at fiscal year end 1999 were also virtually unchanged over fiscal
year end 1998, increasing by $451,000. Increases in net property, plant and
equipment were almost equally offset by decreases in total current assets and
other assets. Also, total liabilities at fiscal year end 1999 decreased
slightly, by $509,000, as compared to fiscal year end 1998. Decreases in total
current liabilities and other long-term liabilities was almost equally offset by
increases in long-term debt and deferred income taxes.

     During 1999, the Company expended $31,663,000 on capital expenditures,
which were financed primarily with cash flows from operating activities. Capital
expenditures in 2000 are currently forecasted to be approximately $25 to $30
million. In 1999, the Company repurchased $4,106,000 of the Company's Class A
Common Stock, received $59,000 from the exercise of stock options by

                                       17
<PAGE>

employees, received a tax benefit of $24,000 from the exercise of such options
and paid four quarterly dividends totaling $2,776,000 to its stockholders. The
cash dividend for each of the quarters in 1999 was $0.05 per share.

     The Company entered into a first amendment, dated as of August 17, 1998, to
its existing credit facility with The Chase Manhattan Bank, Mellon Bank, N.A.
and other lending institutions. The amendment modified the amount of money the
Company can borrow from an aggregate $155,000,000 to an aggregate $175,000,000.
In addition, the term of the credit facility was extended until June 30, 2003,
certain covenants were amended, and borrowings were permitted under the
anticipated single currency of participating member states of the European Union
(the Euro). The Company entered into a second amendment, dated as of December
31, 1998, to its existing credit facility with The Chase Manhattan Bank, Mellon
Bank, N.A. and other lending institutions. This amendment modifies both the
allowable consolidated leverage ratio and the allowable consolidated cash flow
coverage ratio. In addition, the pricing grid was modified primarily to reflect
the newly permitted ratios. The Company entered into a third amendment, dated as
of March 31, 1999, to its existing credit facility with The Chase Manhattan
Bank, Mellon Bank, N.A. and other lending institutions. This amendment modified
certain covenants of the Company under the credit facility, and evidenced the
lenders' consent to certain transactions, including the restructuring
effectuated by the Company. The Company entered into a fourth amendment, dated
as of February 29, 2000, with The Chase Manhattan Bank, Mellon Bank, N.A. and
other lending institutions. Based on certain financial tests, this amendment
permitted the applicable margin to be reduced earlier than provided for in the
third amendment.

     The credit facility provides for revolving credit loans, swing line loans
and multi-currency loans, within the parameters described below. A balloon
payment of the then remaining principal and accrued interest is due on the
termination date of the loan. The Company has classified all of the line of
credit as long-term debt, as there are no required principal payments due within
the next 12 months. At the Company's option, borrowings may be effectuated,
subject to certain conditions, on a NYBOR rate, a eurocurrency rate for dollars,
an applicable eurocurrency rate for certain foreign currencies, a money market
rate, or an alternative base rate. Eurocurrency loans bear interest at the then
current applicable LIBOR rate, plus an applicable margin. The applicable margin,
which pertains only to LIBOR and NYBOR rate loans, varies from 0.5% to 2.00%,
depending upon the Company's ability to satisfy certain quarterly financial
tests. In addition, the credit agreement permits the Company to request the
issuance of up to a maximum of $20,000,000 in letters of credit, which issuance
will be deemed part of the $175,000,000 maximum amount of borrowing permitted
under the credit facility.

     The line of credit agreement provides for achieving certain consolidated
cash flow coverage and leverage ratios, prescribes minimum 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.

                                       18
<PAGE>

     Inflation affects the Company's business principally in the form of cost
increases from materials and wages. Historically, the Company has generally been
able to offset these cost increases by improved productivity, cost and waste
reduction, more effective purchasing practices, and to a lesser extent, price
increases.

ITEM 7A.   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 on this facility at fiscal year end
1999 and at fiscal year end 1998, a one percentage point change in interest
rates would result in interest expense fluctuating approximately $1.2 million
annually for both balances.

     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 impact of converting foreign currency denominated
profit/loss into U.S. dollars and the balance sheet/consolidated income impact
of converting foreign currency denominated assets and liabilities into U.S.
dollars. The Company does not believe that a reasonably possible change of 10%
in any foreign currency exchange rate will materially affect the financial
position of the Company.


ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------    -------------------------------------------

     The financial information required by Item 8 is included elsewhere in this
Report (see Part IV, Item 14).


ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
-------    ------------------------------------------------
           ACCOUNTING AND FINANCIAL DISCLOSURE
           -----------------------------------

     None.

                                       19
<PAGE>

                                   PART III
                                   --------

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------   --------------------------------------------------

     The information required by Item 10 is hereby incorporated by reference
from the Registrant's definitive Proxy Statement for the Annual Meeting
scheduled to be held on May 11, 2000, under the caption, "Election of
Directors", to be filed by the Registrant.


ITEM 11.   EXECUTIVE COMPENSATION
--------   ----------------------

     The information required by Item 11 is hereby incorporated by reference
from the Registrant's definitive Proxy Statement for the Annual Meeting
scheduled to be held on May 11, 2000, under the caption, "Executive
Compensation", to be filed by the Registrant.


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
--------   ---------------------------------------------------
           MANAGEMENT
           ----------

     The information required by Item 12 is hereby incorporated by reference
from the Registrant's definitive Proxy Statement for the Annual Meeting
scheduled to be held on May 11, 2000, under the caption, "Security Ownership of
Management and Principal Stockholders", to be filed by the Registrant.


ITEM 13.   CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
--------   ---------------------------------------------

     The information required by Item 13 is hereby incorporated by reference
from the Registrant's definitive Proxy Statement for the Annual Meeting
scheduled to be held on May 11, 2000, under the caption "Certain Transactions",
to be filed by the Registrant.

                                       20
<PAGE>

                                    PART IV
                                    -------


ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
--------   --------------------------------------------
           REPORTS ON FORM 8-K
           -------------------

(A)  The consolidated balance sheets as of January 1, 2000 and January 2,
     1999 and the related consolidated statements of earnings,
     stockholders' equity, cash flows and financial statement schedule for
     each of the three years in the period ended January 1, 2000 are filed
     as part of this report:

(1)  Financial Statements                                              Page
     --------------------                                              ----

Independent Auditors' Report...........................................F-1
Consolidated Balance Sheets............................................F-2
Consolidated Statements of Earnings....................................F-3
Consolidated Statements of Stockholders' Equity........................F-4
Consolidated Statements of Cash Flows..................................F-5
Notes to Consolidated Financial Statements.............................F-6

(2)  Consolidated Financial Statement Schedules
     ------------------------------------------

Schedule II - Valuation and Qualifying Accounts........................S-1

     All other schedules are omitted because they are not applicable, or not
required because the required information is included in the Consolidated
Financial Statements or notes thereto.

