<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13
or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 001-12335
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
BUTLER MANUFACTURING COMPANY
Incorporated in State of Delaware
BMA Tower - Penn Valley Park
Post Office Box 419917
Kansas City, Missouri 64141-0917
Phone: (816) 968-3000
I.R.S. Employer Identification Number: 44-0188420
Shares of common stock outstanding at
SEPTEMBER 30, 1997: 7,762,302
The name, address and fiscal year of the Registrant have not changed since the
last report.
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,
and (2) has been subject to such filing requirements for the past 90 days.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I. - FINANCIAL INFORMATION Page Number
<S> <C>
ITEM 1. Financial Statements
(1) Consolidated Financial Statements (unaudited):
Consolidated Statements of Operations for the Three and Nine Month
Periods Ended September 30, 1997 and 1996. 3
Consolidated Balance Sheets as of September 30, 1997 and
December 31, 1996. 4
Consolidated Statements of Cash Flows for the Nine Month
Periods Ended September 30, 1997 and 1996. 5
(2) Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7-8
PART II.- OTHER INFORMATION
ITEM 5. Other Information 9
ITEM 6. Exhibits and Reports on Form 8-K 9
</TABLE>
Page 2
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine month periods ended September 30, 1997 and 1996
(unaudited)
($000's omitted except for per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------ ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 241,031 $ 229,019 $ 670,211 $ 598,157
Cost of sales 197,149 187,492 552,926 488,486
-------- -------- -------- --------
Gross profit 43,882 41,527 117,285 109,671
Selling, general and administrative expenses 30,513 26,350 88,166 76,410
-------- -------- -------- --------
Operating income 13,369 15,177 29,119 33,261
International joint venture income (loss), net --- 108 222 408
Other income (expense), net 68 1,269 75 860
Gain on sale of Grain Systems --- --- 22,000 ---
-------- -------- -------- --------
Earnings before interest and taxes 13,437 16,554 51,416 34,529
Interest expense 950 1,059 3,860 3,224
-------- -------- -------- --------
Pretax earnings 12,487 15,495 47,556 31,305
Income tax expense 5,681 6,717 19,862 13,460
-------- -------- -------- --------
Net earnings $ 6,806 $ 8,778 $ 27,694 $ 17,845
======== ======== ======== ========
Earnings per common share* $ .86 $ 1.14 $ 3.57 $ 2.32
======== ======== ======== ========
</TABLE>
*Earnings per common share are based on net earnings and the average number of
common shares and common share equivalents outstanding during each period. The
weighted average number of shares outstanding used in the computation of
earnings per share are as follows:
Three months ended September 30, 1997 7,871,803
Three months ended September 30, 1996 7,702,801
Nine months ended September 30, 1997 7,753,125
Nine months ended September 30, 1996 7,707,803
See Accompanying Notes to Consolidated Financial Statements.
Page 3
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and December 31, 1996
(unaudited)
($000's omitted)
<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,412 $ 2,013
Receivables, net 118,402 110,136
Inventories:
Raw materials 35,081 37,292
Work in process 9,054 6,460
Finished goods 41,234 27,590
Lifo reserve (10,870) (11,252)
-------- --------
Total inventory 74,499 60,090
Real estate developments in progress 33,211 33,803
Deferred tax assets 8,878 8,878
Other current assets 10,922 7,141
-------- --------
Total current assets 247,324 222,061
Investments and other assets 35,180 24,701
Assets held for sale 9,423 13,260
Property, plant and equipment, at cost 230,778 228,051
Less accumulated depreciation (141,452) (150,653)
-------- --------
Net property, plant and equipment 89,326 77,398
-------- --------
$ 381,253 $ 337,420
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 4,965 $ 9,237
Current maturities of long-term debt 5,862 5,464
Accounts payable 87,252 74,549
Dividends payable 1,087 907
Accrued liabilities 59,848 62,222
Taxes on income 11,602 8,500
-------- --------
Total current liabilities 170,616 160,879
Deferred tax liabilities 3,837 3,837
Other noncurrent liabilities 12,157 9,865
Long-term debt, less current maturities 39,211 38,397
Shareholders' equity:
Common stock, no par value, authorized 20,000,000
shares, issued 9,088,200 shares, at stated value 12,623 12,623
Cumulative foreign currency translation adjustment (309) 551
Retained earnings 170,154 141,900
-------- --------
182,468 155,074
Less cost of common stock in treasury, 1,325,898 shares in
in 1997 and 1,526,735 shares in 1996 27,036 30,632
-------- --------
Total shareholders' equity 155,432 124,442
-------- --------
$ 381,253 $ 337,420
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
Page 4
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine month periods ended September 30, 1997 and 1996
(unaudited)
($000's omitted)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 27,694 $ 17,845
Adjustments to reconcile net earnings to net cash used
in operating activities:
