A gain from the sale of a furniture assembly business helped Bush Industries boost its fourth-quarter profits by 59 percent, but the Jamestown-based ready-to-assemble furniture maker also warned that its earnings would be flat this year.
With sales of its ready-to-assemble furniture in North America slumping, forcing the company to reduce its inventory and scale back production by about 35 percent during the first half of this year, Bush said it expects its total sales to grow by about 3 percent to an estimated $463 million.
The company also said it expects its profits this year to be flat, which was well below the 30 percent earnings growth that analysts were expecting, according to First Call Corp., which tracks earnings estimates.
The more downbeat forecast, coupled with operating profits that also fell short of expectations during the fourth quarter, caused Bush's stock to fall 94 cents Tuesday to $13.74.
Paul S. Bush, the company's chairman and president, said Bush expects the production cuts and inventory reductions planned during the first half of this year to reduce its earnings by about 30 cents per share. Shipments of ready-to-assemble furniture in North America are expected to drop by 15 percent as the economy remains sluggish and Bush's customers reduce their inventory, he said.
That drop will be partially offset by growth in the company's surface technologies business, as well as its European markets, where Bush bolstered its presence by acquiring the 49 percent of Rohr-Bush GmbH that it didn't already own during the fourth quarter.
Bush also said it plans to significantly increase its capital investment in its furniture business to increase its capacity and technical capabilities as part of its push into the commercial office and higher-end home furnishings markets.
The company also plans to double the capacity and capability of its surface technology business, which is expected to grow rapidly this year and beyond, Bush said.
During the fourth quarter, Bush's profits rose to $9.1 million, or 65 cents per share, from $5.74 million, or 40 cents per share, a year earlier. Part of that increase was due to a one-time gain of $2.3 million, or 16 cents per share, from the sale of The Assembly & Service Co. business to National Products Services.
Without that gain, Bush's profits rose to $6.8 million, or 49 cents per share, which was down from the 52 cents per share that analysts had been expecting.
Sales fell 4 percent to $118 million from $123.4 million because of a 12 percent drop in furniture sales, which offset a near quadrupling of revenues from Bush's surface technologies business.
For the year, Bush's profits more than quadrupled to $22.8 million, or $1.60 per share, from $5.76 million, or 40 cents per share, a year ago. Sales rose 2 percent to $451.2 million from $441.7 million.