(3)   Exhibits
      --------

3.1   Certificate of Incorporation. (1)

3.2   Amendment to Certificate of Incorporation, dated June 30, 1994. (6)

3.3   Amendment to Certificate of Incorporation, dated July 9, 1993. (4)

3.4   By-Laws. (1)

3.5   Amendment to By-Laws, dated October 27, 1999

10.1  The Registrant's 1985 Stock Plan, as amended. (4)

10.2  The Registrant's 1985 Incentive Stock Option Plan, as amended. (4)

                                       21
<PAGE>

10.3  Lease Agreement between County of Chautauqua Industrial Development Agency
      and the Registrant dated January 1, 1990. (2)

10.4  Employment Agreement between the Registrant and Paul S. Bush dated July
      29, 1992, as amended. (3)

10.5  Employment Agreement between the Registrant and Robert L. Ayres dated July
      29, 1992, as amended. (3)

10.6  Employment Agreement between the Registrant and Lewis H. Aronson dated
      July 29, 1992, as amended. (3)

10.7  Employment Agreement between the Registrant and David G. Messinger dated
      July 29, 1992, as amended. (3)

10.8  Second Supplemental Indenture of Trust between the County of Chautauqua
      Industrial Development Agency and the Trustee, with the consent of Marine
      Midland Bank, N.A., Mellon Bank, N.A. and the Registrant dated June 23,
      1992. (3)

10.9  Split Dollar Insurance Agreements between the Registrant and Paul Bush
      dated November 1, 1990 and March 15, 1991 and related Collateral
      Assignment Agreements of same dates. (3)

10.10 Split Dollar Insurance Agreement between the Registrant and Robert L.
      Ayres dated December 19, 1991 and related Collateral Assignment Agreement.
      (3)

10.11 Performance Bonus Plan. (5)

10.12 The Registrant's 1995 Stock Plan. (7)

10.13 Stock Redemption Agreement between the Registrant and Paul S. Bush dated
      July 10, 1997. (8)

10.14 Credit Agreement, dated as of June 26, 1997, by and among the Registrant,
      as Borrower, the Lenders party thereto from time to time, The Chase
      Manhattan Bank as administrative agent and Mellon Bank, N.A., as co-agent.
      (8)

10.15 First Amendment, dated as of August 17, 1998, to the Credit and Guarantee
      Agreement dated as of June 26, 1997. (9)

10.16 Second Amendment, dated as of December 31, 1998, to the Credit and
      Guarantee Agreement dated as of June 26, 1997. (10)

                                       22
<PAGE>

10.17 Third Amendment, dated as of March 31, 1999, to the Credit and Guarantee
      Agreement dated as of June 26, 1997. (11)

10.18 The Registrant's 1999 Stock Plan. (12)

10.19 Fourth Amendment, dated as of February 29, 2000, to the Credit and
      Guarantee Agreement dated as of June 26, 1997. (13)

21.1  List of Subsidiaries of Registrant.

23.1  Consent of Deloitte & Touche LLP, independent auditors.

----------------------

(1)   Incorporated by reference to the Registrant's Registration Statement on
      Form S-1 dated March 14, 1985 (File No. 2-96428).

(2)   Incorporated by reference to Registrant's Annual Report on Form 10-K for
      the fiscal year ended December 29, 1989.

(3)   Incorporated by reference to the Registrant's Annual Report on Form 10-K
      for the fiscal year ended January 2, 1993.

(4)   Incorporated by reference to the Registrant's Annual Report on Form 10-K
      for the fiscal year ended January 1, 1994.

(5)   Incorporated by reference to the Registrant's definitive Proxy Statement,
      dated May 16, 1994.

(6)   Incorporated by reference to the Registrant's Annual Report on Form 10-K
      for the fiscal year ended December 31, 1994.

(7)   Incorporated by reference to the Registrant's definitive Proxy Statement,
      dated March 29, 1995.

(8)   Incorporated by reference to the Registrant's Current Report on Form 8-K,
      filed September 10, 1997.

(9)   Incorporated by reference to the Registrant's Current Report on Form 8-K,
      filed September 14, 1998.

(10)  Incorporated by reference to the Registrant's Current Report on Form 8-K,
      filed March 10, 1999.

(11)  Incorporated by reference to the Registrant's Current Report on Form 8-K,
      filed June 15, 1999.

(12)  Incorporated by reference to the Registrant's Registration Statement on
      Form S-8 dated November 3, 1999 (File No. 333-90255).

(13)  Incorporated by reference to the Registrant's Current Report on Form 8-K,
      filed March 17, 2000.


(B)   Reports on Form 8-K.
      --------------------
      During the first quarter of fiscal year 2000, an 8-K was filed on March
      17, 2000 regarding

                                       23
<PAGE>

        an amendment to the Company's existing credit facility with The Chase
        Manhattan Bank, Mellon Bank, N.A. and other lending institutions.

                                       24
<PAGE>

INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders
Bush Industries, Inc.
Jamestown, New York

We have audited the accompanying consolidated balance sheets of Bush Industries,
Inc. and subsidiaries (the "Company") as of January 1, 2000 and January 2, 1999,
and the related consolidated statements of earnings, stockholders' equity, and
cash flows for each of the three years in the period ended January 1, 2000. Our
audits also included the financial statement schedule listed in the Index at
Item 14 (A) (2). These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Bush Industries, Inc. and
subsidiaries as of January 1, 2000 and January 2, 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
January 1, 2000 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

Deloitte & Touche LLP
Buffalo, New York

February 4, 2000
(February 29, 2000 as to Note 14)

                                      F-1
<PAGE>

<TABLE>
<CAPTION>

BUSH INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JANUARY 1, 2000 AND JANUARY 2, 1999
-----------------------------------------------------------------------------------------------------------------------------

                                                                                                        (In Thousands)
ASSETS                                                                                                1999            1998

<S>                                                                                                  <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                                         $  2,704        $  2,236
  Accounts receivable (less allowance for doubtful accounts of $1,911
    on January 1, 2000 and $1,905 on January 2, 1999)                                                 34,585          39,714
  Inventories                                                                                         55,681          61,629
  Prepaid expenses and other current assets                                                           11,356           6,182
                                                                                                    --------        --------
          Total current assets                                                                       104,326         109,761

PROPERTY, PLANT AND EQUIPMENT, NET                                                                   198,300         191,218

OTHER ASSETS                                                                                          26,955          28,151
                                                                                                    --------        --------