Depreciation and amortization 9,127 7,151
Gain on sale of Grain Systems (13,299) ---
Equity (earnings) loss on joint ventures (207) 771
Change in asset and liabilities, net of businesses acquired and sold:
Receivables (7,606) (18,489)
Inventories (18,207) (3,964)
Real estate developments in progress 592 (21,296)
Other current assets (3,721) 2,481
Current liabilities excluding short-term debt 5,745 27,761
-------- --------
Net cash used in operating activities 118 12,260
Cash flows from investing activities:
Capital expenditures (20,140) (16,073)
Sale of Grain Systems 33,748 ---
Acquisition of new businesses (7,697) ---
Other, net (1,611) (4,457)
-------- --------
Net cash provided (used) by investing activities 4,300 (20,530)
Cash flows from financing activities:
Payment of dividends (2,751) (2,277)
Proceeds from issuance of long-term debt 790 771
Repayment of long-term debt (533) (342)
Net change in short-term debt (4,031) 2,753
Sale and issuance of treasury stock 783 1,303
Purchase of treasury stock (1,035) (1,981)
Other, net 2,618 857
-------- --------
Net cash provided by financing activities (4,159) 1,084
Effect of exchange rate changes on cash (860) 76
-------- --------
Net increase (decrease) in cash and cash equivalents (601) (7,110)
Cash and cash equivalents at beginning of year 2,013 7,253
-------- --------
Cash and cash equivalents at September 30 $ 1,412 $ 143
======== ========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
The Company purchased all of the capital stock of Modu-Line, Inc. for
191,777 shares of the Company's common stock issued from the treasury, plus
deferred cash payments and closing costs totaling $.5 million. The Company
also retired Modu-Line's existing bank debt of $4.5 million. In conjunction
with the acquisition, the value of treasury stock issued is shown below:
Fair value of assets acquired $11,982
Cash paid 4,982
-------
Treasury stock issued for purchase of capital stock $7,000
=======
See Accompanying Notes to Consolidated Financial Statements.
Page 5
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the accounting policies described in the
consolidated financial statements and related notes included in Butler
Manufacturing Company's 1996 Form 10-K. It is suggested that those
consolidated statements be read in conjunction with this report. The year-end
financial statements presented were derived from the Company's audited
financial statements. In the opinion of management, the accompanying
consolidated financial statements reflect all adjustments necessary for a fair
presentation of the financial position of Butler Manufacturing Company and the
results of its operations.
NOTE 2 - NEW ACCOUNTING PRONOUNCEMENT
In March 1997, the Financial Accounting Standards Board released FASB Statement
No. 128, "Earnings Per Share" which revises the calculation and presentation
provisions of Accounting Principles Board Opinion 15 and related
interpretations. Statement No. 128 is effective for the Company's fiscal year
ending December 31, 1997. Retroactive application will be required. The
Company expects the effect of adopting the new standard to be immaterial.
NOTE 3 - ACQUISITION AND DISPOSITION OF BUSINESS
On June 11, 1997, the Company announced the acquisition of Modu-Line Windows,
Inc. for 191,777 shares of Butler stock having a market value of approximately
$7 million, plus deferred cash payments and closing costs totaling $.5 million.
The Company also retired Modu-Line's existing bank debt of approximately $4.5
million. The fair value of assets acquired of $12 million consists primarily
of receivables, inventory, and equipment valued at $6.2 million with the
remaining amount allocated to goodwill which will be amortized over 40 years.
On June 23, 1997, the Company sold the business and substantially all of the
assets and liabilities used in the business of the Grain Systems Division, an
unincorporated division of the Company, to CTB, Inc., a privately owned company
in Indiana. The business was sold for an agreed upon price of approximately
$34 million in cash. The sale of the Grain Systems division generated an
after-tax gain of $13.3 million, or $1.72 per share. Net cash proceeds to the
Company were approximately $23 million.
Page 6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents decreased $1 million in the first nine months of 1997,
primarily due to increased investments in domestic operations and in working
capital. The increased working capital requirement was funded with short-term
borrowings. For the nine months ended September 30, 1997, domestic short term
borrowings averaged $25 million for 213 days compared to $8 million for 195
days in 1996.
The Company currently has revolving domestic bank credit facilities aggregating
$50 million and a separate line of credit for approximately $2.4 million for
its United Kingdom subsidiary. As of September 30, 1997, $9 million of the
credit line was utilized to provide a bank letter of credit to secure insurance
obligations. Management believes the Company's operating cash flow, along with
the bank credit lines, is sufficient to meet future liquidity requirements.
