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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1998
BUTLER MANUFACTURING COMPANY
BMA Tower, Penn Valley Park
(P.O. Box 419917)
Kansas City, Missouri 64141-0917
Telephone: (816) 968-3000
Incorporated in the State of Delaware
COMMISSION FILE NO. 0-603
IRS No. 44-0188420
The Company has no securities registered pursuant to Section 12(g) of the
Act. The only class of stock outstanding consists of Common Stock having no par
value 7,281,998 shares of which were outstanding at December 31, 1998. The
Common Stock and related Preferred Share Purchase Rights are registered pursuant
to Section 12(b) of the Act.
The aggregate market value of the Common Stock of the Company held by
non-affiliates, based upon the last sales price of such stock on February 22,
1999 was $167,473,413.
The Registrant 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
has been subject to such filing requirements for the past 90 days.
As indicated by the following check mark, disclosure of delinquent filers
pursuant to Rule 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:
The following documents are incorporated herein by reference:
(1) Butler Manufacturing Company 1998 Annual Report, pages 14 through 32
(the "Annual Report" incorporated into Part II).
(2) Butler Manufacturing Company Notice of Annual Meeting of Stockholders
and Proxy Statement, dated March 10, 1999 (the "Proxy
Statement" incorporated into Parts I and III).
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BUTLER MANUFACTURING COMPANY
FORM 10-K
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For the Fiscal Year Ended December 31, 1998
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CONTENTS
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PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 6
Item 3. Legal Proceedings........................................... 7
Item 4. Submission of Matters to a Vote of Security Holders......... 7
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters............................. 7
Item 6. Selected Financial Data..................................... 7
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 8
Item 7A. Quantitative and Qualitative Disclosure About Market
Risk ....................................................... 8
Item 8. Financial Statements and Supplementary Data................. 8
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...................... 8
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 8
Item 11. Executive Compensation...................................... 10
Item 12. Security Ownership of Certain Beneficial
Owners and Management....................................... 10
Item 13. Certain Relationships and Related Transactions.............. 10
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K................................................. 10
SIGNATURES............................................................... 14
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...................... 16
FINANCIAL STATEMENT SCHEDULES............................................ S-1
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PART I
Item 1.Business
(a) General Description of Business
The Company was founded as a partnership in 1901. It was incorporated in
Missouri in 1902 and reincorporated in Delaware in 1969. Its corporate
headquarters are located in Kansas City, Missouri, and principal plants and
offices are operated throughout the continental United States. Principal
international operations are conducted through Butler Building Systems, Ltd., a
wholly owned United Kingdom subsidiary and Beker Kft, a majority owned Hungarian
joint venture, Butler Shanghai Inc., a Chinese wholly owned subsidiary, Butler
do Brazil Limitada, a South American wholly owned subsidiary and Saudi Building
Systems Ltd. a Saudi Arabian joint venture.
The Company and its subsidiaries are primarily engaged in the marketing,
design and production of systems and components for nonresidential structures.
Products and services fall into four principal business segments: (1) Building
Systems, consisting primarily of custom designed and pre-engineered steel and
wood frame building systems for commercial, community, industrial and
agricultural uses; (2) Architectural Products, consisting primarily of curtain
wall and storefront systems, custom window systems, skylights and roof vents for
low-rise, medium-rise and high-rise nonresidential buildings; (3) Construction
Services, providing construction management services for purchasers of large,
complex or multiple site building projects; and (4) Real Estate, providing
build-to-suit-to-lease development services for corporations who prefer to lease
rather than own their facilities.
The Company's products are sold primarily through independent dealers.
Other Company products are sold through a variety of distribution arrangements.
(b) Financial Information about Industry Segments
The information required by Item 1(b) is incorporated by reference to
pages 25 through 26 of the Company's Annual Report, of which pages 14 through 32
are attached as Exhibit 13.1 to this report. See also items 6, 7, 7A, and 8 of
this report.
(c) Narrative Description of Business
Building Systems
The Company's largest segment, Building Systems, includes the U.S. steel
and wood frame pre-engineered building systems; Butler European operations
consisting of wholly owned subsidiaries in the United Kingdom, France, and
Germany, and Beker Kft., a 90% owned joint venture in Hungary; Butler Shanghai
Inc., a wholly owned Chinese subsidiary, and Butler do Brasil Limitada, a wholly
owned South American subsidiary; and a 30% owned Saudi Arabian joint venture
(Saudi Building Systems, Ltd.)a manufacturer of metal building systems.
The Company's building systems segment consists primarily of custom
designed and pre-engineered one to five-story steel and one to two-story wood
framed buildings for commercial, community, industrial and agricultural uses
such as office buildings, manufacturing facilities, warehouses, schools,
shopping centers, livestock and farm buildings. Principal product components of
the systems are structural members and a variety of pre-engineered wall and
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roof components. These are fabricated according to standard or customer
specifications and shipped to building sites for assembly by independent
dealers. Building components are manufactured in plants located at
Galesburg and Charleston, Illinois; Laurinburg, North Carolina; Birmingham,
Alabama; Visalia, California; Annville, Pennsylvania; San Marcos, Texas;
Lester Prairie, Minnesota; Ottawa, Kansas; and Clear Brook, Virginia.
In December 1997 the Company formed Innovative Building Technology, Inc.
to design, engineer, market and erect panelized buildings for the smaller
commercial buildings segment. Products are manufactured at existing facilities
in Lester Prairie, Minnesota and Ottawa, Kansas.
In December 1998 the Company announced the restructuring of its
International operations leading to the closing of its United Kingdom and
Brazilian pre-engineered steel frame buildings manufacturing plants. In 1999 the
European manufacturing operations will shift to an expanded facility in
Nyiregyhaza, Hungary acquired in late 1996 with the acquisition of a 90%
interest in Beker Kft. European requirements will be provided by the Hungarian
facility and a manufacturing alliance formed with a European supplier.
Saudi Building Systems, Ltd. manufactures pre-engineered steel frame
buildings for Middle Eastern markets at manufacturing facilities located in
Jeddah, Saudi Arabia. The Company serves the Canadian market through a branch
office in Burlington, Ontario.
The U.S. export operation is focused on sales and marketing in the
Central American, Caribbean and select Latin American markets, including
Brazil. Shipments are sourced primarily from Butler's U.S. plants.
Building Systems' products are distributed throughout the world by
independent Butler dealers. The dealers provide construction services and in
many cases complete design and engineering capabilities.
Nonresidential pre-engineered buildings compete with ordinary forms of
building construction in the low-rise commercial, community, industrial and
agricultural markets. Competition is primarily based upon cost, time of
construction, appearance, thermal efficiency, and other specific customer
requirements.
The Company also competes with numerous pre-engineered steel frame
building manufacturers doing business within the United States, Canada, Europe,
South America and China. The Company believes that its 1998 sales of steel frame
pre-engineered building systems within the United States exceeded those of any
other nonresidential steel frame pre-engineered building systems manufacturer,
with its next largest competitors being NCI Building Systems, Inc., V.P.
Buildings (previously Varco-Pruden Buildings), a division of the LTV
Corporation, American Buildings Company and Ceco and Star Buildings Systems
combined, a division of Robertson - Ceco Corporation. Competition among
manufacturers of pre-engineered buildings is based primarily upon price,
service, product design and performance and marketing capabilities.
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Lester Building Systems, the Company's wood frame buildings business,
ranks second in sales to the industry leader, Morton Buildings, Inc., a
manufacturer which sells direct to the end user.
Architectural Products
This segment includes the operations of the Vistawall group which
designs, manufactures and sells aluminum curtain wall systems for mid and
high-rise office markets, entry doors, custom architectural window systems,
translucent roof and wall systems, custom and standard skylights and other
standard storefront products for low-rise retail and commercial markets. In
early 1997 the Vistawall group acquired the assets of Rebco West, Inc., a West
Coast manufacturer and distributor of entrance doors and storefront products. In
June 1997 the Vistawall group acquired the stock of Moduline Windows Inc., a
Wisconsin based manufacturer of architectural window systems for the
nonresidential buildings market. The Vistawall group's products are distributed
on a material supply basis to either curtain wall erection subcontractors or
general contractors, and through distribution warehouses to glazing contractors
for storefront and entry door applications. Manufacturing and distribution
facilities are located in Warwick, Rhode Island; Atlanta and Newnan, Georgia;
Modesto, Hayward and Rancho Cucamonga, California; Cincinnati and Cleveland,
Ohio; Terrell, Houston and Dallas, Texas; Tampa, Florida; Washington, D.C.;
Chicago, Illinois; St. Louis, Missouri; Seattle, Washington; and Wausau,
Wisconsin. In 1997 Vistawall completed the expansion of its Terrell, Texas
operation with the addition of facilities to house a second extrusion press, and
additional painting operations.
The Division operates in highly competitive markets with other national
manufacturers which operate multiple plants and distribution facilities and with
regional manufacturers. Competition is primarily based on price, engineering and
installation capabilities, delivery, appearance and other specific customer
requirements.
Prior to 1997 the Grain Systems Division was included in this business
segment which was previously designated as "Other Building Products". In June
1997 the Company sold its Grain Systems Division which manufactured and marketed
grain storage bins, and also distributed grain conditioning and handling
equipment. The business was sold to CTB, Inc.
Construction Services
The Company's Construction Services segment consists of Butler
Construction, a wholly-owned construction subsidiary formally known as BUCON,
Inc. providing comprehensive design, planning, execution and construction
management services to major purchasers of construction. Butler Heavy Structures
is an operating unit of Butler Construction serving markets requiring large
complex building designs using heavy fabricated mill steel in combination with
Butler's pre-engineered secondary structural and metal cladding systems.
Revenues of the Construction Services segment are derived primarily from general
contracting. In addition, the segment performs "furnish and erect" and
"materials only" subcontracts using products from several Company divisions,
predominantly the Company's Buildings Division. Butler Construction's
competition is primarily based upon price, time necessary to complete a project,
design, and product performance. This business segment competes with
international, national, regional and local general contracting firms, and
whenever possible, performs projects in conjunction with independent Butler
dealers.
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Real Estate
This business segment consists soley of Butler Real Estate, Inc., a
wholly-owned subsidiary of the Company, and provides value-added real estate
development and leasing services to major corporations in cooperation with
Butler dealers. Butler Real Estate functions as a development and financing
source during the lead procurement and construction process. On the basis of
commitments to lease obtained from credit worthy customers, Butler Real Estate,
Inc., acquires building sites, arranges with Butler dealers for construction of
build-to-suit projects, then sells the completed projects to permanent investors
when the facilities are occupied by lessees.
Manufacturing and Materials
The Company's manufacturing facilities include most conventional metal
fabricating operations, such as punching, shearing, welding, extruding and
forming of sheet and structural steel and aluminum. The Company also operates
painting and anodizing lines for structural steel and aluminum components,
respectively. Wood frame manufacturing operations include sawing and truss
fabrication. The principal materials used in the manufacture of Company products
include steel, aluminum, wood and purchased parts. Materials are presently
available in sufficient quantities to meet current Company needs.
Seasonal Business
Historically, the Company's sales and net earnings have been affected by
cycles in the general economy which influence nonresidential construction
markets (see in particular Item 7 of this report). The Company also experiences
seasonal demand for products and services. Sales for the first, second, third,
and fourth quarters of 1998 were $194 million, $239 million, $268 million, and
$262 million, respectively.
Backlog
The Company's backlog of orders believed to be firm was $317 million at
December 31, 1998, up 11% from a year ago.
Employees
At December 31, 1998 the Company employed 5,171 persons, 4,268 of whom
were non-union employees, and 903 were hourly paid employees who were members of
three unions. At December 31, 1997 the Company employed 5,117 persons.
Item 2.Properties
The principal plants and physical properties of the Company consist of the
manufacturing facilities described under Item 1 and the Company's executive
offices in Kansas City. Through a subsidiary, the Company also owns a land
development venture with property located on approximately an 85 acre site in
San Marcos, Texas. The property is recorded as "Assets held for sale" and
described in a footnote on page 25 in the Company's Annual Report. All other
plants and offices described under Item 1 are utilized by the Company and are
generally suitable and adequate for the business activity conducted therein. The
Company's manufacturing facilities described under Item 1, along with current
outsourcing agreements with various domestic and foreign fabricators, provide
production capabilities sufficient to meet current and foreseeable needs.
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Except for leased facilities listed below, all of the Company's principal
plants and offices are owned:
(1) Leased space used for the Company's executive offices in Kansas City,
Missouri (122,000 sq. ft. lease expiring in the year 2001 with an option
to renew).
(2) Leased space used for the Vistawall Division plant in Terrell, Texas
(145,000 sq. ft. and 121,000 sq. ft. with leases expiring in 2000 and
2006, respectively, both containing options to renew), and fabrication
and distribution facilities in Dallas and Houston, Texas; St. Louis,
Missouri; Chicago, Illinois; Washington, D.C.; Cincinnati and Cleveland,
Ohio; Atlanta and Newnan, Georgia; Tampa, Florida; Seattle, Washington;
Modesto, Hayward, and Rancho Cucamonga, California; Warwick, Rhode
Island; and Denver, Colorado (483,000 sq. ft. leased with various
expiration dates).
(3) Leased space used for Bucon, Inc. and Innovative Building Technology
offices in Kansas City, Missouri (74,000 sq. ft. lease expiring in the
year 2007).
(4) The Company also leases various sales offices throughout the world.
Item 3. Legal Proceedings.
There are no material legal or environmental proceedings pending as of
March 10, 1999, nor does the Company have any known material environmental
contingencies as of this date. Proceedings which are pending consist of matters
normally incident to the business conducted by the Company and taken together do
not appear to be material.