TOTAL ASSETS                                                                                        $329,581        $329,130
                                                                                                    ========        ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                                  $ 22,401        $ 36,198
  Income taxes                                                                                           585             107
  Other accrued liabilities                                                                           40,389          32,703
  Current portion of long-term debt                                                                      495             707
                                                                                                    --------        --------
          Total current liabilities                                                                   63,870          69,715

DEFERRED INCOME TAXES                                                                                  8,427           5,998
OTHER LONG-TERM LIABILITIES                                                                            7,940           8,744
LONG-TERM DEBT                                                                                       124,765         121,054
                                                                                                    --------        --------
          Total liabilities                                                                          205,002         205,511
                                                                                                    --------        --------

COMMITMENTS

STOCKHOLDERS' EQUITY:
  Common Stock - Class A                                                                               1,055           1,054
  Common Stock - Class B                                                                                 340             340
  Paid-in capital                                                                                     20,826          20,656
  Retained earnings                                                                                  105,615         102,629
  Accumulated other comprehensive income (loss)                                                        1,733            (264)
                                                                                                    --------        --------
          Subtotal                                                                                   129,569         124,415

  Less treasury stock, at cost                                                                        (1,146)           (796)
  Less notes receivable related to common stock                                                       (3,844)              0
                                                                                                    --------        --------
          Total stockholders' equity                                                                 124,579         123,619
                                                                                                    --------        --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                          $329,581        $329,130
                                                                                                    ========        ========
</TABLE>

See notes to consolidated financial statements.

                                      F-2
<PAGE>

<TABLE>
<CAPTION>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JANUARY 1, 2000, JANUARY 2, 1999 AND JANUARY 3, 1998
-------------------------------------------------------------------------------------------------------------------------




                                                                (In Thousands, except share and per share data)

                                                                       1999              1998              1997
                                                                    (52 Weeks)        (52 Weeks)        (53 Weeks)

<S>                                                                 <C>               <C>               <C>
NET SALES                                                           $  441,706         $ 413,527         $ 325,289
                                                                     ---------          --------          --------

COSTS AND EXPENSES:
  Cost of sales                                                        309,794           301,132           228,505
  Selling, general and administrative                                  100,954            88,137            58,264
  Interest expense                                                       9,430             5,897             3,542
  Restructuring                                                          9,672                 0                 0
                                                                     ---------          --------          --------
                                                                       429,850           395,166           290,311
                                                                     ---------          --------          --------

EARNINGS BEFORE INCOME TAXES                                            11,856            18,361            34,978

INCOME TAXES                                                             6,094             6,879            12,858
                                                                     ---------          --------          --------

NET EARNINGS                                                        $    5,762         $  11,482         $  22,120
                                                                     =========          ========          ========

EARNINGS PER SHARE
  Basic                                                                  $0.42             $0.83             $1.64
  Diluted                                                                $0.40             $0.78             $1.52

WEIGHTED AVERAGE SHARES
  OUTSTANDING
  Basic                                                             13,878,060        13,824,331        13,464,479
  Diluted                                                           14,412,660        14,747,523        14,523,356
</TABLE>



See notes to consolidated financial statements.

                                      F-3
<PAGE>

<TABLE>
<CAPTION>
BUSH INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 1, 2000, JANUARY 2, 1999 AND JANUARY 3, 1998
----------------------------------------------------------------------------------------------------------------------------------



                                                                                                  (In Thousands, except share data)

                                                        Common Stock - Par Value $.10
                                               ------------------------------------------------------
                                                         Class A                   Class B
                                               -------------------------  ---------------------------      Paid-in       Retained
                                                  Shares        Amount        Shares         Amount        Capital       Earnings

<S>                                              <C>         <C>             <C>          <C>            <C>           <C>
BALANCE, DECEMBER 28, 1996                       9,650,721   $       965     3,855,365    $       386    $    12,311   $    73,476
  Issuance of shares to pay loan                      --            --            --             --              171          --
  Issuance of shares for acquisition                  --            --            --             --            1,456          --
  Issuance of shares for patent rights                --            --            --             --              308          --
  Conversion of Class B stock to Class A           300,000            30      (300,000)           (30)          --            --
  Exercise of stock options                        278,755            28          --             --            2,467          --
  Tax benefit from exercise of stock options          --            --            --             --            1,563          --
  Dividends paid                                      --            --            --             --             --          (1,888)

  Comprehensive income:
    Net earnings                                      --            --            --             --             --          22,120
    Other comprehensive income:
      Foreign currency translation                    --            --            --             --             --            --
                                                ----------       -------     ---------          -----       --------     ---------
           Total comprehensive income

BALANCE, JANUARY 3, 1998                        10,229,476         1,023     3,555,365            356         18,276        93,708
  Conversion of Class B stock to Class A           160,000            16      (160,000)           (16)          --            --
  Exercise of stock options                        155,362            15          --             --            1,369          --
  Tax benefit from exercise of stock options          --            --            --             --            1,011          --
  Dividends paid                                      --            --            --             --             --          (2,561)

  Comprehensive income:
    Net earnings                                      --            --            --             --             --          11,482
    Other comprehensive income:
      Foreign currency translation                    --            --            --             --             --            --
      Minimum pension liability                       --            --            --             --             --            --
                                                ----------       -------     ---------          -----       --------     ---------
           Total comprehensive income


BALANCE, JANUARY 2, 1999                        10,544,838         1,054     3,395,365            340         20,656       102,629
  Acquisition of treasury stock                       --            --            --             --             --            --
  Sale of stock to employees                          --            --            --             --               88          --
  Exercise of stock options                          9,618             1          --             --               58          --
  Tax benefit from exercise of stock options          --            --            --             --               24          --
  Dividends paid                                      --            --            --             --             --          (2,776)

  Comprehensive income:
    Net earnings                                      --            --            --             --             --           5,762
    Other comprehensive income:
      Foreign currency translation                    --            --            --             --             --            --
      Minimum pension liability                       --            --            --             --             --            --
                                                ----------       -------     ---------          -----       --------     ---------
           Total comprehensive income


BALANCE, JANUARY 1, 2000                        10,554,456   $     1,055     3,395,365    $       340    $    20,826   $   105,615
                                                ==========       =======     =========          =====       ========     =========

</TABLE>


<TABLE>
<CAPTION>
                                                                  (In Thousands, except share data)

                                                                     Accumulated
                                                                        Other               Treasury Stock
                                                Comprehensive       Comprehensive       ----------------------       Notes
                                                   Income           Income (Loss)       Shares         Amount     Receivable
<S>                                              <C>                 <C>                <C>        <C>            <C>
BALANCE, DECEMBER 28, 1996                                           $      --          224,965    $     2,821    $      --
  Issuance of shares to pay loan                                            --          (13,411)          (168)          --
  Issuance of shares for acquisition                                        --         (123,075)        (1,544)          --
  Issuance of shares for patent rights                                      --          (25,000)          (313)          --
  Conversion of Class B stock to Class A                                    --             --             --             --
  Exercise of stock options                                                 --             --             --             --
  Tax benefit from exercise of stock options                                --             --             --             --
  Dividends paid                                                            --             --             --             --