On September 16, 1997, the Company announced a 17% increase in its cash
dividend to a new annual rate of $.56 per share. The quarterly dividend of
$.14 per share is an increase from the $.12 per share previously paid, and was
paid on October 10, 1997 to shareholders of record as of the close of business
on September 26, 1997.
Capital expenditures were $20.1 million for the first nine months of 1997
compared to $16.1 million for the same period a year ago. Total capital
expenditures are projected to be approximately $33 million in 1997 compared to
actual expenditures of $22.7 million in 1996. Projected capital expenditures
for 1997 are primarily for investments in Butler's domestic operations, while
last year's expenditures included significant investments in new metal
buildings plants in China and Brazil.
RESULTS OF OPERATIONS
Net sales of $241 million for the quarter ended September 30, 1997 were up 5%
compared to the previous year. A very strong third quarter was achieved by
most of the U.S. operating units, particularly in the metal buildings systems
business. Third quarter 1996 results include $15 million in sales from the
Grain Systems business, which was sold in June of 1997. For the nine months
ended September 30, 1997, net sales were $670 million, or a 12% increase from a
year ago. The Building Systems Segment had increased volume as did the Other
Building Products Segment.
The third quarter 1997 consolidated gross profit was $43.9 million compared to
$41.5 million a year ago. The increase was primarily due to increased volume
in the Building Systems segment. For the nine months ended September 30, 1997,
consolidated gross profit was $117.3 million compared to $109.7 million in
1996. The 7% increase was attributable to the Building Systems and Other
Building Products segments. Other income in 1997 declined compared to a year
ago. Third quarter 1996 included a gain on the sale of a plant facility Butler
continued to own after the business was divested in 1993.
Net earnings from operations for the quarter ended September 30, 1997 were $6.8
million or $.86 per share compared to $8.8 million or $1.14 per common share in
1996. The Lester wood frame buildings business continued to operate at lower
profitability, due to backlog not being adequately priced to reflect the
current cost of lumber. In addition, the strength of the British pound against
the German mark severely depressed margins and reduced sales in Europe for
products fabricated in the Company's plant in Scotland and shipped to the
Continent. The Construction Services group had increased earnings, despite
lower sales in the third quarter, as a result of actions taken to reduce costs
and improve project execution. The net earnings from operations for the nine
months ended September 30, 1997 were $14.4 million (excluding the gain on the
sale of the Grain Systems business) or $1.85 per common share, compared to
$17.8 million or $2.32 per common share a year ago.
Page 7
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In addition, earnings were affected by start-up costs of the new metal
buildings plants in China and Brazil. Total net earnings for the nine months of
$27.7 million or $3.57 per common share, includes the sale of our Grain Systems
business.
Total backlog of $318 million is down 3% from the September 30, 1996 level.
FORWARD LOOKING INFORMATION
In addition to historical information included herein, this Report contains
forward-looking statements and information that are based on management's
beliefs as well as on assumptions made by and information currently available
to management. These forward-looking statements and information are within the
meaning of the Private Securities Litigation Reform Act of 1995. When used in
this Report, the words "anticipate," "intend," "plan," "believe," "estimate,"
"project," and similar expressions are intended to identify forward-looking
statements. Such statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions which could cause the
Company's future results and stockholder values to differ materially from those
expressed in such forward-looking statements. Such risks, uncertainties, and
assumptions include, but are not limited to, industry cyclicality, fluctuations
in customer demand and order pattern, seasonality related to weather, changes
in pricing and competitor action.
For additional comments, refer to the October 14, 1997 letter to shareholders,
which is attached as exhibit 19.
Page 8
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PART II. - OTHER INFORMATION
Item 5 Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(19) October 14, 1997 letter to shareholders
(27) Financial Data Schedule
(b) Reports on Form 8-K.
Page 9
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUTLER MANUFACTURING COMPANY
November 6, 1997 /s/ John J. Holland
- --------------------- -------------------------------
Date John J. Holland
Vice President - Finance
and Chief Financial Officer
November 7, 1997 /s/ Richard O. Ballentine
- --------------------- -------------------------------
Date Richard O. Ballentine
Vice President, General Counsel
and Secretary
Page 10
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EXHIBIT INDEX
Exhibit
Number Description
- ------- ---------------------------------------
19 October 14, 1997 letter to shareholders
27 Financial Data Schedule
Page 11
<PAGE> 1
Exhibit 19
Butler
Manufacturing
Company
THIRD
QUARTER
REPORT 1997
Nine Months Ended
September 30, 1997
BMA TOWER PENN VALLEY PARK KANSAS CITY, MO 64108
To Our Shareholders:
Butler's third quarter sales of $241 million were up 5% compared to the
previous year. Quarterly net earnings of $6.8 million, or $.86 per share, were
22% lower than third quarter earnings a year ago. Third quarter 1996 results
include $15 million in sales and $.18 in earnings per share from the Grain
Systems business, which was sold in June of 1997.