Item 4. Submissions of Matters to a Vote of Security Holders.
No matters have been submitted to a vote of stockholders since the last
annual meeting of stockholders on April 21, 1998
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
Incorporated by reference to the information under "Quarterly Financial
Information (Unaudited)", "Price Range of Common Stock (Unaudited)" and
"Historical Review 1998-1994" on pages 31 and 32 of the Annual Report.
In September 1998 the Company increased its cash dividend from 14 cents
to 15 cents per share to shareholders of record as of October 1. The Company has
limited restrictions on the payment of dividends based on certain debt covenants
of Note Agreements dated June 1, 1994, between the Company and four insurance
companies and the Note Agreement dated March 1, 1998, with an insurance company
(incorporated by reference to the Forms 10-Q for the quarters ended June 30,
1994, and March 31, 1998 as indicated under Item 14). The Company had
approximately $13 million of retained earnings available for cash dividends at
December 31, 1998.
Item 6. Selected Financial Data.
Incorporated by reference to the information under "Historical Review
1998-1994" on page 32 of the Annual Report.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Incorporated by reference to the information under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 14 through 17 of the Annual Report.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Incorporated by reference to page 15 of the Annual Report to the
information under "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
Item 8. Financial Statements and Supplementary Data.
Incorporated by reference to the consolidated financial statements and
related notes on pages 18 through 32 of the Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
On April 15, 1997, the Audit Committee of the Board of Directors of the
Company, chose to engage Arthur Andersen LLP as independent accountants to audit
the financial statements of the Company rather than reengage KPMG LLP.
The report of KPMG LLP for the year ending December 31, 1996, contains
no adverse opinion or disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles. Subsequent to December 31,
1996 there have been no disagreements between the Butler Manufacturing Company
and KPMG LLP.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information as to Directors is incorporated herein by reference to pages
2 through 5 of the Proxy Statement. The Executive Officers, their ages, their
positions and offices with the Company and their principal occupations during
the past five years are shown below:
Corporate Executive Officers
Robert H. West - age 60, Chairman of the Board and Chairman of the Executive
Committee. He joined the Company in 1968, became President in 1978 and Chairman
of the Board and Chief Executive Officer in 1986. He relinquished his CEO
responsibilities on January 19, 1999. Mr. West is a director of Commerce
Bancshares, Inc., Burlington Northern Santa Fe Corporation, Kansas City Power &
Light Company, and Saint Luke's Shawnee Mission Health System. He is a trustee
of the University of Missouri at Kansas City.
John J. Holland - age 48, President and Chief Executive Officer and member of
the Board Executive Committee; He joined Butler in 1980 and became Vice
President - Controller in 1986, Vice President-Finance in 1990, Executive Vice
President in 1998 and President and Chief Executive Officer in 1999. Mr. Holland
is a director of Commerce Fund, a mutual fund; an advisory director of Allendale
Insurance Company, and a director of Saint Luke's Hospital. He is a former
chairman of Heart of America Family Services.
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Donald H. Pratt - age 61, Vice Chairman and member of the Board Executive
Committee; has been a director since 1979. He joined Butler in 1965, became
Executive Vice President in 1980, President of the Company in 1986 and Vice
Chairman in 1999. Mr. Pratt is also a director of American Century Mutual Funds,
a director of Atlas-Copco North America Inc. and is a trustee of the Midwest
Research Institute.
Richard S. Jarman - age 52, Executive Vice President since 1999. He joined the
Company in 1974 and became President of the Buildings Division in 1986. Mr.
Jarman is a director and former chairman of the Metal Buildings Manufacturers
Association and a member if its Executive Committee, and a director of
Mid-America Coalition on Health Care. He is a past chairman of INROADS, Kansas
City.
Richard O. Ballentine - age 62, Vice President, General Counsel, and Secretary
since 1978. He joined Butler in 1975 as Vice President-Legal.
Barbara B. Bridger - age 41, Vice President- Human Resources since 1998. She
joined Butler in 1980 and previously was Vice President- Human Resources for the
Buildings Division.
John T. Cole - age 48, Controller since 1990. He joined Butler in 1977 and
previously was Corporate Audit Manager.
John W. Huey - age 51, Vice President-Administration since 1993 and Assistant
General Counsel and Assistant Secretary since 1987. He joined Butler in 1978.
Paul F. Liljegren - age 44, Treasurer since 1998. He joined Butler in 1979 and
previously was Vice President and Controller of Lester Building Systems.
Larry C. Miller - age 42, Vice President-Finance since 1998. He joined Butler
in 1980 and became Assistant Treasurer in 1985 and Treasurer in 1989.
Division Executive Officers
Moufid (Mike) Alossi - age 56, President, Butler Shanghai Inc., since 1997. He
joined Butler in 1968 and was previously President of Butler World Trade and
Vice President-International Sales and Marketing.
Hans G. Berger - age 51, Managing Director, Butler Europe since 1995. He
previously was Managing Director, Butler Bausysteme GmbH from 1993 to 1995 and
Vice President-Engineering, Butler Canada from 1986 to 1992.
Marc S. Hafer - age 41, President, Lester Building Systems since 1996. From 1993
to 1996 he was President of Walker Systems, Inc., a subsidiary of Wiremold, Inc.
He was Vice President-Sales and Marketing of the Company's Walker Division from
1991 to 1993. He first joined Butler in 1988.
Thomas J. Hall - age 53, President, Butler Real Estate, Inc. since 1991. He
joined Butler in 1969, and was named Vice President and General Manager of
Butler Real Estate, Inc. in 1987.
Charles E. Hatch - age 51, Managing Director, Butler do Brasil, Ltda since 1997.
He first joined Butler in 1981.
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William L.Johnsmeyer - age 51, President Butler Construction (Bucon, Inc.) since
1990. He joined Butler in 1982 and became President, Walker Division in 1984.
Ronald E. Rutledge - age 57, President Vistawall Division since 1984 when he
joined Butler.
Clyde E. Wills, Jr. - age 53, President, Buildings Division since 1999. He
first joined Butler in 1972. He previously was Senior Vice President of
Operations, Building Division from 1992 to 1997 and was President, International
Division.
Lavon Winkler - age 42, President, Innovative Building Technology since 1999. He
first joined Butler in 1979 and became Operations Manager, Innovative Building
Technology in 1998.
Item 11. Executive Compensation.
Incorporated by reference to the information under "Report on Executive
Compensation", "Summary Compensation Table", "Option Grants During 1998",
"Aggregated Option Exercises and Fiscal Year-End Option Value Table", and
"Pension Plan Table" on pages 9 through 14 of the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated by reference to the information under "Beneficial Ownership
Table" on pages 7 through 8 of the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
Incorporated by reference to the information under "Election of Class
C Directors" on pages 2 through 10 and "Report on Executive Compensation" in
the Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
The following documents are filed as part of this report:
(a) Financial Statements:
- "Report of Independent Public Accountants" for the two-year period
ended December 31, 1998 and "The Report of Independent Public
Accountants" for the year ended December 31, 1997.
- Consolidated Balance Sheets as of December 31, 1998 and 1997.
- Consolidated Statements of Earnings and Retained Earnings for years
Ended December 31, 1998, 1997 and 1996. - Consolidated Statements of
Comprehensive Income for years ended December 31,1998, 1997, and 1996
- Consolidated Statements of Cash Flows for years ended December 31,
1998, 1997 and 1996.
- Notes to Consolidated Financial Statements.
The foregoing have been incorporated by reference to the Annual Report
as indicated under Item 8.
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(b) Financial Statement Schedules:
Auditors' Reports on Financial Statement and Schedule II, Valuation
and Qualifying Accounts.
All other schedules are omitted because they are not applicable or
the information is contained in the consolidated financial statements
or notes thereto.
(c) Exhibits:
3.1 Restated Certificate of Incorporation (incorporated by reference
to Exhibit 3.1 to Company's form 10-Q for the quarter ended, March 31,
1996).
3.2 Bylaws of Butler Manufacturing Company as amended effective January
19, 1999.
4.1 Note Agreement between the Company and four Insurance Companies
dated as of June 1, 1994 (incorporated by reference to Exhibit 4 of
the Company's Form 10-Q for the quarter ended June 30, 1994).
4.2 Note Agreement between the Company and an Insurance Company dated
as of March 1, 1998 (incorporated by reference to Exhibit 4 of the
Company's Form 10-Q for the quarter ended March 31, 1998).
10.1 Butler Manufacturing Company Executive Deferred Compensation
Plan as amended (incorporated by reference to Exhibit 10.2 to the
Company's Form 10-K for the year ended December 31, 1989). 10.2
Butler Manufacturing Company Stock Incentive Plan for 1987, as
amended (incorporated by reference to Exhibit 10.1 to the
Company's Form 10-K for the year ended December 31, 1990).
10.3 Butler Manufacturing Company Stock Incentive Plan of 1979, as
amended (incorporated by reference to Exhibit 10.2 to the Company's
Form 10-K for the year ended December 31, 1990).
10.4 Form of Change of Control Employment Agreements, as amended, between
the Company and each of six executive officers (incorporated by
reference to Exhibit 10.3 to the Company's Form 10-K for the year
ended December 31, 1990).
10.5 Copy of Butler Manufacturing Company Supplemental Benefit Plan as
amended and restated (incorporated by reference to Exhibit 10.5 to
the Company's Form 10-K for the year ended December 31, 1994).
10.6 Form of Butler Manufacturing Company Split Dollar Life Insurance
Agreement (Collateral Assignment Method; Bonus Arrangement) entered
into between the Company and certain executive officers
(incorporated by reference to Exhibit 10.6 to the Company's Form
10-K for the year ended December 31, 1994).
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10.7 Form of Butler Manufacturing Company Split Dollar Life Insurance
Agreement (Collateral Assignment Method; Roll Out Arrangement)
entered into between the Company and certain executive officers
(incorporated by reference to Exhibit 10.7 to the Company's Form
10-K for the year ended December 31, 1994).
10.8 Butler Manufacturing Company Stock Incentive Plan of 1996
(incorporated by reference to Exhibit 4(a) to the Company's
Registration Statement Number 333-02557 on S-8 filed April 17,
1996).
10.9 Butler Manufacturing Company Director Stock Compensation Program
(incorporated by reference to Exhibit 10.9 to the Company's
December 31, 1997 Form 10-K).
10.10 Butler Manufacturing Company Restricted Stock Compensation
Program of 1996 (incorporated by reference to Exhibit 10.10 to the
Company's December 31, 1997 Form 10-K).
10.11 Asset Purchase Agreement dated March 31, 1997 between Butler
Manufacturing Company and CTB, Inc. relating to the sale of the
Company's Grain Systems Division (incorporated by reference to
Exhibit (2) to the Company's form 8-K dated June 23, 1997.
13.1 Butler Manufacturing Company 1997 Annual Report Pages 14 through
32 only (the information expressly incorporated herein by
reference).
13.2 KPMG LLP's "Report of Independent Public Accountants" for the
year ended December 31, 1996.
22.0 Set forth below is a list as of February 19, 1999 of subsidiaries
of the Company and their respective jurisdictions of incorporation.
Subsidiaries not listed, when considered in the aggregate as a
single subsidiary, do not constitute a significant subsidiary.
Jurisdiction of
Subsidiary Incorporation
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Butler Argentina, S.A. Argentina
Butler do Brasil Limitada Brazil
Butler Export, Inc. Barbados
Butler Building Systems, Ltd. Scotland
Butler Europe GmbH Germany
Butler Systemes de Construction SARL France
BMC Real Estate, Inc. Delaware
BUCON, Inc. Delaware
Butler Pacific, Inc. Delaware
Butler Real Estate, Inc. Delaware
Butler, S.A. de C.V. Mexico
Butler (Shanghai) Inc. China
Butler Holdings, Inc. Delaware
Beker Kft Hungary
Comercial Butler Limitada Chile
Innovative Building Technology, Inc. Delaware
Lester's of Minnesota, Inc. Minnesota
Lester Holdings, Inc. Delaware
Moduline Windows, Inc. Wisconsin
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23.1 Consent of Arthur Andersen LLP (incorporated by reference to page
16 of this report).
23.2 Consent of KPMG LLP (incorporated by reference to page 17 of this
report).
24.0 Power of Attorney to sign this Report by each director.
27.0 Financial Data Schedule.
The Company filed a report on Form 8-K on January 7, 1999 disclosing an
announced restructuring and asset impairment charge in the fourth quarter. It
also announced an authorization by the Board of Directors to purchase shares of
Company stock from time to time, replacing a prior authorization announced in
June, 1997.
The calculation of the aggregate market value the Company's Common Stock
held by non-affiliates shown on the front of the cover page assumes that
directors are affiliates. Such assumption does not reflect a belief by the
Company or any director that any director is an affiliate of the Company.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on this 25th day of
March, 1999.
BUTLER MANUFACTURING COMPANY
BY /S/ John J. Holland
_____________________________
John J. Holland
President-CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/S/ Robert H. West Chairman of the Board March 25, 1999
- ------------------------------
Robert H. West
/S/ Donald H. Pratt Vice Chairman-Director March 25, 1999
- ------------------------------
Donald H. Pratt
/S/ John J. Holland President-CEO March 25, 1999
- ------------------------------ (Principal Executive Officer)
John J. Holland
/S/ Richard S. Jarman Executive VP March 25, 1999
- ------------------------------
Richard S. Jarman
/S/ Larry C. Miller Vice President-Finance March 25, 1999
- ------------------------------ (Principal Financial Officer)
Larry C. Miller
/S/ John T. Cole Controller March 25, 1999
- ------------------------------ (Principal Accounting Officer)
John T. Cole
/S/ Harold G. Bernthal * Director March 24, 1999
- ------------------------------
Harold G. Bernthal
/S/ Gary M. Christensen * Director March 24, 1999
- ------------------------------
Gary M. Christensen
/S/ Alan M. Hallene * Director March 24, 1999
- ------------------------------
Alan M. Hallene
/S/ C.L. William Haw * Director March 24, 1999
- ------------------------------
C.L. William Haw
/S/ Robert J. Novello * Director March 24, 1999
- ------------------------------
Robert J. Novello
/S/ Robert J. Reintjes, Sr. * Director March 24, 1999
- ------------------------------
Robert J. Reintjes, Sr.