  Comprehensive income:
    Net earnings                                 $   22,120                 --             --             --             --
    Other comprehensive income:
      Foreign currency translation                     (137)                (137)          --             --             --
                                                   --------              -------      ---------        -------        -------
           Total comprehensive income            $   21,983
                                                   ========

BALANCE, JANUARY 3, 1998                                                    (137)        63,479            796           --
  Conversion of Class B stock to Class A                                    --             --             --             --
  Exercise of stock options                                                 --             --             --             --
  Tax benefit from exercise of stock options                                --             --             --             --
  Dividends paid                                                            --             --             --             --

  Comprehensive income:
    Net earnings                                 $   11,482                 --             --             --             --
    Other comprehensive income:
      Foreign currency translation                      (36)                 (36)          --             --             --
      Minimum pension liability                         (91)                 (91)          --             --             --
                                                   --------              -------      ---------        -------        -------
           Total comprehensive income            $   11,355
                                                   ========

BALANCE, JANUARY 2, 1999                                                    (264)        63,479            796           --
  Acquisition of treasury stock                                             --          287,008          4,106           --
  Sale of stock to employees                                                --         (268,574)        (3,756)         3,844
  Exercise of stock options                                                 --             --             --             --
  Tax benefit from exercise of stock options                                --             --             --             --
  Dividends paid                                                            --             --             --             --

  Comprehensive income:
    Net earnings                                 $    5,762                 --             --             --             --
    Other comprehensive income:
      Foreign currency translation                    1,987              1,987             --             --             --
      Minimum pension liability                          10                 10             --             --             --
                                                   --------              -------      ---------        -------        -------
           Total comprehensive income            $    7,759
                                                   ========

BALANCE, JANUARY 1, 2000                                             $     1,733         81,913    $     1,146    $     3,844
                                                                         =======      =========        =======        =======
</TABLE>

See notes to consolidated financial statements.


                                      F-4
<PAGE>

<TABLE>
<CAPTION>

BUSH INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 1, 2000, JANUARY 2, 1999 AND JANUARY 3, 1998
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                     (In Thousands)
                                                                                           1999            1998             1997
<S>                                                                                     <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings                                                                          $  5,762         $ 11,482         $ 22,120
  Adjustments to reconcile:
    Depreciation and amortization                                                         17,203           12,592            7,787
    Deferred income taxes                                                                 (1,558)          (1,137)             406
  Changes in assets and liabilities affecting cash flows:
    Accounts receivable                                                                    7,514            6,511              291
    Inventories                                                                            4,304          (27,472)           4,209
    Prepaid expenses and other current assets                                             (2,807)           1,540           (1,295)
    Accounts payable                                                                     (12,077)           6,470            1,993
    Income taxes                                                                           1,929            1,417              515
    Other accrued liabilities                                                              9,272           (5,494)          (3,039)
                                                                                        --------         --------         --------
Net cash provided by operating activities                                                 29,542            5,909           32,987
                                                                                        --------         --------         --------

CASH FLOWS USED FOR INVESTING ACTIVITIES:
  Capital expenditures                                                                   (31,663)         (48,182)         (28,474)
  Acquisition of business                                                                      0           (7,000)               0
  Increase in other assets                                                                (1,125)          (1,729)          (2,676)
                                                                                        --------         --------         --------
Net cash used in investing activities                                                    (32,788)         (56,911)         (31,150)
                                                                                        --------         --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayments of long-term debt                                                              (707)         (11,008)         (47,444)
  Proceeds from long-term debt                                                            10,106           61,341           45,656
  Purchase of Class A Stock for treasury                                                  (4,106)               0                0
  Exercise of stock options                                                                   59            1,384            2,495
  Dividends paid (per share $.20 - 1999; $.185 - 1998; $.140 - 1997)                      (2,776)          (2,561)          (1,888)
                                                                                        --------         --------         --------
Net cash provided by (used in) financing activities                                        2,576           49,156           (1,181)
                                                                                        --------         --------         --------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                    1,138              683              (67)
                                                                                        --------         --------         --------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                                                       468           (1,163)             589

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                               2,236            3,399            2,810
                                                                                        --------         --------         --------

CASH AND CASH EQUIVALENTS, END OF YEAR                                                  $  2,704         $  2,236         $  3,399
                                                                                        ========         ========         ========
</TABLE>


See notes to consolidated financial statements.


                                      F-5
<PAGE>

BUSH INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 1, 2000, JANUARY 2, 1999 AND JANUARY 3, 1998
--------------------------------------------------------------------------------


1.    DESCRIPTION OF BUSINESS AND SUMMARY OF
      SIGNIFICANT ACCOUNTING POLICIES

      Principles of Consolidation - The consolidated financial statements
      consist of Bush Industries, Inc. and its majority-owned subsidiaries
      (collectively, the "Company"). All significant intercompany accounts and
      transactions have been eliminated.

      Nature of Operations - The Company operates primarily in one industry
      segment - the design, manufacture and sale of both RTA (ready to assemble)
      and set-up furniture for the home and office. The majority of the
      Company's customer base is electronic and office product superstores and
      mass merchandisers throughout the United States and furniture stores in
      Europe.

      Cash Equivalents - The Company considers all highly liquid investments
      with a maturity of three months or less at the time of purchase to be cash
      equivalents.

      Inventories - Inventories, consisting of raw materials, work-in-progress
      and finished goods, have been stated at the lower of cost or market as
      determined by the first-in, first-out method.

      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. Construction
      in progress is recorded in property, plant and equipment and amounted to
      $38,503,000 and $24,040,000 at January 1, 2000 and January 2, 1999,
      respectively. Interest associated with construction indebtedness is
      capitalized. Interest amounting to approximately $1,333,000, $338,000 and
      $258,000 associated with construction in process was capitalized for 1999,
      1998 and 1997, respectively.

      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.

      Other Assets - Other assets consist primarily of goodwill, cash value of
      officer's life insurance policies and certain intangible assets. The
      Company continually reviews these assets to determine that the carrying
      values have not been impaired whenever significant events or changes occur
      which might impair recovery of their recorded costs.

                                      F-6
<PAGE>

      Fair Value of Financial Instruments - The fair value of financial
      instruments is determined by reference to various market data and other
      valuation techniques, as appropriate. Unless otherwise disclosed, the fair
      value of short-term instruments approximates their recorded values due to
      the short-term nature of the instruments. The fair value of long-term debt
      instruments approximates their recorded values primarily due to interest
      rates approximating current rates available for similar instruments.