For the nine months, sales were 12% higher than for the same period last year,
and net earnings from operations were 19% lower. 1997 year-to-date reported
earnings include a gain of $13.3 million, or $1.72 per share, from the sale of
Grain Systems.
Very strong third quarter performance was achieved by most of Butler's U.S.
operating units. Gaining particular momentum was our metal building systems
business, which recorded a 17% increase in sales and 24% increase in earnings
compared to very positive results in the third quarter of 1996. The Lester wood
frame buildings business continued to operate at lower profitability, primarily
because of backlog not adequately priced to reflect the current cost of lumber.
Price increases have been implemented to address this situation. Butler Real
Estate has made significant profit contributions both this year and last.
Our metal buildings business in Europe is suffering because of the strength of
the British pound against the German mark. While that relationship has improved
somewhat recently, it has had the effect for most of the year of severely
depressing margins and reducing sales for products fabricated in our plant in
Scotland and shipped to the continent. We are pleased with the
operational progress being made in our new businesses in China and Brazil, but
start-up losses are greater than anticipated because of competitive conditions
in both of those markets. We are encouraged by the recent financial
improvements at Butler Shanghai, Inc., which achieved modest profitability for
the third quarter.
Butler's Construction Services group had lower sales but increased earnings in
the third quarter and for the year-to-date, compared to their results in 1996.
Actions to reduce costs and improve project execution are having a positive
effect on their overall performance.
The Architectural Products group is having an outstanding year. Nine month
sales, including Modu-Line Windows, Inc. acquired in June, were up 27% from a
year ago, and earnings rose 25%. All product lines in the group are doing well,
benefiting from good activity in the commercial and community segments of the
construction market.
Butler's balance sheet reflects considerable strength and flexibility.
Shareholders' equity of over $155 million is 32% higher than a year ago, and
long and short term debt is modest. Based on our good operating results, strong
financial condition, and favorable prospects for the future, the board of
directors approved a 17% increase in the cash dividend to a new annual rate of
$.56 per share. The $.14 per share quarterly dividend paid October 10 to
shareholders of record September 26 reflected that increase.
<PAGE> 2
We announced in a mid-September press release that Butler's combined annual
losses for our three international subsidiaries will total about $.70 per share
for 1997. We are addressing all three situations aggressively--reducing
expenses selectively and repositioning product costs and intensifying marketing
efforts in all three businesses. As a result of these actions, we look for
substantial improvement in their 1998 financial results.
In that same recent press release, we indicated that for all of 1997, we expect
Butler's operating earnings per share to be about 20% below the level of last
year. Part of that decline is attributable to our international difficulties
and part to the absence of the Grain Systems business sold earlier this year.
Market conditions in the U.S. remain positive for Butler's business. Backlog on
September 30 was $318 million compared to $329 million a year ago. Product
backlog was up 11% and construction backlog was down 41%, the latter primarily
due to delays in project closings and greater project selectivity. With a
favorable economic outlook and major improvements anticipated in our non-U.S.
operations, we are optimistic about the outlook for the foreseeable future.
Cordially yours,
Robert H. West
Chairman and Chief Executive Officer
October 14, 1997
Butler Manufacturing Company
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000015840
<NAME> BUTLER MANUFACTURING CO.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,412
<SECURITIES> 0
<RECEIVABLES> 118,402
<ALLOWANCES> 0
<INVENTORY> 74,499
<CURRENT-ASSETS> 247,324
<PP&E> 230,778
<DEPRECIATION> 141,452
<TOTAL-ASSETS> 381,253
<CURRENT-LIABILITIES> 170,616
<BONDS> 39,211<F1>
0
0
<COMMON> 12,623
<OTHER-SE> 182,468<F2>
<TOTAL-LIABILITY-AND-EQUITY> 381,253
<SALES> 670,211
<TOTAL-REVENUES> 670,279<F3>
<CGS> 552,926
<TOTAL-COSTS> 552,926
<OTHER-EXPENSES> 88,166<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,860
<INCOME-PRETAX> 25,556
<INCOME-TAX> 11,161
<INCOME-CONTINUING> 14,395
<DISCONTINUED> 0
<EXTRAORDINARY> 13,299
<CHANGES> 0
<NET-INCOME> 27,694
<EPS-PRIMARY> 3.57
<EPS-DILUTED> 3.57
<FN>
<F1>Reflects long-term debt, less current maturities
<F2>Reflects other stockholders' equity before deduction of $26 million cost of
treasury stock
<F3>Reflects net sales plus net international joint venture income less net other
expense
<F4>Consists of selling, general and administrative expense
</FN>
</TABLE>