/S/ Judith A. Rogala * Director March 24, 1999
- ------------------------------
Judith A. Rogala
/S/ Gary L. Tapella * Director March 24, 1999
- ------------------------------
Gary L. Tapella
</TABLE>
14
<PAGE> 16
Richard O. Ballentine, by signing his name hereto, does hereby sign this report
on Form 10-K on behalf of each of the directors of the Registrant pursuant to a
power of attorney executed by each of such directors.
* By /S/ Richard O. Ballentine, Attorney-in-fact March 24, 1999
______________________________________________
Richard O. Ballentine, Attorney-in-fact
15
<PAGE> 17
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Butler Manufacturing Company
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated January 25, 1999, appearing on page 17 of Butler
Manufacturing Company's 1998 Annual Report, which is incorporated in the Form
10-K, into the Company's previously filed Registration Statements on Form S-8
(Nos. 33-14464, 2-63830, 2-55753, 333-02285, 333-02557 and 2-36370). (We also
consent to the incorporation in our report dated January 25, 1999, on the
Financial Statement Schedule, appearing in item 14 of Form 10-K.) It should be
noted that we have not audited any financial statements of Butler Manufacturing
Company subsequent to December 31, 1998, or performed any audit procedures
subsequent to the date of our report.
/S/ ARTHUR ANDERSEN LLP
_______________________
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
March 26, 1999
16
<PAGE> 18
We consent to the incorporation by reference in Registration Statement Nos.
33-14464, 2-63830, 2-55753, 333-02285, 333-02557 and 2-36370 on Form S-8 and the
related Prospectus of June 11, 1987, with Appendix dated March 8, 1996, of
Butler Manufacturing Company of our report dated February 3, 1997 relating to
the consolidated statements of earnings and cash flows and the related schedule
of Butler Manufacturing Company and subsidiaries for the year ended December 31,
1996, which report appears in or is incorporated by reference in the Annual
Report on Form 10-K of Butler Manufacturing Company for the fiscal year ended
December 31, 1998. We also consent to the reference to our firm under the
heading "Experts" in the Prospectus to the Registration Statements.
/S/ KPMG LLP
_____________
KPMG LLP
Kansas City, Missouri
March 25, 1999.
17
<PAGE> 19
BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Financial Statement Schedules
(Form 10-K)
December 31, 1998, 1997 and 1996
(With Auditors' Reports Thereon)
S-1
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Butler Manufacturing Company:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Butler Manufacturing Company's
1998 Annual Report to shareholders, which is incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 25, 1999. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The Financial Statement Schedule listed in item 14 is presented for the
purpose of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material aspects the
financial data required to be set forth in relation to the basic consolidated
financial statements taken as a whole.
/S/ ARTHUR ANDERSEN LLP
_______________________
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
January 25, 1999
S-2
<PAGE> 21
The Board of Directors
Butler Manufacturing Company:
Under date of February 3, 1997, we reported on the consolidated balance sheet of
Butler Manufacturing Company and subsidiaries as of December 31, 1996, and the
related consolidated statements of earnings and retained earnings and cash flows
for the year ended December 31, 1996, as contained in the 1998 Annual Report.
These consolidated financial statements and our report thereon are incorporated
by reference or included in the report on form 10-K for the year 1998. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedule as of December 31, 1996 and 1995 and for the years then ended as listed
in item 14. This consolidated financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
consolidated financial statement schedule based on our audits.
In our opinion, such schedule, when considered in relation to the basic 1996
consolidated financial statements taken as a whole, presents fairly, in all
material aspects, the information set forth therein.
/S/ KPMG LLP
____________
KPMG LLP
Kansas City, Missouri
February 3, 1997
S-3
<PAGE> 22
SCHEDULE II
BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
(Thousands of Dollars)
<TABLE>
<CAPTION>
Balance at Charged Balance
beginning to at end
Description of year earnings Other Deductions of year
_________________________ __________ ________ _____ __________ _______
(A)
<S> <C> <C> <C> <C> <C>
Allowance for Losses
on Accounts Receivable:
1998 $2,473 $2,772 -- $1,454 $3,791
1997 $2,918 $ 887 $ 198 $1,530(B) $2,473
1996 $2,348 $1,344 $ 470 $1,244 $2,918
Restructuring Reserve:
1998 -- $2,409 -- $ 132 $2,277
1997 -- -- -- -- --
1996 -- -- -- -- --
</TABLE>
(A) Includes transfers from other reserve accounts.
(B) Includes write-off of $293.0 thousand in 1997 for the sale of the Grain
Systems Division.
S-4
<PAGE> 23
EXHIBIT INDEX
EXHIBITS DESCRIPTION
________ ___________
3.1 Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to Company's form 10-Q for the
quarter ended, March 31, 1996).
3.2 Bylaws of Butler Manufacturing Company as amended effective
January 19, 1999.
4.1 Note Agreement between the Company and four Insurance
Companies dated as of June 1, 1994 (incorporated by reference
to Exhibit 4 of the Company's Form 10-Q for the quarter ended
June 30, 1994).
4.2 Note Agreement between the Company and an Insurance Company
dated as of March 1, 1998 (incorporated by reference to
Exhibit 4 of the Company's Form 10-Q for the quarter ended
March 31, 1998).
10.1 Butler Manufacturing Company Executive Deferred Compensation
Plan as amended (incorporated by reference to Exhibit 10.2 to
the Company's Form 10-K for the year ended December 31, 1989).
10.2 Butler Manufacturing Company Stock Incentive Plan for 1987, as
amended (incorporated by reference to Exhibit 10.1 to the
Company's Form 10-K for the year ended December 31, 1990).
10.3 Butler Manufacturing Company Stock Incentive Plan of 1979, as
amended (incorporated by reference to Exhibit 10.2 to the
Company's Form 10-K for the year ended December 31, 1990).
10.4 Form of Change of Control Employment Agreements, as amended,
between the Company and each of six executive officers
(incorporated by reference to Exhibit 10.3 to the Company's
Form 10-K for the year ended December 31, 1990).
10.5 Copy of Butler Manufacturing Company Supplemental Benefit
Plan as amended and restated (incorporated by reference to
Exhibit 10.5 to the Company's Form 10-K for the year ended
December 31, 1994).
10.6 Form of Butler Manufacturing Company Split Dollar Life
Insurance Agreement (Collateral Assignment Method; Bonus
Arrangement) entered into between the Company and certain
executive officers (incorporated by reference to Exhibit 10.6
to the Company's Form 10-K for the year ended December 31,
1994).
10.7 Form of Butler Manufacturing Company Split Dollar Life
Insurance Agreement (Collateral Assignment Method; Roll Out
Arrangement) entered into between the Company and certain
executive officers (incorporated by reference to Exhibit 10.7
to the Company's Form 10-K for the year ended December
31,1994).
<PAGE> 24
10.8 Butler Manufacturing Company Stock Incentive Plan of 1996
(incorporated by reference to Exhibit 4(a) to the Company's
Registration Statement Number 333-02557 on S-8 filed April 17,
1996).
10.9 Butler Manufacturing Company Director Stock Compensation
Program (incorporated by reference to Exhibit 10.9 to the
Company's December 31, 1997 Form 10-K).
10.10 Butler Manufacturing Company Restricted Stock Compensation
Program of 1996 (incorporated by reference to Exhibit 10.10 to
the Company's December 31, 1997 Form 10-K).
10.11 Asset Purchase Agreement dated March 31, 1997 between Butler
Manufacturing Company and CTB, Inc. relating to the sale of
the Company's Grain Systems Division (incorporated by
reference to Exhibit (2) to the Company's form 8-K dated June
23, 1997.
13.1 Butler Manufacturing Company 1997 Annual Report Pages 14
through 32 only (the information expressly incorporated herein
by reference).
13.2 Report of Independent Public Accountants for the year ended
December 31, 1996.
22.0 Set forth below is a list as of February 19, 1999 of
subsidiaries of the Company and their respective jurisdictions
of incorporation. Subsidiaries not listed, when considered in
the aggregate as a single subsidiary, do not constitute a
significant subsidiary.
Jurisdiction of
Subsidiary Incorporation
---------- -------------
Butler Argentina, S.A. Argentina
Butler do Brasil Limitada Brazil
Butler Export, Inc. Barbados
Butler Building Systems, Ltd. Scotland
Butler Europe GmbH Germany
Butler Systemes de Construction SARL France
BMC Real Estate, Inc. Delaware
BUCON, Inc. Delaware
Butler Pacific, Inc. Delaware
Butler Real Estate, Inc. Delaware
Butler, S.A. de C.V. Mexico
Butler (Shanghai) Inc. China
Butler Holdings, Inc. Delaware
Beker Kft Hungary
Comercial Butler Limitada Chile
Innovative Building Technology, Inc. Delaware
Lester's of Minnesota, Inc. Minnesota
Lester Holdings, Inc. Delaware
Moduline Windows, Inc. Wisconsin
23.1 Consent of Arthur Andersen LLP (incorporated by reference to
page 16 of this report).
23.2 Consent of KPMG LLP (incorporated by reference to page 17 of
this report).
24.0 Power of Attorney to sign this Report by each director.
27.0 Financial Data Schedule.
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
BUTLER MANUFACTURING COMPANY
(A DELAWARE CORPORATION)
EFFECTIVE JANUARY 19, 1999
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of the Corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle, and the resident agent in charge thereof shall be The Corporation Trust
Company.
SECTION 2. OTHER OFFICES. The Corporation may have offices at such
other place or places, within or without the State of Delaware, as from time to
time the Board of Directors may determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS.
1.1 DATE, PLACE AND TIME. The annual meeting of the
stockholders shall be held on the third Tuesday in April in each year or on such
other day, which shall not be a legal holiday, as shall be determined by the
Board of Directors. The annual meeting shall be held at such place and hour,
within or without the State of Delaware, as shall be determined by the Board of
Directors. The day, place and hour of each annual meeting shall be specified in
the notice of the annual meeting. The meeting may be adjourned by the chairman
of the meeting from time to time and place to place. At any adjourned meeting
the Corporation may transact any business which might have been transacted at
the original meeting. The Board of Directors acting by resolution may postpone
and reschedule any previously scheduled annual or special meeting of
stockholders.
1.2 NOMINATION AND STOCKHOLDER BUSINESS BYLAW.
(A) ANNUAL MEETINGS OF STOCKHOLDERS.
(1) Nominations of persons for election to
the Board of Directors of the Corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders
(a) pursuant to the Corporation's notice of meeting, (b) by or at the direction
of the Board of Directors or (c) by any stockholder of the Corporation who was a
stockholder of record at the time of giving of notice provided for in this
Bylaw, who is entitled to vote at the meeting and who complied with the notice
procedures set forth in this Bylaw.
(2) For nominations or other business to be
properly brought before an annual meeting by a stockholder pursuant to clause
(c) of paragraph (A)(1) of this Bylaw, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be
<PAGE> 2
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 90th day nor earlier than the close of business on the 120th day
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is more than 30
days before or more than 60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the 120th day prior to such annual meeting and not later than the
close of business on the later of the 90th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of such
meeting is first made. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving of a
stockholder's notice as described above. Such stockholder's notice shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or re-election as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
Rule 14 a-11 thereunder (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected);
(b) as to any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; (c) as to the stockholder giving
the notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such stockholder, as they appear on
the Corporation's books, and of such beneficial owner and (ii) the class and
number of shares of the Corporation which are owned beneficially and of record
by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second
sentence of paragraph (A)(2) of this Bylaw to the contrary, in the event that
the number of directors to be elected to the Board of Directors of the
Corporation is increased and there is no public announcement naming all of the
nominees for Director or specifying the size of the increased Board of Directors
made by the Corporation at least 100 days prior to the first anniversary of the
preceding year's annual meeting, a shareholder's notice required by this Bylaw
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the Corporation.
(B) SPECIAL MEETINGS OF STOCKHOLDERS. Only such
business shall be conducted at a special meeting of stockholders as shall have
been brought before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected pursuant to
the Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) by any stockholder of the Corporation who is a stockholder of
record at the time of giving of notice provided for in this Bylaw, who shall be
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Bylaw. Nominations by stockholders of persons for election to the
Board of Directors may be made at such a special meeting of stockholders if the
stockholder's notice required by paragraph (A)(2) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the 90th day prior to such special meeting and not later than
the close of business on the later of the 70th day prior to such special meeting
or the 10th day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
<PAGE> 3
(C) GENERAL. (1) Only such persons who are
nominated in accordance with the procedures set forth in this Bylaw shall be
eligible to serve as directors and only such business shall be conducted at a
meeting of stockholders as shall have been brought before the meeting in
accordance with the procedures set forth in this Bylaw. The Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in accordance with
the procedures set forth in this Bylaw and, if any proposed nomination or
business is not in compliance with this Bylaw, to declare that such defective
proposal shall be disregarded.