      Foreign Currency Translation - Essentially all assets and liabilities are
      translated into U.S. dollars at year-end exchange rates, while elements of
      the income statement and cash flow statement are translated at average
      exchange rates in effect during the year. Adjustments arising from the
      translation of most net assets located outside the United States are
      recorded as a component of comprehensive income.

      Stock-Based Compensation - The Company accounts for stock-based
      compensation in accordance with Statement of Financial Accounting
      Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation". As
      permitted in that standard, the Company has elected to continue to follow
      the recognition provisions of Accounting Principles Board 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 for the years ended January 1, 2000,
      January 2, 1999 and January 3, 1998.

      Income Taxes - Deferred taxes are recorded for temporary differences
      between the financial reporting and tax basis of assets and liabilities
      using the anticipated tax rate when taxes are expected to be paid or
      recovered.

      Supplemental Cash Flow Information - Cash paid for interest was
      $10,835,000, $5,898,000 and $3,824,000 and cash paid for income taxes was
      $5,714,000, $5,689,000 and $12,814,000 in 1999, 1998 and 1997,
      respectively.

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

      Financial Statement Year End - The Company's year end is the closest
      Saturday to December 31. The accounts of two majority owned subsidiaries,
      Rohr-Bush GmbH & Co. and Bush-Viotechnik GmbH, have been consolidated on
      the basis of a year ending in October. Such fiscal period corresponds with
      those companies' fiscal year end.

      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.

      Comprehensive Income - Comprehensive income includes all changes in
      stockholders' equity during the period except those resulting from
      investments by owners and distribution to owners. The Company's
      comprehensive income includes net earnings, an amount for foreign currency
      translation and a minimum pension liability adjustment.

                                      F-7
<PAGE>

      Use of Estimates - The preparation of financial statements in conformity
      with generally accepted accounting principles requires management to make
      estimates and assumptions that effect the reported amounts of revenues and
      expenses during the reported period and the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the
      date of the financial statements. Actual results could differ from those
      estimates.

      Recent Accounting Pronouncements - In June 1998, the Financial Accounting
      Standards Board issued SFAS No. 133, "Accounting for Derivative
      Instruments and Hedging Activity", which is required to be adopted by the
      Company in 2001. The Statement will require the Company to recognize all
      derivatives on the balance sheet at fair value. Derivatives that are not
      hedges of underlying transactions must be adjusted to fair value through
      income. If the derivative is a hedge, depending on the nature of the
      hedge, changes in the fair value of derivatives will either be offset
      against the change in fair value of the hedged assets, liabilities or firm
      commitments through earnings or recognized in other comprehensive income
      until the hedged item is recognized in earnings. The ineffective portion
      of a derivative's change in fair value will be immediately recognized in
      earnings. Management has not yet determined the effect SFAS No. 133 will
      have, if any, on the Company's consolidated financial position, results of
      operations or cash flows.

2.    INVENTORIES

      Inventories consist of (in thousands):

                                                       January 1,     January 2,
                                                          2000           1999

      Raw materials                                    $  16,533       $ 17,663
      Work in progress                                     7,077          9,754
      Finished goods                                      32,071         34,212
                                                       ---------       --------
      Total                                            $  55,681       $ 61,629
                                                       =========       ========

3.    PROPERTY, PLANT AND EQUIPMENT, NET

      Property, plant and equipment consist of (in thousands):

                                                       January 1,     January 2,
                                                          2000           1999

      Land                                             $   5,559       $  6,704
      Building and improvements                          114,494        107,829
      Machinery and equipment                            167,987        163,945
      Transportation equipment                             1,571          1,698
      Office equipment                                    12,008          9,085
      Leasehold improvements                                 695          1,497
                                                       ---------       --------
                                                         302,314        290,758
      Less accumulated depreciation                     (104,014)       (99,540)
                                                       ---------       --------
      Total                                            $ 198,300       $191,218
                                                       =========       ========

                                      F-8
<PAGE>

<TABLE>
<CAPTION>
4.    OTHER ACCRUED LIABILITIES

      Other accrued liabilities consist of (in thousands):

                                                                                                       January 1,        January 2,
                                                                                                          2000              1999
<S>                                                                                                    <C>               <C>
      Payroll, profit sharing and related
       liabilities                                                                                       $ 14,977          $ 12,775
      Commissions and sales related expenses                                                               23,897            16,512
      Other                                                                                                 1,515             3,416
                                                                                                          -------           -------
      Total                                                                                              $ 40,389          $ 32,703
                                                                                                          =======           =======


5.    LONG-TERM DEBT

      Long-term debt consists of:

                                                                                                               (In thousands)
                                                                                                       January 1,        January 2,
                                                                                                          2000              1999

      Revolving credit facility with first contractual principal payment
        due June 2003                                                                                    $119,895          $115,690

      Industrial Development Revenue Bonds, issued December 27, 1984, interest at rate
        of short-term, tax exempt obligations (TENR rate) plus 1/2% to 2%, depending
        on market. Future principal payment of $75,000 due January 2000.                                       75               375

      Pennsylvania Industrial Development Authority loan, issued
        October 3, 1996, interest at a rate of 3%. Monthly principal and
        interest payments of $13,812 are due through 2011.                                                  1,659             1,773

      Pennsylvania Industrial Development Authority loan, issued
        February 26, 1997, interest at a rate of 3.75%. Monthly
        principal and interest payments of $14,544 are due through 2012.                                    1,712             1,820

      Pennsylvania Sunny Day Loan Fund loan, issued June 27, 1996, interest at a rate
        of 3%. Monthly principal and interest payments of $13,812 are due through 2011.                     1,620             1,735

      Pennsylvania Machinery & Equipment Loan Fund loan, issued
        November 6, 1996, interest at a rate of 3%. Monthly principal
        and interest payments of $6,707 are due through 2003.                                                 299               368
                                                                                                          -------           -------
      Total debt                                                                                          125,260           121,761
      Less current portion                                                                                   (495)             (707)
                                                                                                          -------           -------
      Total long-term debt                                                                               $124,765          $121,054
                                                                                                          =======           =======
</TABLE>

                                      F-9
<PAGE>

      The Company finances operations through a $175 million revolving credit
      facility with a consortium of banks. The revolving credit facility is
      available through June 30, 2003. The Company classifies this facility as
      long-term because there are no contractual requirements for the repayment
      of principal until that time. Interest is payable on the average daily
      balance of loans outstanding on a NYBOR based rate (7.69% at December 30,
      1999) or a FIBOR based rate (7.00% at January 1, 2000) option. As part of
      this revolving line, the Company may also issue letters of credit, not to
      exceed $20 million, which issuance will be deemed part of the $175 million
      maximum amount of borrowing permitted. As of January 1, 2000, letters of
      credit amounting to $4,327,750 were outstanding.

      The revolving credit facility 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. In
      addition, the revolving credit facility provides for certain limitations
      of the amount of cash dividends that the Company can declare.

      The Industrial Development Revenue Bonds are supported by a $303,750
      letter of credit (which is included in the total letters of credit
      outstanding of $4,327,750 as discussed above) expiring in February 2000.
      The bonds are further collateralized by land, building and certain
      equipment acquired with the proceeds.

      A five-year summary of aggregate principal payments on outstanding
      long-term debt is (in thousands):

      2000                                                              $    495
      2001                                                                   434
      2002                                                                   448
      2003                                                               120,356
      2004                                                                   397
      Thereafter                                                           3,130
                                                                        --------
      Total                                                             $125,260
                                                                        ========
6.    COMMITMENTS

      The Company has incurred rental expense for manufacturing and warehouse
      space and equipment. A summary of rent expense follows (in thousands):

                                               1999          1998           1997

      Real estate                             $1,310        $1,144         $ 769
      Equipment                                2,156         2,555         1,451

      Minimum future obligations over the next five years under all operating
      leases are summarized as follows (in thousands):

      2000                                                                $2,673
      2001                                                                 1,717
      2002                                                                 1,132
      2003                                                                   363
      2004                                                                   274

                                      F-10
<PAGE>

7.    INCOME TAXES

      The provision (benefit) for income taxes is as follows (in thousands):

                                              1999          1998          1997

        Current:
          Federal                           $ 6,867       $ 7,550       $11,662
          State                                 785           466           790
        Deferred                             (1,558)       (1,137)          406
                                             ------        ------        ------
        Total                               $ 6,094       $ 6,879       $12,858
                                             ======        ======        ======

      The types and tax effects of temporary differences included in deferred
      tax assets and liabilities are as follows (in thousands):

                                                            1999          1998

        Deferred Tax Assets:
          Accounts receivable                            $    710      $    657
          Accrued expenses                                  4,868         2,323
          Inventories                                       1,408           960
          Deferred income                                     495           581
          State investment tax credit carryforward          3,099         3,907
          Subsidiary net operating loss carryforward        7,179         6,556
                                                          -------       -------
                                                           17,759        14,984

        Deferred Tax Liabilities:
          Property, plant and equipment                   (16,311)      (12,686)
                                                          -------       -------

          Subtotal                                          1,448         2,298

        Total valuation allowance                          (3,099)       (3,907)
                                                          -------       -------

        Net deferred tax liability                       $ (1,651)     $ (1,609)
                                                          =======       =======


                                                            1999          1998

        Reported as (in thousands):
          Current asset (included in prepaid expenses
            and other current assets)                      $ 6,776      $ 4,389
          Long-term liability                               (8,427)      (5,998)
                                                           -------      -------
        Net deferred tax liability                         $(1,651)     $(1,609)
                                                           =======      =======

     The Company has recorded a valuation allowance primarily in anticipation
     that certain state investment tax credits will expire prior to their usage.

                                      F-11
<PAGE>

      The provision for income taxes differs in each of the years from the
      federal statutory rate due to the following:

                                              1999         1998         1997

        Statutory rate                        35.0 %       35.0 %        35.0 %
        State taxes                            4.4          1.8           1.6
        Effect of non-deductible costs         2.6          1.1           0.7
        Effect of foreign tax rates            8.9          1.3           0.0
        Other, net                             0.5         (1.7)         (0.5)
                                              ----         ----          ----
        Effective tax rate                    51.4 %       37.5 %        36.8 %
                                              ====         ====          ====

      The Company realized tax benefits amounting to $24,000, $1,011,000 and
      $1,563,000 as the result of stock option transactions during 1999, 1998,
      and 1997, respectively. The benefit has been credited to paid-in capital
      and is not reflected in the current year provision for taxes.

8.    CAPITAL STOCK

      The authorized capital stock of the Company consists of 20,000,000 shares
      of Class A Common Stock, $.10 par value, and 6,000,000 shares of Class B
      Common Stock, $.10 par value. Dividends may be declared and paid on Class
      A Common Stock without being paid on Class B Common Stock. No dividend may
      be paid on Class B Common Stock without equal amounts paid concurrently on
      Class A Common Stock. Holders of Class A Common Stock have one-tenth vote
      per share and are entitled to elect at least 25% of the Board of Directors
      as long as the number of outstanding shares of Class A Common Stock is at
      least 10% of the total of all Common Stock outstanding. Holders of Class B
      Common Stock have one vote per share.

      On July 10, 1997, the Company entered into a stock redemption agreement
      with the principal shareholder, which provides that upon his death the
      Company may be required to redeem a portion of the Company's stock then
      owned by the shareholder's estate. The redemption price per share shall be
      determined at the then market price based upon a thirty day average prior
      to the closing of any such stock redemption. The amount of the redemption
      is limited to approximately $21.4 million which will be funded by the
      proceeds from life insurance policies maintained on the life of the
      principal shareholder. The shareholder's estate can request the Company to
      redeem shares under the agreement until the maximum time period permitted
      to pay estate taxes has elapsed.

9.    STOCK PLANS

      The Company currently has two open stock plans which provide for the
      issuance of Class A Common Stock. As of January 1, 2000, there were
      161,465 shares of Class A Common Stock available for issuance under the
      1995 Stock Plan and 166,961 shares of Class A Common Stock under the 1999
      Stock Plan. Incentive Stock Options granted under the 1995 Stock Plan must
      have an option price of at least 100% (110% for stockholders with more
      than 10% of the total combined voting power) of the fair market value of
      the Class A Common Stock on the date of the grant. The option price of the
      1995 Stock Plan and the Non-Qualified Stock Options granted pursuant to
      this plan shall be determined by the Compensation Committee of the Board
      of Directors, in its sole discretion. No option can be exercised within
      one year after the date of grant. Under the 1999 Stock Plan, shares may be
      awarded for such consideration as determined by the Company. No shares may
      be awarded under the 1999 Stock Plan to any officer and/or director of the
      Company, unless the 1999 Stock Plan has been previously approved by the
      requisite vote of the Company's stockholders.

                                      F-12
<PAGE>

      As of January 1, 2000, there were outstanding options to purchase
      1,251,517 shares of Class A Common Stock under the current and prior plans
      at prices ranging from $1.69 to $29.93 that could be exercised, as
      adjusted for stock splits effectuated in the form of stock dividends. Of
      these outstanding options, 1,248,996 have an exercise price of $8.91.