(2) For purposes of this Bylaw, "public
announcement" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions
of this Bylaw, a stockholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect
any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act."
SECTION 2. QUORUM. At each meeting of the stockholders, except where
other provision is made by law, the holders of a majority of the issued and
outstanding stock of the Corporation entitled to vote at such meeting shall
constitute a quorum for the transaction of business. In the absence of a quorum
the chairman of the meeting shall have the power to adjourn the meeting from
time to time, until stockholders holding the requisite amount of stock shall be
present or represented. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at the
meeting as originally called.
SECTION 3. ORGANIZATION. At each meeting of the stockholders the
Chairman of the Board, or if he shall be absent therefrom, the Vice Chairman, or
if he shall be absent therefrom, the President, or if he shall be absent
therefrom, another officer of the Corporation chosen by the Board of Directors
shall act as chairman of the meeting or preside thereat; and the Secretary, or
if he shall be absent from such meeting or shall be required pursuant to the
provisions of this Section 3 to act as chairman of such meeting, the person (who
shall be an Assistant Secretary, if an Assistant Secretary shall be present
thereat) whom the chairman of such meeting shall appoint shall act as secretary
of such meeting and keep the minutes thereof.
SECTION 4. ORDER OF BUSINESS. The order of business and all other
matters of procedure at each meeting of the stockholders shall be determined by
the chairman of such meeting.
SECTION 5. VOTING. Each stockholder entitled to vote shall, at each
meeting of the stockholders, be entitled to one vote in person or by proxy for
each share of voting stock of the Corporation held by him and registered in his
name on the books of the Corporation on the date fixed pursuant to the
provisions of Section 6 of Article VII of these Bylaws at the record date for
the determination of stockholders who shall be entitled to notice of and to vote
at such meeting. Any vote on stock of the Corporation may be given at any
meeting of the stockholders by the stockholder entitled thereto in person or by
his proxy appointed by an instrument in writing executed by such stockholder or
by his attorney thereunto authorized or appointed by means of an electronic
transmission and delivered to the Secretary of the Corporation or to the
secretary of the meeting, provided, however, that no proxy shall be voted or
acted upon after three (3) years from its date, unless said proxy shall provide
for a longer period. At all meetings of the stockholders all matters, except
where other provision is made by
<PAGE> 4
law, by the Certificate of Incorporation of the Corporation or by these
Bylaws, shall be decided by the vote of a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat, a
quorum being present. Unless demanded by a stockholder of the Corporation
present in person or by proxy at any meeting of the stockholders and entitled to
vote thereat or so directed by the chairman of the meeting, the vote thereat on
any question need not be by ballot. Upon a demand of any such stockholder for a
vote by ballot on any question or at the direction of such chairman that a vote
by ballot be taken on any question, such vote shall be taken. On a vote by
ballot each ballot shall be signed by the stockholder voting, or by his proxy,
if there be such proxy, and shall state the number of shares voted.
SECTION 6. LIST OF STOCKHOLDERS. It shall be the duty of the Secretary
or other officer of the Corporation who shall have charge of its stock ledger,
either directly or through another officer of the Corporation designated by him
or through a transfer agent appointed by the Board of Directors, to prepare and
make, at least ten (10) days before every meeting of the stockholders, a
complete list of the stockholders entitled to vote thereat, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such a list shall be open
to the examination of any stockholder, for any purpose germane to the meeting
during ordinary business hours, for a period of at least ten (10) days prior to
said meeting, either at a place within the city where said meeting is to be
held, which place shall be specified in the notice of said meeting, or, if not
so specified, at the place where said meeting is to be held. The list shall also
be produced and kept at the time and place of said meeting during the whole time
thereof, and may be inspected by any stockholder who shall be present thereat.
SECTION 7. INSPECTORS OF VOTES. At each meeting of the stockholders the
chairman of such meeting may appoint two Inspectors of Votes to act thereat.
Each Inspector of Votes so appointed shall first subscribe an oath or
affirmation faithfully to execute the duties of an Inspector of Votes at such
meeting with strict impartiality and according to the best of his ability. Such
Inspector of Votes, if any, shall take charge of the ballots at such meeting and
after the balloting thereat on any question shall count the ballots cast thereon
and shall make a report in writing to the secretary of such meeting of the
results thereof. An Inspector of Votes need not be a stockholder of the
Corporation, and any officer of the Corporation may be an Inspector of Votes on
any question other than a vote for or against his election to any position with
the Corporation or on any other question in which he may be directly interested.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The property, business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors.
SECTION 2. NUMBER, ELECTION AND TERMS OF DIRECTORS. The number of
Directors of the Corporation shall be fixed from time to time by the Board of
Directors, but shall not be less than three. Such Directors shall be classified
with respect to the time for which they severally hold office into three
classes. The three classes shall be designated Class A, Class B and Class C.
Each class shall be as nearly equal in number as possible, as shall be
determined by the Board of Directors. The Class A Directors shall be elected
initially for a term expiring at the annual meeting of the stockholders to be
held in 1987, the Class B Directors shall be elected initially for a term
expiring at the annual meeting of stockholders to be held in 1988, and the Class
C Directors shall be elected initially for a term expiring at the annual meeting
of stockholders to be held in 1989, with the members of each class to hold
office until their successors are elected and qualified. At each annual meeting
of the stockholders of the Corporation, the successors to the class of Directors
whose term expires at the meeting shall be elected to hold office for a
<PAGE> 5
term expiring at the annual meeting of stockholders held in the third
year following the year of their election, and until their successors shall have
been elected and qualified. Elections of Directors need not be by written
ballot.
SECTION 3. MEETINGS. All meetings of the Board of Directors of this
Corporation may be held within or without the State of Delaware as may be
provided in the resolution or notice calling such meeting. The regular annual
meeting of the Board of Directors shall be held with or without special notice
immediately after the final adjournment of and at the same place as each annual
meeting of the shareholders. Other regular meetings of the Board of Directors
shall be held with or without notice at such times and places as may be provided
by the Board of Directors. Special meetings of the Board may be held at any time
upon the call of any member of the Board. Written notice of all special meetings
of the Board of Directors shall be given to each director, which notice shall
state the time and place of such meeting, and shall be mailed to each director,
addressed to him at his residence or usual place of business, at least two (2)
days before the day on which such meeting is to be held, or shall be sent
addressed to him at such place by telegraph, cable, wireless or by other means
of electronic transmission or be delivered personally or by telephone or by
other means of electronic transmission not later than the day before the day on
which such meeting is to be held. Attendance of a director at any meeting,
whether regular or special, shall constitute a waiver of notice of such meeting
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened; and any director may waive notice, whether he attends a meeting or
not, and such waiver may be in writing, by telegram, or other means of
electronic transmission.
SECTION 4. QUORUM AND MANNER OF ACTING. One half of the total number of
directors shall be required to constitute a quorum for the transaction of
business at any meeting, and the act of a majority of the directors present at
any meeting at which a quorum shall be present shall be the act of the Board of
Directors. In the absence of a quorum, a majority of the directors present may
adjourn any meeting from time to time until a quorum be had. Notice of any
adjourned meeting need not be given.
SECTION 5. ACTION BY CONSENT. Unless otherwise restricted by these
Bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors may be taken without a meeting if all members of the Board of
Directors consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board of Directors.
SECTION 6. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created
directorships resulting from any increase in the number of Directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of a majority of the remaining Directors then in office, even
though less than a quorum of the Board of Directors. Any Director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of Directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified. No decrease in the number of Directors constituting
the Board of Directors shall shorten the term of any incumbent Director.
SECTION 7. PARTICIPATION. Members of the Board or of any committee
designated by the Board may participate in a meeting of the Board or such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section constitutes presence in
person at the meeting.
<PAGE> 6
ARTICLE IV
COMMITTEES
SECTION 1. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors may,
by resolution or resolutions passed by a majority of the whole Board, designate
an Executive Committee and one or more other committees, each to consist of two
(2) or more of the directors of the Corporation. The Executive Committee shall
not have authority to make, alter or amend the Bylaws, but shall exercise all
other powers of the Board of Directors between the meetings of said Board,
except the power to fill vacancies in their own membership, which vacancies
shall be filled by the Board of Directors. The Executive Committee and such
other committees shall meet at stated times or on notice to all by any of their
own number. They shall fix their own rules of procedure. Two (2) members of any
Committee shall constitute a quorum and the act of a majority of the members
present at any meeting at which a quorum is present shall be the act of the
Committee. The Executive Committee and such other committees shall keep regular
minutes of their proceedings and report the same to the Board of Directors. Such
other committees shall have and may exercise the powers of the Board of
Directors to the extent provided in such resolution or resolutions. Any action
required or permitted to be taken at any meeting of the Executive Committee or
any other committee of the Board of Directors may be taken without a meeting if
all members of such committee consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of such committee.
SECTION 2. APPOINTMENT OF SUBSTITUTE COMMITTEE MEMBERS. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
ARTICLE V
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be elected by
the Board of Directors and shall be a Chairman of the Board, a President, one or
more Vice Presidents (one or more of whom may be designated Executive Vice
President or Senior Vice President), a Secretary, a Treasurer, and such other
Officers (including a Vice Chairman) as may be designated and elected by the
Board of Directors.
SECTION 2. EXECUTIVES. The Board of Directors may authorize the
Chairman of the Board or the President to confer such titles on corporate and
divisional executives as the Chairman or President deems appropriate. Persons
holding titles conferred by the Chairman or President shall not be officers of
the Company, but shall be deemed assistants to the officers, and shall have only
such authority as may be specified by these Bylaws, by resolution of the Board
of Directors, or as may be properly delegated by or through the Chairman or
President. Such persons shall hold such titles at the pleasure of the Chairman
or President.
SECTION 3. QUALIFICATIONS. The Chairman of the Board, Vice Chairman, if
any, and the President shall be members of the Board of Directors.
SECTION 4. TERM. Each officer shall hold his office at the pleasure of
the Board of Directors from the date of his election until his successor is
elected and qualified, or until his earlier resignation or removal.
<PAGE> 7
SECTION 5. CONSOLIDATION OF OFFICES. Any two (2) or more offices,
except those of President and Vice President, may be held by one and the same
person.
SECTION 6. REMOVAL. Any officer may be removed, either with or without
cause, by a vote of a majority of the whole Board of Directors.
SECTION 7. VACANCIES. A vacancy in any office because of death,
resignation, removal or any other cause shall be filled by the affirmative vote
of a majority of the whole Board of Directors.
SECTION 8. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of stockholders and the Board of Directors. He shall
perform such duties as shall be delegated or assigned by the President, the
Board of Directors, or these bylaws.
SECTION 9. VICE CHAIRMAN. The Vice Chairman shall perform all of the
duties of the Chairman of the Board in the event of the death, disability or
absence of the Chairman of the Board, and such other duties as the Board of
Directors may from time to time assign to him.
SECTION 10. PRESIDENT. The President shall be the chief executive
officer of the Corporation and, under the direction of the Board of Directors,
shall be responsible for the general management and direction of the affairs and
business of the Corporation. He shall perform such other duties as may be
assigned by the Board of Directors and these Bylaws and shall have all powers
necessary and proper to perform such responsibilities and duties. In the absence
of the Chairman of the Board or the Vice Chairman, if any, the President shall
preside at meetings of the stockholders and the Board of Directors.
SECTION 11. VICE PRESIDENTS. The Vice Presidents shall perform all of
the duties of the President in the event of the death, disability or absence of
the President and such other duties, if any, as the Board of Directors may from
time to time assign to them.
SECTION 12. THE SECRETARY AND THE ASSISTANT SECRETARIES. The Secretary
shall record or cause to be recorded in books provided for the purpose the
minutes of the meetings of the stockholders, the Board of Directors, the
Executive Committee and all other committees of the Board of Directors, if any;
shall see that all notices are duly given in accordance with the provisions of
these Bylaws and as required by law; shall be custodian of all corporate records
(other than financial) and of the seal of the Corporation and see that the seal
is affixed to all documents the execution of which on behalf of the Corporation
under its seal is duly authorized in accordance with the provisions of these
Bylaws; shall keep the list of stockholders which shall include the post-office
address of each stockholder, and make all proper changes therein, retaining and
filing his authority for all such entries; shall see that the books, reports,
statements, certificates and all other documents and records required by law are
properly kept and filed; and, in general, shall perform all duties incident to
the office of Secretary and such other duties as may, from time to time, be
assigned to him by the Board of Directors or by the President.
At the request of the Secretary, or in his absence or disability, any
Assistant Secretary shall perform any of the duties of the Secretary and when so
acting, shall have all the powers of, and be subject to all the restrictions
upon, the Secretary. Except where by law the signature of the Secretary is
required, each of the Assistant Secretaries shall possess the same power as the
Secretary to sign certificates, contracts, obligations and other instruments of
the Corporation, and affix the seal of the Corporation to such instrument, and
attest the same.
<PAGE> 8
SECTION 13. THE TREASURER AND THE ASSISTANT TREASURERS. The Treasurer
shall have charge and custody of, and be responsible for, all funds and
securities of the Corporation, and shall deposit all such funds in the name of
the Corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of these Bylaws; shall render to the
Board of Directors, whenever the Board may require him so to do, and shall
present at the annual meeting of the stockholders, if called upon so to do, a
report of all his transactions as Treasurer; and, in general, shall perform all
duties incident to the office of Treasurer and such other duties as may, from
time to time, be assigned to him by the Board of Directors or by the President.
If required by the Board of Directors, the Treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the Board of Directors shall determine.