      The following is a summary of option transactions:

<TABLE>
<CAPTION>
                                                     1999          1998          1997
        <S>                                      <C>           <C>           <C>
        Options outstanding, beginning of year    1,574,889     1,639,751     1,857,506
        Options granted                              15,500        73,000        51,000
        Options exercised/cancelled                 (35,258)     (137,862)     (268,755)
                                                  ---------     ---------     ---------
        Options outstanding, end of year          1,555,131     1,574,889     1,639,751
                                                  =========     =========     =========
</TABLE>

      All of the options outstanding expire at various dates from 2000 through
      2009. The option price of the shares subject to options exercised in 1999
      ranged from $2.77 to $8.91. The weighted-average exercise prices of
      options were $6.12, $8.91 and $8.95 for fiscal years 1999, 1998 and 1997,
      respectively. The weighted-average grant-date fair value of options
      granted were $10.34, $25.14 and $23.12 for fiscal years 1999, 1998 and
      1997, respectively.

      In addition to the options granted under the aforementioned plans, the
      Company has outstanding 48,376 shares (35,718 shares exercisable) subject
      to non-qualifying options granted to certain key individuals which can be
      exercised through 2003 at an exercise price of $8.91, as adjusted for
      stock splits effectuated in the form of stock dividends.

      Pro forma information regarding net income and earnings per common 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. The fair value of those options were estimated at
      the date of grant using a Black-Scholes option pricing model with the
      following weighted-average assumptions for the years ended January 1,
      2000, January 2, 1999 and January 3, 1998, respectively: risk free
      interest rate of 6.55%, 4.80% and 5.50%; dividend yield of 1.45%, .90% and
      .60%; volatility factors of the expected market price of the Company's
      common stock of 44%, 39% and 30%; and a weighted-average expected life of
      7 years for all three years.

      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 pro forma net earnings, basic and diluted earnings per common
      share for the years ended January 1, 2000, January 2, 1999 and January 3,
      1998 were $5,729,000, $.41 and $.40; $11,126,000, $.80 and $.75; and
      $22,092,000, $1.64 and $1.52, respectively.

                                      F-13
<PAGE>

10.   PENSIONS

      The Company sponsors a defined benefit plan for eligible non-U.S.
      employees at its German facility.

      The following are reconciliations of the benefit obligation, the funded
      status of the plan, and the amounts recognized in the balance sheets (in
      thousands):

                                                           1999         1998

        Change in benefit obligation:
          Benefit obligation at beginning of year          7,131       $ 5,925
          Service cost                                       143           147
          Interest cost                                      381           400
          Foreign currency exchange rate changes          (1,294)          384
          Actuarial loss (gain)                             (100)          459
          Benefits paid                                     (202)         (184)
                                                          ------       -------
        Benefit obligations at end of year                 6,059         7,131
                                                          ------       -------

        Funded status (the plan is unfunded)              (6,059)       (7,131)
          Unrecognized net actuarial (gain) loss            (100)          459
                                                          ------       -------
        Net amount recognized                             (6,159)      $(6,672)
                                                          ======       =======

      Amounts recognized in the balance sheets consist of:

                                                           1999         1998

        Accrued benefit liability (included in other
        long-term  liabilities)                          $(6,240)      $(6,763)
        Accumulated other comprehensive loss                  81            91
                                                         -------       -------
        Net amount recognized                            $(6,159)      $(6,672)
                                                         =======       =======

      There were no plan assets at January 1, 2000 and January 2, 1999.
      Valuations of the pension plan as shown above were conducted as of October
      31, 1999 and 1998. The plan is funded to the extent of benefits paid.

      Weighted average assumptions for the years ended:

                                                   1999      1998       1997

        Discount rate                              6.00 %    6.25 %     7.25 %
        Rate of increase in compensation levels    2.50 %    3.00 %     3.00 %

                                      F-14
<PAGE>

      Components of net periodic benefit cost consisted of the following (in
      thousands):

                                                  1999         1998         1997

        Service cost                              $143         $147         $113
        Interest cost                              381          400          331
                                                  ----         ----         ----
        Net periodic benefit cost                 $524         $547         $444
                                                  ====         ====         ====

      The Company also sponsors defined contribution plans which cover
      substantially all of the Company's eligible U.S. employees. The plans
      provide for both direct employer contributions and a salary reduction
      feature under Section 40l(k). Employer contributions can be paid in cash
      or in shares of Class A Common Stock at the discretion of the Board of
      Directors. Net pension cost related to the plans was $1,462,000,
      $1,315,000 and $1,259,000 for the years ended January 1, 2000, January 2,
      1999 and January 3, 1998, respectively.

11.   SEGMENT AND GEOGRAPHIC INFORMATION

      The Company operates and manages its business in one reportable industry
      segment - the design, manufacture and sale of both RTA (ready to assemble)
      and set-up furniture for the home and office. The Company's geographic
      operations outside of the United States principally include Germany. The
      Company's products are sold throughout the world. Net sales by geographic
      area are presented by attributing net sales to external customers based on
      the domicile of the selling location. This data (in thousands) is
      presented in accordance with SFAS No. 131, "Disclosures about Segments of
      an Enterprise and Related Information", which the Company has
      retroactively adopted for all periods presented.

        Geographic areas                1999            1998            1997


        Net sales:
          United States               $370,675         $328,196        $299,979
          Germany                       71,031           85,331          25,310
                                      --------         --------        --------
                                      $441,706         $413,527        $325,289
                                      ========         ========        ========

                                                    January 1,        January 2,
                                                       2000              1999

        Long-lived assets:
          United States                              $162,480          $143,088
          Germany                                      35,820            48,130
                                                     --------          --------
                                                     $198,300          $191,218
                                                     ========          ========

                                      F-15
<PAGE>

      Electronic and office product superstores and mass merchandisers,
      throughout the United States and furniture stores in Europe, comprise a
      significant portion of the Company's customer base. The Company performs
      ongoing credit evaluations of its customers' financial condition and,
      generally, requires no collateral from its customers. Although the
      Company's exposure to credit risk associated with nonpayment by customers
      is affected by conditions or occurrences within the retail industry, the
      majority of trade receivables were current at January 1, 2000. The Company
      has one United States customer that accounted for total gross sales of
      approximately 21% in 1999, 15% in 1998 and 16% in 1997, and approximately
      23% and 11% of accounts receivable at January 1, 2000 and January 2, 1999,
      respectively. The Company has a second United States customer that
      accounted for total gross sales of approximately 16% in 1999, 11% in 1998
      and 9% in 1997, and approximately 13% and 14% of accounts receivable at
      January 1, 2000 and January 2, 1999, respectively.