At the request of the Treasurer, or in his absence or disability, any
Assistant Treasurer may perform any and all of the duties of the Treasurer and,
when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the Treasurer. Except where by law the signature of the
Treasurer is required, each of the Assistant Treasurers shall possess the same
power as the Treasurer to sign all certificates, contracts, obligations and
other instruments of the Corporation.
SECTION 14. COMPENSATION. The compensation of Directors who are
employees shall be established by the Board of Directors upon recommendation of
the Compensation and Benefits Committee. Compensation of other Officers and
Employees shall be established by the President or his delegate.
No officer shall be prevented from receiving such compensation by reason of
the fact that he is also a Director of the Corporation.
ARTICLE VI
CONTRACTS, CHECKS, LOANS AND DEPOSITS
SECTION 1. CONTRACTS, CHECKS, ETC. All contracts and agreements
authorized by the Board of Directors, and all checks, drafts, bills of exchange
or other orders for the payment of money, notes, or other evidences of
indebtedness issued in the name of the Corporation, shall be signed by such
person or persons as may from time to time be designated by the Board of
Directors, or as may be designated by such officer or officers as the Board of
Directors may appoint, which designation or designations may be general or
confined to specific instances. The Board of Directors may authorize the use of
facsimile signatures on any such document. [Amended 9/18/90]
SECTION 2. PROXIES IN RESPECT OF SECURITIES OF OTHER CORPORATIONS.
Unless otherwise provided by resolution adopted by the Board of Directors, the
Chairman of the Board, President or a Vice President may from time to time
appoint an attorney or attorneys, or an agent or agents, to exercise in the name
and on behalf of the Corporation the powers and rights which the Corporation may
have as the holder of stock or other securities in any other corporation to vote
or to consent in respect of such stock or other securities; the Chairman of the
Board, the President or a Vice President may instruct the person or persons so
appointed as to the manner of exercising such powers and rights and the Chairman
of the Board, the President or a Vice President may execute or cause to be
executed in the name and on behalf of the Corporation and under its corporate
seal, or otherwise, all such written proxies, powers of attorney, or other
written instruments as he may deem necessary in order that the Corporation may
exercise such powers and rights.
<PAGE> 9
ARTICLE VII
CERTIFICATES OF STOCK, BONDS AND RECORDS
SECTION 1. FORM, SIGNATURES. The certificates of stock of the
Corporation shall be numbered and shall be entered in the books of the
Corporation as they are issued. They shall exhibit the holder's name and number
of shares and shall be signed by the Chairman of the Board or President or a
Vice President and the Secretary or an Assistant Secretary which signature may
be a facsimile; provided, however, that if any such certificate is countersigned
(a) by a transfer agent other than the Corporation or its employee or (b) by a
registrar other than the Corporation or its employee, any other signature on
such certificate may be a facsimile. In case any officer of the Corporation who
shall have signed, or whose facsimile signature shall have been placed upon,
such certificate shall cease to be such officer before such certificate shall
have been issued, such certificate may nevertheless be issued by the Corporation
with the same effect as though such person were such officer at the date of
issuance.
SECTION 2. TRANSFER. Transfers of stock shall be made on the books of
the Corporation only by the person named in the certificate or by attorney
lawfully constituted in writing, and upon surrender of the certificate therefor.
SECTION 3. RECORD OWNER. The Corporation shall be entitled to treat the
holder of record of any share or shares of stock as the holder in fact thereof
and accordingly shall not be bound to recognize any equitable or other claim to
or interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by the
laws of Delaware.
SECTION 4. LOST CERTIFICATES. In the case any certificates of stock
issued by the Corporation shall be alleged to have been lost, stolen or
destroyed the Transfer Agent is authorized to issue and authenticate any
certificate or certificates of stock issued in lieu of a lost, stolen or
destroyed certificate or certificates of stock, and in an appropriate case to
transfer shares represented by certificates of stock registered in the name of a
decedent without requiring documents as to probate proceedings provided that an
Indemnity Bond satisfactory to the Transfer Agent indemnifying the Corporation
and the Transfer Agent shall be required in all cases.
SECTION 5. BOOKS AND RECORDS. The books and records of the Corporation
may be kept at such places within or without the State of Delaware as the Board
of Directors may from time to time determine.
SECTION 6. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) days nor less than ten (10) days before the date of
such meeting, nor more than sixty (60) days prior to any other action. If in any
case involving the determination of stockholders for any purpose other than
notice of or voting at a meeting of stockholders the Board of Directors shall
not fix such a record date, the record date for determining stockholders for
such purpose shall be the close of business on the day on which the Board of
Directors shall adopt the resolution relating thereto. A determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
<PAGE> 10
ARTICLE VIII
DIVIDENDS
Subject to the provisions of law and of the Certificate of Incorporation, the
Board of Directors, at any regular or special meeting, may declare and pay
dividends upon the shares of its stock either (a) out of its surplus as defined
in and computed in accordance with the provisions of law or (b) in case it shall
not have any such surplus, out of its net profits for the fiscal year in which
the dividend is declared and/or the preceding fiscal year, whenever and in such
amount as, in the opinion of the Board of Directors, the condition of the
affairs of the Corporation shall render it advisable.
Before payment of any dividend or making any distribution of profits, there may
be set aside out of the surplus or net profits of the Corporation such sum or
sums as the Directors from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall think conducive to the interests of the
Corporation.
ARTICLE IX
SEAL
The corporate seal of the Corporation shall be circular in form and shall
contain the following words:
BUTLER MANUFACTURING COMPANY
CORPORATE
SEAL
DELAWARE
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall end on the thirty-first day of December
in each year.
ARTICLE XI
AMENDMENTS
Subject to the provisions of the Certificate of Incorporation, these Bylaws may
be altered, amended or repealed at any regular annual meeting of the
stockholders (or at any special meeting thereof duly called for that purpose) by
a majority vote of the shares represented and entitled to vote at such meeting;
provided that in the notice of such special meeting notice of such purpose shall
be given. Subject to the laws of the State of Delaware, the Certificate of
Incorporation and these Bylaws, the Board of Directors may by majority vote of
those present at any meeting at which a quorum is present amend these Bylaws, or
enact such other Bylaws as in their judgment may be advisable for the regulation
of the conduct of the affairs of the Corporation.
<PAGE> 1
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Company sales for 1998 were $962 million compared with $925 million in 1997, an
increase of 4%. Building Systems segment revenues increased slightly over 1997
while the Architectural Products and Construction Services segments increased
19.4% and 11.3%, respectively. The Real Estate segment reported a 12.7% decline
in sales in 1998 due to lower project sales.
Building Systems segment sales were $638 million in 1998 compared with $633
million in 1997. The domestic and international steel buildings businesses both
contributed to increased sales in this segment. The company's Lester wood frame
buildings business reported lower sales in 1998 due to reduced demand in
agricultural markets.
Sales in the Architectural Products segment were $182 million in 1998 and $152
million in 1997. Continued strong demand for both storefront and curtain wall
product lines contributed to the increase in sales along with a full year of
sales in 1998 for Moduline and Rebco West, both of which were acquired in 1997.
The Construction Services segment reported sales of $135 million in 1998
compared to $121 million in 1997. Construction Services continued to benefit
from strategic alliance customer relationships by meeting their construction
needs for multi-site projects.
The Real Estate segment, which develops build-to-suit-to-lease facilities and
sells them to investors, reported sales of $33 million in 1998 compared with
$38 million in 1997.
The company's consolidated sales in 1997 were $925 million compared to $870
million in 1996, an increase of 6.3%. Building Systems segment revenues
increased 13.1% over 1996 due to strong demand in the company's domestic metal
buildings business and a full year of operations in China and Brazil.
Architectural Products segment sales in 1997 increased 23.8% due to increased
demand for curtain wall and storefront systems, plus the acquisitions of Rebco
West and Moduline during the year.
Gross profit in 1998 was $162 million or 16.8% of sales compared to $164
million or 17.7% of sales in 1997. Gross profit in the Building Systems segment
declined as project losses sustained in the Brazilian operation more than
offset gross profit increases in all other business units within this segment.
The Architectural Products segment gross profit dollars increased 18.2% in
1998, on significantly higher sales. Gross profit dollars in the Construction
Services and Real Estate segments were comparable with 1997.
Gross profit was $156 million or 17.9% of sales in 1996. The gross profit
dollars increased in 1997 due to greater sales volume in the Buildings System
segment. The gross profit percentage declined in 1997 due to rising lumber
prices in the wood frame buildings business and lower margins on sales to
continental Europe due to the appreciation of the British pound to the German
mark.
Selling, general, and administrative expenses were $125 million in 1998
compared to $122 million in 1997 or 13% and 13.2% of sales, respectively.
In 1996 selling, general, and administrative expenses were $107 million or
12.2% of sales. The increase in 1997 was due to sales increases and costs
associated with acquisition and growth initiatives in the Building Systems and
Architectural Products segments.
Restructuring and asset impairment charges, discussed below, were recorded in
1998 for $7.1 million and $6.5 million, respectively.
In 1998 the company recorded net other income of $.4 million compared with $1.2
million in 1997 and $.9 million in 1996. The amount of rental income received
on real estate development projects accounts for most of the differences in
each year.
In June 1997 the company recorded a pretax gain of $22 million from the sale of
the Grain Systems division.
Interest expense in 1998 increased to $5.7 million from $5.1 million in 1997.
The increase was due to interest incurred on a $35 million private placement
note entered into in March 1998 and an increase in short-term borrowings to
support working capital needs in early 1998. Interest expense was $4.3 million
in 1996, lower than the 1997 level, due to lower short-term borrowings to
support working capital needs in 1996.
The company's effective tax rates were 60.5% in 1998, 42.5% in 1997, and 44% in
1996. The higher rate in 1998 was due to larger foreign loss components of the
company's pretax earnings which management does not believe will result in
fully realizable foreign tax benefits.
Liquidity and Capital Resources
The company's cash balance increased $4.7 million in 1998 compared to an
increase of $3.5 million in 1997 and a decrease of $5.2 million in 1996.
Principal sources of cash in 1998 were $32.2 million from operations and $35
million from the issuance of the private placement note. Principal uses of cash
in 1998 were capital expenditures of $14.8 million, a $19.7 million decrease in
short-term borrowings, and share repurchases of $10.3 million.
In 1997 principal sources of cash were earnings adjusted for depreciation and
amortization along with the proceeds from the sale of the Grain Systems
division. Principal uses of cash were capital expenditures and increased
working capital.
Cash flow from operations was $32.2 million in 1998 compared with $5.2 million
in 1997 and $24.4 million in 1996. In 1998, 1997, and 1996 working capital
increased to accommodate higher sales levels.
In March 1998 the company completed a $35 million private placement note. The
note matures in March 2013, carries a fixed interest rate of 6.57%, and is
payable in equal annual installments of $3.5 million beginning in 2004.
Proceeds were used to pay down the company's short-term borrowings and other
corporate purposes. The company's total debt to total capital ratio was 31.4%
in 1998, compared with 20.3% in 1997 and 26.1% in 1996.
The company maintains short-term credit facilities aggregating $42.5 million to
meet the needs of the company and its subsidiaries. Borrowings outstanding at
December 31, 1998 were $1.6 million with an additional $1.8 million of the
credit
Page 14
<PAGE>
line utilized to provide a bank letter of credit. Management believes
the company's operating cash flow, along with bank credit lines are sufficient
to meet future liquidity requirements.
Capital expenditures were $14.8 million in 1998, $30.2 million in 1997, and
$22.7 million in 1996. The increased expenditures in 1997 and 1996 were used to
expand domestic and international production capacity in the Building Systems
and Architectural Products segments.
Market Price Risk
The company's principal exposure to market risk is from changes in commodity
prices, interest rates, and currency exchange rates. To limit exposure and to
manage volatility related to these risks, the company enters into select
commodity and currency hedging transactions, as well as forward purchasing
arrangements. The company does not use financial instruments for trading
purposes.
Commodity Price Exposure: The company's primary commodities are steel,
aluminum, and wood.
Steel is the company's largest purchased commodity. The company enters into
forward steel purchase arrangements in its metal buildings business for periods
of less than one year's duration to protect against potential price increases.
To the extent there are increases in the company's steel costs, they are
generally recaptured in the company's product sales prices. During the latter
half of 1998 steel prices have trended downward.
Aluminum hedge contracts of less than one year's duration are purchased to
hedge the engineered products backlog of the Vistawall group against potential
losses caused by increases in aluminum costs. This product line is sensitive to
material cost movements due to the longer lead times from project quoting to
manufacture. Gains or losses recorded on hedge contracts are offset against the
actual aluminum costs incurred. At December 31, 1998 outstanding hedge
contracts represent approximately 10% of annual aluminum purchases. The fair
value of aluminum contracts and their associated risk were immaterial at that
date.
The company's wood frame building business enters into forward purchase
arrangements for commercial grade lumber for periods of less than one year's
duration. Lumber costs are generally more volatile than steel costs. To offset
increases in lumber costs, the company adjusts product prices accordingly.
During the latter half of 1998 lumber costs have remained relatively stable.
Interest Rates: Approximately 88% of the company's long-term debt carries a
fixed interest rate, therefore the company's interest expense is relatively
stable and not influenced by changes in market interest rates. Principal
payments over the next five years on the long-term, fixed-rate debt are $5
million per year with a weighted-average interest rate of approximately 7.2%.
At the end of five years, the long-term, fixed-rate debt outstanding of $35
million carries a weighted-average interest rate of 6.57%.
Foreign Currency Fluctuation: The majority of the company's business is
transacted in U.S. dollars, therefore limiting the company's exposure to
foreign currency fluctuations. Where the company has foreign-based operations,
the local currency has been adopted as the functional currency. As such, the
company has both transaction and translation foreign exchange exposure in those
operations.
The company's net asset investment in foreign operations at December 31, 1998
was approximately $25 million. Due to relative cost and limited availability,
the company does not hedge its foreign net asset exposure.
The company does hedge short-term foreign currency transaction exposures
related to sales activity in Canada. Forward Canadian dollar sale contracts of
up to four months duration are purchased to cover the exposure. At December 31,
1998 the fair value of such contracts was immaterial.
Restructuring and Asset Impairment Charges
In December 1998 the company's board of directors approved a restructuring of
the South American and European metal buildings businesses. As a result, the
company recorded a $7.1 million pretax charge in connection with the
restructuring. In addition, the company recorded a $6.5 million pretax charge
for the impairment of certain assets.
The actions leading to the restructuring charge were the closing of
manufacturing operations in Brazil and the move of European manufacturing
operations to Hungary from Scotland. The charge includes amounts for the write-
down to realizable sale value of redundant assets ($2.8 million) and the write-
off of worthless assets ($1.9 million). Estimates of realizable sales values
were obtained from outside appraisal and the company's experience in selling
redundant assets. The remaining $2.4 million pertains to severance and
termination costs for approximately one hundred employees ($1.3 million) and
legal, claims, and other incremental shut-down costs ($1.1 million) associated
with the restructuring.
Details of the restructuring accrual are as follows:
<TABLE>
<CAPTION>
Original 12/31/98
Accrual Utilization Accrual
------ ---- ------
<S> <C> <C> <C>
Severance and termination costs $1,317 $132 $1,185
Legal, claims, and other costs 1,092 - 1,092
------ ---- ------
$2,409 $132 $2,277
</TABLE>
In the first quarter of 1999 the Brazilian government decided to float its
currency, the real. This led to a significant devaluation of the Brazilian real
against the U.S. dollar. As a result the company will recognize an additional
currency translation loss as a restructuring charge in 1999. At January 26,
1999 the additional charge was estimated at approximately $2 million after-tax,
at the exchange rates existing at that time.
The asset impairment charge of $6.5 million relates to the write-down of two
assets to their current market values. The majority of the charge ($5.4
million) was associated with the company's real estate development project
located in San Marcos, Texas, which is recorded in the balance sheet as,
"Assets held for sale." The current market value was based upon a recent
appraisal. The company is actively marketing the project, however it may take
several years to ultimately sell. The remainder of the charge was related to
the company's decision to abandon a portion of a software program linked to the
company's international subsidiaries.
Page 15
<PAGE>
Year 2000 Update
Many computer systems used by companies, governments, and individuals around
the world use only the last two digits to refer to a year ("98" for 1998).
Therefore, these computer programs and systems may not properly distinguish
between a year that begins with "20" versus one beginning with "19." If not
corrected, many computer applications could fail or create erroneous results.
This has come to be known as the "Year 2000" ("Y2K") problem.
The company believes it has identified, or has processes in place to identify,
and will be able to address all of its critical Information Technology, Other
Technology, and Business Issues Y2K problems in a timely manner. The company
has incurred approximately $1.4 million in Y2K compliance costs, and
anticipates the total costs to attain full compliance will approximate $2.2
million.
In 1997 the company reviewed its principal business, manufacturing, and
engineering computer systems and applications to determine the impact of the
Y2K problem on these systems, and to establish a compliance plan to address
critical issues. In early 1998 the company engaged a consultant to assess the
company's plan and its progress toward effecting the plan in a timely manner.
The consultant reviewed three areas: Information Technology ("IT"), such as the
company's business, telecommunications, manufacturing, and engineering systems;
Other Technology ("Non-IT") such as manufacturing equipment which may contain
embedded micro-controllers; and Business Issues related to service providers,
vendors, and customers. The consultant advised the company that nothing was
identified that, in and of itself, would indicate the company would not be
successful with its Y2K compliance efforts.
In mid-1998 the company established a Y2K project office and chairperson
responsible for the oversight and coordination of the Y2K Plan, including
assessment, remediation, and reporting efforts. This office reports to the
president and chief executive officer of the company and its board of
directors. A management representative at each of the company's business units
has been assigned responsibility for the coordination and reporting of all
three compliance area efforts, including any contingency plans, if needed.
Status reports are reviewed, evaluated, and summarized monthly by the Y2K
project office.
Information Technology: The assessment phase of the IT process was completed in
1997. The company is currently in the remediation and compliance phases.
Currently individual business units are at various stages of compliance. It is
estimated that collectively the company has achieved 61% compliance with its IT
plan. It is estimated that 100% compliance with all phases of the IT plan will
be achieved during the third quarter of 1999.
Other Technology: The assessment phase of the Non-IT process began in 1998 with
an inventory of all computer controlled and networked manufacturing equipment
to determine if date functions existed in their controllers and whether they
were compliant. This phase of the Non-IT process is substantially complete.
Subsequent phases include remediation of equipment controls which are non-
compliant. To date the company is approximately 73% complete with its Non-IT
plan and anticipates 100% compliance during the third quarter of 1999.
Business Issues: The assessment phase of the Business Issues compliance plan
began in 1998. To date each business unit has solicited their key service
providers, vendors, and customers to assess their Y2K readiness. The company is
approximately 51% complete with its Business Issues plan.
Contingency Plans: The company has identified its most critical Y2K risk to be
associated with its internally developed order management and manufacturing
control systems. However, the company anticipates being 100% compliant with all
aspects of its plan during the third quarter of 1999.
Successful completion of the company's plan is dependent upon timely Y2K
compliance by key suppliers and service providers. The company has received
notification from many of its key suppliers providing assurances that
significant progress is being made towards their attaining Y2K compliance. If
they are incapable of achieving compliance there could be a material adverse
effect on the company's business, results of operations, and financial
condition.
The company has and continues to develop contingency plans to mitigate
potential disruption which may occur due to Y2K problems. Contingency plans and
associated cost estimates will be continually refined as additional information
and communications are received.
Management Transition
In January 1999 John J. Holland was elected President and Chief Executive
Officer of the company succeeding Robert H. West as CEO. Mr. Holland was also
elected a director of the company. Mr. West remains Chairman until he retires
in mid-1999. Donald H. Pratt has been elected Vice Chairman and will succeed
Mr. West as Chairman when he retires. Richard S. Jarman was elected Executive
Vice President and Clyde E. Wills was selected to succeed Mr. Jarman as
President of the U.S. Buildings Division.
The board of directors also elected Gary M. Christensen as a director of the
company. Mr. Christensen is President and Chief Executive Officer of Pella
Corporation. He replaces Harold G. Bernthal who will retire from the board when
his current term expires in April, 1999.
Page 16
<PAGE>
Outlook
Domestic economic indicators suggest very modest growth for the U.S. economy in
1999. Internationally, the operational progress made in China has greatly
improved the company's ability to serve this large market. Relocation of the
European manufacturing operations to the continent during 1999 should position
this operation to be more cost competitive and to better serve both western and
eastern European markets. The company is taking steps to hasten the wind-up of
the Brazilian operation in order to minimize the company's exposure to further
foreign currency risk. The growth in strategic alliances with major
corporations is a factor that may lessen the effect of an economic slowdown.
Finally, the company's systems approach to construction solutions continues to
maintain a dominant share of the nonresidential construction market it serves.
Order backlog at year end was $317 million, 11% greater than a year ago.
Other
During 1998 the company increased its quarterly dividend to $.15 per common
share. In January 1999 the board of directors approved an 800,000 share common
stock repurchase authorization, replacing the previous 800,000 share
authorization granted in 1997. Purchases will be made from time to time in the
open market and in private transactions at prevailing market prices. Shares are
deposited in the company's treasury and are used for stock options, employee
stock ownership plans, and other corporate purposes.
Forward Looking Information
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, which may include statements
concerning projection of revenues, income or loss, capital expenditures,
capital structure, or other financial items, statements regarding the plans and
objectives of management for future operations, statements of future economic
performance, statements of the assumptions underlying or relating to any of the
forgoing statements, and other statements which are other than statements of
historical fact. These statements appear in a number of places in this report
and include statements regarding the intent, belief, or current expectations of
the company and its management with respect to (i) the cost and timing of the
completion of new or expanded facilities, (ii) the company's competitive
position, (iii) the supply and price of materials used by the company, (iv) the
demand and price for the company's products and services, or (v) other trends
affecting the company's financial condition or results of operations including
changes in manufacturing capacity utilization and corporate cash flow in both
domestic and international markets. Readers are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially as a
result of these various factors.
Report of Independent Public Accountants
To the Shareholders of Butler Manufacturing Company:
We have audited the accompanying consolidated balance sheets of Butler
Manufacturing Company and subsidiaries at December 31, 1998 and 1997, and the
related consolidated statements of earnings and retained earnings,
comprehensive income and cash flows for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated financial statements of Butler Manufacturing
Company for 1996 were audited by other auditors whose report, dated February 3,
1997, expressed an unqualified opinion on those statements.
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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Butler
Manufacturing Company and subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Kansas City, Missouri
January 25, 1999
PAge 17
<PAGE>
<TABLE>
Consolidated Balance Sheets
<CAPTION>
(Thousands of dollars)
At December 31 1998 1997
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 10,260 $ 5,515
Receivables:
Trade 122,345 102,591
Other 12,068 6,764
-------- --------
134,413 109,355
Less allowance for possible losses 3,791 2,473
-------- --------
Net receivables 130,622 106,882
Inventories 70,252 78,291
Real estate developments in progress 19,139 22,401
Deferred tax assets 10,944 7,812
Other current assets 12,283 12,422
-------- --------
Total current assets 253,500 233,323
-------- --------
Investments and other assets 38,689 35,887
Assets held for sale 4,000 9,423
Property, plant, and equipment, at cost:
Land 5,017 5,005
Buildings 60,166 59,732
Machinery, tools, and equipment 137,290 130,598
Office furniture and fixtures 39,573 42,607
Transportation equipment 1,625 1,805
-------- --------
243,671 239,747
Less accumulated depreciation 145,967 143,408
-------- --------
Net property, plant, and equipment 97,704 96,339
-------- --------
$393,893 $374,972
======== ========
See Accompanying Notes to Consolidated Financial Statements.
Page 18
<PAGE>
(Thousands of dollars)
At December 31 1998 1997
-------- --------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable to banks $ 1,627 $ 21,280
Current maturities of long-term debt 5,832 5,862
Accounts payable 83,710 72,266
Dividends payable 1,092 1,069
Accrued taxes and other expenses 40,728 37,842
Accrued payroll and pension expense 17,180 14,304
Billings in excess of costs and estimated earnings 4,536 3,700
Taxes on income 6,425 8,181
-------- --------
Total current liabilities 161,130 164,504
-------- --------
Deferred tax liabilities 3,441 3,561
Other noncurrent liabilities 16,233 16,423
Long-term debt, less current maturities 62,901 33,918
Shareholders' equity:
Common stock, no par value, authorized 20,000,000
shares, issued 9,088,200 shares, at stated value 12,623 12,623
Foreign currency translation adjustment (52) 26
Retained earnings 178,536 175,373
-------- --------
191,107 188,022
Less cost of common stock in treasury, 1,806,202
shares in 1998 and 1,451,205 shares in 1997 40,919 31,456
-------- --------
Total shareholders' equity 150,188 156,566
Commitments and contingencies
-------- --------
$393,893 $374,972
======== ========
</TABLE>
Page 19
<PAGE>
<TABLE>
Consolidated Statements of Earnings and retained earnings
<CAPTION>
(Thousands of dollars, except per share amounts)
Years ended December 31 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales $962,163 $924,646 $870,162
Cost of sales 800,307 760,721 714,116
-------- -------- --------
Gross profit 161,856 163,925 156,046
Selling, general, and administrative expenses 125,291 122,214 106,548
Restructuring charge 7,117 - -
Asset impairment charge 6,499 - -
-------- -------- --------
Operating income 22,949 41,711 49,498
Other income (expense), net 393 1,180 850
Gain on sale of business - 22,000 -
-------- -------- --------
393 23,180 850
-------- -------- --------
Operating and other income 23,342 64,891 50,348
Interest expense 5,667 5,069 4,344
-------- -------- --------
Pretax earnings 17,675 59,822 46,004
Income taxes 10,696 25,438 20,241
-------- -------- --------
Net earnings 6,979 34,384 25,763
Retained earnings at beginning of year 175,373 141,900 119,395
-------- -------- --------
182,352 176,284 145,158
Dividends declared:
Common stock, $.58, $.52, and $.44 per share (4,356) (3,999) (3,335)
Net change in retained earnings due to
treasury stock transactions 540 3,088 77
-------- -------- --------
Retained earnings at end of year $178,536 $175,373 $141,900
======== ======== ========
Basic earnings per share $ 0.92 $ 4.48 $ 3.39
======== ======== ========
Diluted earnings per share $ 0.92 $ 4.43 $ 3.35
======== ======== ========
</TABLE>
<TABLE>
Consolidated Statements of Comprehensive Income
<CAPTION>
(Thousands of dollars)
Years ended December 31 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net earnings: $ 6,979 $ 34,384 $ 25,763
Other comprehensive income:
Foreign currency translation adjustment (78) (525) 397
-------- -------- --------
Comprehensive income $6,901 $ 33,859 $ 26,160
======== ======== ========
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
Page 20
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
(Thousands of dollars)
Years ended December 31 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 6,979 $ 34,384 $ 25,763
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 14,923 12,474 9,737
Restructuring charge 7,117 - -
Asset impairment charge 6,499 - -
Gain on sale of business - (13,299) -
Equity in (earnings) loss of joint ventures 222 (576) 720
Change in assets and liabilities, net of
sale or purchase of new businesses:
Receivables (23,740) 3,914 (18,979)
Inventories 6,871 (21,999) (8,922)
Real estate developments in progress 3,262 11,402 (13,680)
Deferred taxes (3,252) 790 725
Other current assets and
current liabilities 13,316 (21,885) 29,012
-------- -------- --------
Net cash provided by
operating activities 32,197 5,205 24,376
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (14,800) (30,249) (22,670)
Cash received on sale of business - 33,748 -
Acquisition of new businesses - (7,697) (805)
Net change in other noncurrent assets (7,356) (2,429) (6,275)
-------- -------- --------
Net cash used by investing activities (22,156) (6,627) (29,750)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 35,000 790 771
Repayment of long-term debt (6,017) (5,826) (5,384)
Net change in short-term borrowings (19,683) 12,284 7,597
Dividends paid (4,333) (3,837) (3,184)
Sale and issuance of treasury stock 797 1,507 1,660
Purchase of treasury stock (10,260) (6,179) (2,543)
Net change in other noncurrent liabilities (722) 6,710 820
-------- -------- --------
Net cash provided (used) by
financing activities (5,218) 5,449 (263)
Effect of exchange rate changes (78) (525) 397
-------- -------- --------
Net change in cash and cash equivalents 4,745 3,502 (5,240)
Cash and cash equivalents at beginning of year 5,515 2,013 7,253
-------- -------- --------
Cash and cash equivalents
at end of year $ 10,260 $ 5,515 $ 2,013
======== ======== ========
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
Page 21
<PAGE>
Notes to Consolidated Financial Statements
Significant Accounting Policies
Accounting Standards. In June 1998 the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133), effective for fiscal
years beginning after December 31, 1998. SFAS 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. The
company plans to adopt the accounting and reporting standards of SFAS 133 in
2000. It is anticipated that SFAS 133 will have no material impact on the
company.