12.   ACQUISITIONS

      On April 22, 1998, the Company acquired all of the issued and outstanding
      shares of Fournier Furniture, Inc. ("Fournier"), a Virginia based
      manufacturer of RTA furniture, for a purchase price of $7.0 million in
      cash. Substantially all of Fournier's debt that existed on April 22, 1998
      was repaid utilizing the Company's existing credit facility. The
      acquisition of Fournier has been recorded under the purchase method of
      accounting and accordingly, the results of operations of Fournier have
      been included in the consolidated financial statements from the date of
      acquisition. The excess of purchase price over fair value of the net
      tangible assets acquired resulted in an allocation of goodwill of
      approximately $11.9 million which is being amortized over 15 years.

      On June 30, 1997, the Company acquired a 51% interest in Rohr Gruppe
      (Rohr), a German furniture manufacturer by issuing 123,075 shares of Class
      A Common Stock (approximate market value on June 30, 1997 of $3,000,000).
      The transaction had been recorded under the purchase method of accounting
      and accordingly, the results of operations are included in the
      accompanying consolidated financial statements from the date of
      acquisition. The purchase price has been allocated to the assets acquired
      and liabilities assumed based on fair market value at the date of
      acquisition. The excess of purchase price over fair value of the net
      tangible assets acquired resulted in an allocation to goodwill of
      approximately $2.5 million which is being amortized over 15 years.

13.   RESTRUCTURING

      During the first quarter of 1999, the Company finalized plans to
      restructure certain of its operations resulting in non-recurring
      restructuring costs amounting to $9,672,000 being charged to expense in
      1999. Restructuring costs include employee termination costs of
      approximately $7,800,000 related to terminating approximately 305
      employees based on cost reduction programs implemented by the Company on a
      worldwide basis. The remaining components of the restructuring costs
      include primarily asset write-downs ($300,000), lease termination costs
      and other commitments ($900,000) and various other charges ($672,000). As
      of January 1, 2000 all components of the restructuring are complete. Cash
      payments made during 1999 to the terminated employees totaled
      approximately $6,115,000 resulting in a remaining liability for severance
      to terminated employees of $1,685,000, as of January 1, 2000. This
      liability, which is the only liability remaining for the restructuring, is
      included in other accrued liabilities as of January 1, 2000.

                                      F-16
<PAGE>

14.   SUBSEQUENT EVENT

      On February 29, 2000, the Company executed a definitive agreement with
      certain members of the Rohr family to acquire the family's approximately
      49% remaining interest in Rohr-Bush. The transaction is expected to close
      on or before October 31, 2000.

15.   QUARTERLY SALES AND EARNINGS DATA - UNAUDITED

<TABLE>
<CAPTION>
                                                                        (In Thousands, except per share data)
                                                              4th Qtr.        3rd Qtr.        2nd Qtr.        1st Qtr.
        <S>                                                   <C>            <C>              <C>             <C>
        1999

        Net sales                                             $123,429       $ 107,819         $98,873        $111,585
        Gross profit                                            37,893          33,099          30,667          30,253
        Net earnings                                             5,736           3,165           2,301          (5,440) *
        Earnings per share - basic                                0.41            0.23            0.17           (0.39)
        Earnings per share - diluted                              0.40            0.22            0.16           (0.38)

        1998

        Net sales                                             $113,373        $ 94,252         $97,089        $108,813
        Gross profit                                            29,693          25,486          26,724          30,492
        Net earnings                                             1,118           1,006           3,893           5,465
        Earnings per share - basic                                0.08            0.07            0.28            0.40
        Earnings per share - diluted                              0.08            0.07            0.26            0.37
</TABLE>

 *  Amount includes a pre-tax non-recurring charge of $9,672,000 (See Note 13).

                                      F-17
<PAGE>

Schedule II

<TABLE>
<CAPTION>
                                                       VALUATION AND QUALIFYING ACCOUNTS
                                                                 (In Thousands)
                                         Col. B
                                       Balance at                                              Col. D               Col. E
            Col. A                      Beginning                Col. C                        Deductions-         Balance at
         Description                    of Period               Additions                      Describe(1)        End of Period
                                                   ------------------------------------
                                                                         Charged to
                                                      Charged to       Other Accounts-
                                                    Costs & Expenses      Describe
<S>                                  <C>            <C>                <C>                     <C>              <C>
Allowance for doubtful accounts

Fiscal 1999                              $1,905           $ 690             $ 0                   $ 684              $1,911

Fiscal 1998                               1,329             834             394  (2)                652               1,905

Fiscal 1997                               2,036              90               0                     797               1,329
</TABLE>


(1)  Accounts written off, net of collections on accounts receivable previously
     written off

(2)  Business acquisition during 1998

                                      S-1
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                 REGISTRANT:

                                                 BUSH INDUSTRIES, INC.


March 21, 2000                                   By /s/ Paul S. Bush
                                                    -------------------------
                                                      Paul S. Bush, President


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

   SIGNATURE                    TITLE                       DATE
   ---------                    -----                       ----

/s/ Paul S. Bush
----------------------
Paul S. Bush              President, Chief
                          Executive Officer, and
                          Chairman of the Board
                          of Directors                     March 21, 2000

/s/ Robert L. Ayres
----------------------
Robert L. Ayres           Executive Vice President,
                          Chief Operating Officer,
                          Chief Financial Officer,
                          and Director                     March 21, 2000

/s/ Lewis H. Aronson
----------------------
Lewis H. Aronson          Senior Vice President of
                          Operations
                          and Director                     March 21, 2000

                                       25
<PAGE>

/s/ Douglas S. Bush
------------------------
Douglas S. Bush           Vice President of
                          Merchandising
                          and Director                     March 21, 2000

/s/ Gregory P. Bush
------------------------
Gregory P. Bush           Senior Vice President of
                          Product Development and
                          Research and Development
                          and Director                     March 21, 2000

/s/ Donald F. Hauck
------------------------
Donald F. Hauck           Senior Vice President
                          and Director                     March 21, 2000

/s/ David G. Messinger
------------------------
David G. Messinger        Senior Vice President of
                          Sales and Marketing
                          and Director                     March 21, 2000

/s/ Paul A. Benke
------------------------
Paul A. Benke             Director                         March 21, 2000

/s/ Jerald D. Bidlack
------------------------
Jerald D. Bidlack         Director                         March 21, 2000

/s/ David G. Dawson
------------------------
David G. Dawson           Director                         March 21, 2000

/s/ Robert E. Hallagan
------------------------
Robert E. Hallagan        Director                         March 21, 2000

/s/ Erland E. Kailbourne
------------------------
Erland E. Kailbourne      Director                         March 21, 2000

                                       26