In April 1998 the Accounting Standards Executive Committee issued Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities" (SOP 98-5),
effective for the fiscal years beginning after December 15, 1998. SOP 98-5
requires costs of start-up activities and organization costs to be expensed as
incurred. The company plans to adopt SOP 98-5 in 1999. It is anticipated that
SOP 98-5 will have no material impact on the company.
Principles of Consolidation. The consolidated financial statements include all
subsidiaries which are more than 50% owned. Corporations in which the company
has stock ownership up to but not over 50% are accounted for using the equity
method. All significant intercompany profits, account balances, and
transactions are eliminated in consolidation.
Management of the company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Cash and Cash Equivalents. Cash and cash equivalents are defined as all demand
deposits and overnight investments.
Inventories. Inventories are valued at the lower of cost or market. The last-
in, first-out (LIFO) method of determining cost is used for substantially all
domestic inventories. If the first-in, first-out (FIFO) method had been used
for all locations, inventories would have been $10.2 million and $10.9 million
higher than those reported at December 31, 1998 and 1997, respectively.
In 1998 and 1996, the use of the LIFO method increased net earnings by $.4
million ($.05 per share) and $.1 million ($.01 per share), respectively, and
decreased net earnings by $.3 million ($.04 per share) in 1997.
<TABLE>
Inventories by Component
<CAPTION>
(Thousands of dollars) 1998 1997
-------- --------
<S> <C> <C>
Raw materials $ 34,509 $ 38,622
Work in process 8,503 7,304
Finished goods 37,417 43,223
-------- --------
FIFO inventory 80,429 89,149
LIFO reserve (10,177) (10,858)
-------- --------
LIFO inventory $ 70,252 $ 78,291
======== ========
</TABLE>
Property, Plant, and Equipment. Depreciation is calculated using the straight-
line method over the estimated useful lives of the assets. Expenditures for
maintenance and repairs are charged to expense as incurred. Upon sale or
retirement of assets, the cost and the accumulated depreciation amounts are
removed from the accounts.
Research and Development Costs. Costs incurred in the creation and start-up of
new products or changes of existing products are charged to expense as
incurred. The company expended $2.9 million of research and development costs
in both 1998 and 1997, and $2.7 million in 1996.
Stock Option Plans. The company records stock compensation in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25). Under APB 25 no charges are made to earnings in accounting
for stock options granted because all options are granted at fair market value.
If the amounts received when options are exercised are different than the
carrying value of treasury stock issued, the difference is recorded in retained
earnings. See the "Stock Incentive Plans" footnote for more information on the
company's stock option plans.
Deferred Charges. Incremental costs related to the development of major
software applications expected to reduce costs in future periods have been
capitalized in accordance with SOP 98-1, are included in "Investments and other
assets" in the consolidated balance sheets ($14 million and $11.5 million at
December 31, 1998 and 1997, respectively), and are being amortized on a
straight-line basis over periods not exceeding seven years ($2.1 million in
1998, $1.2 million in 1997, and $1 million in 1996). During 1998 the
unamortized cost of a software application was reduced by $1.1 million, to
reflect current value, as a result of the company restructuring its
international businesses.
Page 22
<PAGE>
Earnings Per Share. The company reports basic and diluted earnings per share in
accordance with Financial Accounting Standard No. 128, "Earnings Per Share."
Basic earnings per share is based upon the weighted average common shares
outstanding during each year. Dilutive earnings per share is based upon the
weighted average common and common equivalent shares outstanding during each
year. Employee stock options are the company's only common stock equivalents;
there are no other potentially dilutive securities.
<TABLE>
Basic and Diluted Earnings Per Share (EPS) Computations
<CAPTION>
1998
--------------------------
(In thousands except Per-Share
per share amounts) Income Shares Amount
------- ------ ------
<S> <C> <C> <C>
Net earnings $ 6,979
------- ------ -----
Basic EPS income available
to common shareholders 6,979 7,553 $ .92
------- ------ -----
Stock options 59
------- ------ -----
Diluted EPS income available to common
shareholders plus assumed conversions $ 6,979 7,612 $ .92
======= ====== =====
<CAPTION>
1997
--------------------------
(In thousands except Per-Share
per share amounts) Income Shares Amount
------- ------ ------
<S> <C> <C> <C>
Net earnings $34,384
------- ------ -----
Basic EPS income available
to common shareholders 34,384 7,668 $4.48
------- ------ -----
Stock options 86
------- ------ -----
Diluted EPS income available to common
shareholders plus assumed conversions $34,384 7,754 $4.43
======= ====== =====
<CAPTION>
1996
--------------------------
(In thousands except Per-Share
per share amounts) Income Shares Amount
------- ------ ------
<S> <C> <C> <C>
Net earnings $25,763
------- ------ -----
Basic EPS income available
to common shareholders 25,763 7,590 $3.39
------- ------ -----
Stock options 103
------- ------ -----
Diluted EPS income available to common
shareholders plus assumed conversions $25,763 7,693 $3.35
======= ====== =====
</TABLE>
Options to purchase 236,000 shares at a range of $23.00 to $38.50 per share
were outstanding during 1998 but were not included in the computation of the
diluted earnings per share during quarters when the options' exercise price was
greater than the average market price of the common shares. These options,
which expire during 2001 through 2006, were still outstanding at the end of
1998.
Options to purchase 108,000 shares of at a range of $35.88 to $38.50 per share
were outstanding during 1997 but were not included in the computation of
diluted earnings per share during quarters when the options' exercise price was
greater than the average market price of the common shares. These options,
which expire during 2002, were still outstanding at the end of 1997.
Foreign Currency Translation. The value of the U.S. dollar fluctuates on
foreign currency exchanges which creates exchange gains or losses on the
company's international investments.
These investments and the related equity earnings and losses are translated
into U.S. dollars at year end and average exchange rates, respectively. The
gains or losses that result from translation are shown in the shareholders'
equity section of the consolidated balance sheets. Foreign currency exchange
transaction gains or losses for 1998, 1997, and 1996 were immaterial to
consolidated results.
Comprehensive Income. In June 1997 the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income" (SFAS 130), effective for fiscal periods beginning after
December 15, 1997. SFAS 130 establishes new rules for the reporting of
comprehensive income and its components; however the adoption of this statement
had no impact on the company's net income or shareholders' equity. Prior years'
financial statements have been restated to conform to these requirements. The
only component of other comprehensive income is foreign currency translation
adjustment which has no tax effect.
Financial Instruments. The fair value of long-term debt is determined by
comparing interest rates for debt with similar terms and maturities. At
December 31, 1998 and 1997 the fair value of the company's long-term debt was
not materially different than its carrying value. Other financial instruments,
consisting of cash and cash equivalents, net receivables, notes payable, and
accounts payable are carried at cost, which approximates fair value, as a
result of the short-term nature of these instruments.
The company has entered into derivative transactions for purposes other than
trading as a means of managing risk of loss of underlying assets. Aluminum
hedge contracts of less than one year's duration are utilized to hedge
architectural aluminum product backlog against losses caused by changes in
aluminum costs. Certain foreign currency forward contracts (principally
Canadian dollars) of less than one year's duration
Page 23
<PAGE>
are used to hedge the company's foreign currency exposure. Gains or losses
related to qualifying hedges are recognized in income when the hedged
transaction settles. The fair values of open aluminum hedge contracts and
foreign currency hedges at December 31, 1998 and 1997 were immaterial.
The company has no significant off-balance sheet risks or concentrations of
credit.
Construction Contracts. The company recognizes earnings on construction
contracts using the percentage of completion method based upon its estimate of
the completion of each project. Costs and estimated earnings in excess of
billings were $1.5 million at both December 31, 1998 and 1997 and are reflected
in the consolidated balance sheets under the caption "Inventories." Total
receivables due under construction contracts, which are included as trade
receivables, were $24.7 million and $11.6 million at December 31, 1998 and
1997, respectively. Included in the contract receivables were $4 million and
$2.1 million at December 31, 1998 and 1997, respectively, for amounts billed
but not collected pursuant to retainage provisions. These amounts are due upon
completion of the contracts.
Acquisition of New Businesses. In March 1997 the company acquired certain
assets of Rebco West, Inc., a leading west-coast manufacturer and distributor
of quality entrance doors and storefront products. The consideration paid was
$2.7 million cash and a $.7 million deferred payment.
In June 1997 the company acquired Moduline Windows, Inc. for 191,777 shares of
Butler common stock having a market value of approximately $7 million, plus
deferred cash payments and closing costs of $.5 million. The company also
retired Moduline's existing bank debt of approximately $4.5 million. The fair
value of the assets acquired of $12 million consisted primarily of receivables,
inventory, and equipment valued at $6.2 million. The remaining amount was
allocated to goodwill. Moduline is a leading manufacturer of high quality
architectural windows for the nonresidential buildings market.
In December 1996 the company purchased a 90% interest in Beker Kft for cash and
a deferred payment. The consideration paid was immaterial to the financial
statements. Beker Kft is a small building systems manufacturer in Hungary.
The results of the businesses acquired have been included in the consolidated
results of the company since the acquisition dates with an immaterial impact on
net sales and net earnings.
All acquisitions to date have been accounted for as purchases. The excess of
cost over net assets of businesses acquired, which is classified as
"Investments and other assets" in the consolidated balance sheets, is being
amortized over periods not exceeding forty years.
Sale and Dissolution of Businesses. In June 1997 the company sold the business
and substantially all of the assets and liabilities of the Grain Systems
division to CTB, Inc. for $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.
Net sales and pretax earnings for the Grain Systems division for the years 1997
and 1996 were $19.5 million and $3.5 million, and $41.7 million and $6.1
million, respectively.
In December 1997 the company agreed to dissolve its 50%-owned partnership,
Advanced Building Systems. The financial impact of dissolution on the company's
financial results was immaterial.
In December 1996 the company recorded a $.6 million pretax loss resulting from
Butler Japan, Inc. discontinuing its business. The company also recognized a
$.2 million tax benefit relating to the discontinuance of this business.
Restructuring of Businesses. In the fourth quarter of 1998 the company recorded
a $7.1 million pretax charge in connection with a restructuring of its South
American and European metal buildings businesses. The actions leading to the
charge were the closing of manufacturing operations in Brazil and the move of
European manufacturing operations to Hungary from Scotland.
The charge includes amounts for the write-down to realizable sale value of
redundant assets ($2.8 million), the write-off of worthless assets ($1.9
million), the severance and termination costs for approximately one hundred
factory and office employees ($1.3 million), and legal, claims, and other
incremental shut-down costs ($1.1 million) associated with the restructuring.
Estimates of realizable sales values were obtained from outside appraisal and
the company's experience in selling redundant assets. At December 31, 1998
approximately $2.3 million of the restructuring charge remained as an accrual
on the company's balance sheet.
In the first quarter of 1999 the Brazilian government decided to float is
currency, the real. This led to a significant devaluation of the Brazilian real
against the U.S. dollar. As a result the company will recognize an additional
currency translation loss as a restructuring charge in 1999. At January 26,
1999 the additional charge was estimated at approximately $2 million after-tax,
at the exchange rates existing at that time.
Page 24
<PAGE>
Assets Held for Sale. BMC Real Estate, Inc., a wholly-owned subsidiary, owns
land for development which is included in "Assets held for sale" in the
consolidated balance sheets with a net carrying value of $4 million and $9.4
million at December 31, 1998 and 1997, respectively. During 1998 the carrying
value of this land development was reduced to current market value based upon a
recent appraisal.
International Joint Venture Operations. The company has a 30% interest in one
international joint venture, Saudi Building Systems. This joint venture is
involved in the design, manufacture, and marketing of pre-engineered metal
buildings for nonresidential use in its respective market. In 1996 the company
also had a 45% interest in Butler Japan, Inc., a marketing joint venture.
The financial results of the joint ventures are reported using the equity
method of accounting. Total net sales of the joint ventures in 1998, 1997, and
1996 were $30.5 million, $29.7 million, and $29.3 million, respectively. The
joint ventures' operating earnings in 1998, 1997, and 1996 were $.6 million,
$.5 million, and $.4 million, respectively. In 1998 and 1997 total assets were
$18.6 million and $19.1 million, respectively. Total liabilities for 1998 and
1997 were $5.3 million and $6.3 million, respectively.
Business Segments
In June 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131, "Disclosures About Segments of an
Enterprise and Related Information" (SFAS 131), effective for fiscal periods
beginning after December 15, 1997. SFAS 131 changes the way the company reports
information about its operating segments. The information for 1997 and 1996 has
been restated from the prior year's presentation in order to conform to the
1998 presentation.
The company groups its operations into four business segments, Building
Systems, Architectural Products, Construction Services, and Real Estate.
The Building Systems segment is involved in the design, manufacture, and
marketing of steel and wood frame pre-engineered building systems for Butler's
global markets.
The Architectural Products segment includes the businesses of the Vistawall
group. The Vistawall group designs, manufactures, and markets aluminum curtain
wall and storefront systems, windows, doors, and skylights.
The Construction Services segment provides comprehensive design, planning, and
construction services for major purchasers of construction.
The Real Estate segment provides real estate build-to-suit-to-lease development
services for major corporations.
The accounting policies for the segments are the same as those described in the
summary of significant accounting policies. The company's reportable segments
are strategic business units that offer different products and services. They
are managed separately because each business requires different technology and
expertise.
The Other classification in the following tables represent unallocated
corporate expenses and assets, including corporate offices, deferred taxes,
pension accounts, and intersegment eliminations. Also included are the
operating results of the former Grain Systems division until its sale in June
1997 as well as the gain on the sale of the division. The asset impairment
charge of $6.5 million and the restructuring charge of $7.1 million are also
included in Other.
<TABLE>
Net Sales
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Building Systems $637,591 $633,441 $560,040
Architectural Products 181,541 152,035 122,764
Construction Services 134,532 120,905 167,069
Real Estate 32,809 37,577 22,716
Other (24,310) (19,312) (2,427)
-------- -------- --------
$962,163 $924,646 $870,162
======== ======== ========
</TABLE>
Net sales represent revenues from sales to affiliated and unaffiliated
customers before elimination of intersegment sales which is included in Other.
Intersegment eliminations are primarily sales from the Building Systems and
Architectural Products segments to Construction Services.
<TABLE>
Interest Expense
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Building Systems $ 425 $ 492 $ 146
Architectural Products - - -
Construction Services - - -
Real Estate 278 891 694
Other 4,964 3,686 3,504
-------- -------- --------
$ 5,667 $ 5,069 $ 4,344
======== ======== ========
</TABLE>
<TABLE>
Pretax Earnings (Loss)
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Building Systems $ 28,931 $ 31,562 $ 37,737
Architectural Products 11,590 9,161 9,656
Construction Services 2,147 1,519 735
Real Estate 4,221 5,032 3,403
Other (29,214) 12,548 (5,527)
-------- -------- --------
$ 17,675 $ 59,822 $ 46,004
======== ======== ========
</TABLE>
Page 25
<PAGE>
<TABLE>
Assets
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Building Systems $227,474 $226,681 $187,661
Architectural Products 80,799 69,299 42,618
Construction Services 26,596 19,921 27,333
Real Estate 26,303 24,415 36,340
Other 32,721 34,656 43,468
-------- -------- --------
$393,893 $374,972 $337,420
======== ======== ========
</TABLE>
Assets represent both tangible and intangible assets used by the segments.
Other assets represent cash and cash equivalents, assets held for sale,
corporate equipment, and miscellaneous other assets which are not related to a
specific business segment.
<TABLE>
Capital Expenditures
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Building Systems $ 8,549 $ 16,689 $ 19,106
Architectural Products 5,677 7,473 1,566
Construction Services 381 4,634 639
Real Estate 39 3 -
Other 154 1,450 1,359
-------- -------- --------
$ 14,800 $ 30,249 $ 22,670
======== ======== ========
</TABLE>
Capital expenditures exclude property, plant, and equipment acquired through
acquisition of new businesses.
<TABLE>
Depreciation and Amortization
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Building Systems $ 11,006 $ 9,693 $ 7,470
Architectural Products 2,488 1,839 1,264
Construction Services 721 389 399
Real Estate 2 3 3
Other 706 550 601
-------- -------- --------
$ 14,923 $ 12,474 $ 9,737
======== ======== ========
</TABLE>
Geographic Information by Country
The following table presents revenues by country based on the location of the
use of the product or service. No single country, other than the United States,
comprised more than 10% of the company's net sales.
<TABLE>
Net Sales
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
United States $821,127 $775,747 $736,685
All other countries 141,036 148,899 133,477
-------- -------- --------
$962,163 $924,646 $870,162
======== ======== ========
</TABLE>
The following table presents all noncurrent assets by country based on the
location of the asset. No single country, other than the United States,
comprised more than 10% of the company's long-lived assets.
<TABLE>
Long-Lived Assets
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
United States $120,568 $118,556 $ 96,952
All other countries 19,825 23,093 18,407
-------- -------- --------
$140,393 $141,649 $115,359
======== ======== ========
</TABLE>
Debt, Leases, Commitments, and Contingencies
<TABLE>
Long-Term Debt Net of Current Maturities
<CAPTION>
(Thousands of dollars) 1998 1997
-------- --------
<S> <C> <C>
Private placement notes $ 55,000 $ 25,000
Industrial revenue bonds 6,250 6,250
Other debt 1,651 2,668
-------- --------
$ 62,901 $ 33,918
======== ========
</TABLE>
In March 1998 the company entered into a Note Agreement with an insurance
company. The proceeds from the financing of $35 million were used to retire
short-term bank debt and other corporate purposes.
Private Placement Notes consists of two agreements with interest rates of 8.02%
and 6.57%. The Notes call for periodic principal payments and mature December
30, 2003 and March 20, 2013, respectively.
Industrial Revenue Bonds mature in 2015, are guaranteed by the company, and are
secured by a bank letter of credit. The weighted-average interest rate on the
bond issue were 4% for 1998, 4.3% for 1997, and 3.8% for 1996.
Total principal payments due on all debt in each of the five years subsequent
to December 31, 1998 are $5.8 million in 1999, $5.8 million in 2000, $5.3
million in 2001, $5.2 million in 2002, $5.2 million in 2003, and $41.4 million
thereafter. Cash payments for interest on long-term debt were $4.6 million, and
$3.2 million, and $3.6 million in 1998, 1997, and 1996, respectively.
Short-Term Borrowings. During 1998 and 1997 the company borrowed to meet
working capital needs and other requirements. At December 31, 1998 the company
and its subsidiaries, including Butler Building Systems Limited, had short-term
credit facilities at several banks totaling $42.5 million. Borrowings
outstanding at December 31, 1998 were $1.6 million at a weighted-average
interest rate of 8%. The company has committed $1.8 million of its credit
facilities
Page 26
<PAGE>
under a letter of credit for insurance obligations. At December 31, 1998 the
company had approximately $39.1 million of available borrowing capacity.
The company's credit agreements contain certain limitations on additional
borrowings, the payment of cash dividends, and the purchase of company stock,
as well as covenants related to the maintenance of certain financial ratios. As
of December 31, 1998 the company was in compliance with all covenants, and at
that date approximately $13 million was available for additional cash dividends
and share repurchases.
Leases. Rental expense under operating leases was $10.2 million, $9.9 million,
and $8.5 million in 1998, 1997, and 1996, respectively. Minimum rental
commitments under noncancelable operating leases are $6.6 million in 1999, $5.4
million in 2000, $4.6 million in 2001, $1.6 million in 2002, and $.9 million in
2003.
Commitments and Contingencies. As a service to its independent dealers, the
company assists in obtaining performance bonds on certain construction
contracts in the ordinary course of business. An irrevocable letter of credit
is generally required for a portion of the contract amount to reduce the
possible liability of the company. At December 31, 1998 such performance bonds
exceeded the related letters of credit by $.2 million. The contracts are in
various stages of completion and management believes that there will be no
liability to the company.
The company is subject to various legal proceedings, claims, and environmental
actions which arise in the ordinary course of business operations. Although the
ultimate outcome of these matters is presently not determinable, management,
after consultation with legal counsel, believes the resolution of these matters
will not have a material adverse effect upon the company's financial position
or results of operations.
Taxes on Income
The components of the provision for income taxes are shown below. The
provisions for income taxes were $10.7 million, $25.4 million, and $20.2
million for 1998, 1997, and 1996, respectively. Cash payments for income taxes
were $14.4 million, $25.2 million, and $15.9 million in 1998, 1997, and 1996,
respectively. The foreign components of pretax earnings were net losses of $7.4
million, $3.6 million, and $2.4 million in 1998, 1997, and 1996, respectively.
<TABLE>
Components of Income Taxes
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ 11,556 $ 19,917 $ 15,881
Foreign 878 189 168
State and local 1,515 4,541 3,467
-------- -------- --------
13,949 24,647 19,516
-------- -------- --------
Deferred:
Federal (2,996) 729 668
State and local (257) 62 57
-------- -------- --------
(3,253) 791 725
-------- -------- --------
Total income tax expense $ 10,696 $ 25,438 $ 20,241
======== ======== ========
</TABLE>
A reconciliation of the statutory federal income tax and the income tax expense
is shown below.
<TABLE>
Reconciliation of Income Tax Expense
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Expected income tax expense $ 6,186 $ 20,938 $ 16,101
State and local income tax,
net of federal benefits 985 2,952 2,253
Nondeductible losses of foreign subsidiaries 2,580 1,437 823
Foreign sales corporation tax benefit (371) (695) -
Loss of U.K. tax credits 540 - -
Other 776 806 1,064
-------- -------- --------
Actual income tax expense $ 10,696 $ 25,438 $ 20,241
======== ======== ========
</TABLE>
Deferred income tax expense or benefit arises from differences between
financial reporting and tax reporting of assets and liabilities, which most
often result from the differences in timing of income and expense recognition.
Differences between financial reporting and tax bases also arise due to
business acquisition activity as tax laws can result in significant differences
in values assigned to assets and liabilities. Previously recorded deferred tax
assets and liabilities are adjusted for any changes in enacted tax rates.
Detail of deferred tax assets and liabilities is shown below.
<TABLE>
Deferred Tax Assets and Liabilities
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Current deferred tax assets:
Operating expenses $ 8,834 $ 6,929 $ 7,861
Inventory 1,071 670 893
Restructuring charge 825 - -
Other 214 213 124
-------- -------- --------
Net current deferred tax assets $ 10,944 $ 7,812 $ 8,878
======== ======== ========
</TABLE>
Page 27
<PAGE>
<TABLE>
Deferred Tax Assets and Liabilities
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Noncurrent deferred tax assets (liabilities):
Depreciation $ (8,835) $ (7,370) $ (7,769)
Operating expenses 3,994 4,451 4,057
Minority investments (428) (90) (72)
Foreign net operating loss carryforward 6,825 4,517 4,338
Restructuring charge 2,905 - -
Other (1,077) (552) (53)
-------- -------- --------
Net noncurrent charge tax assets 3,384 956 501
Valuation allowance (6,825) (4,517) (4,338)
-------- -------- --------
Net noncurrent deferred tax liabilities $ (3,441) $ (3,561) $ (3,837)
======== ======== ========
</TABLE>
Employee Benefit Plans
In February 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 132, "Employers' Disclosure about Pensions
and Other Post Retirement Benefits" (SFAS 132), effective for fiscal years
beginning after December 15, 1997. SFAS 132 revises the disclosure about
pensions and other postretirement benefit plans. It does not change the
measurement or recognition of these plans. Prior year disclosures have been
restated to conform with SFAS 132.
Retirement Plans. The company provides retirement benefits for substantially
all employees, either through a defined benefit plan, the defined contribution
Individual Retirement Asset Account Plan (IRAA), or a combination of both types
of plans. Pension contributions are based on funding standards established by
the Employee Retirement Income Security Act of 1974.
The majority of the company's salaried and nonunion hourly employees are
covered by both a defined benefit plan and the IRAA. These plans are integrated
as to retirement benefits, with benefits based on compensation and years of
service. Bargaining unit employees are covered by defined benefit retirement
plans with benefits based on years of service.
The IRAA assets include the company's common stock, other equities, bonds, and
government securities. At December 31, 1998 and 1997, the IRAA had net assets
of $50.3 million and $57.4 million, respectively, and held 887,943 shares and
949,345 shares of company stock at December 31, 1998 and 1997, respectively.
The company expensed $.6 million for IRAA contributions in 1998 and $.5 million
in both 1997 and 1996.
A reconciliation of benefit obligations and plan assets, the funded status, and
the prepaid pension cost for the defined benefit plans are presented below.
While the market value of IRAA assets is not shown, the effect of the IRAA
offset against the defined benefit has been recognized in the benefit
obligations presented. The assets of the defined benefit plans are primarily
equities, bonds, and government securities.
<TABLE>
Reconciliation of Benefit Obligation and Plan Assets, Funded Status, and Prepaid
Benefit Cost
<CAPTION>
(Thousands of dollars) 1998 1997
-------- --------
<S> <C> <C>
Reconciliation of projected benefit obligation
(Actuarial present value of future benefits
including future increases in compensation levels)
Projected benefit obligation at January 1 $ 70,416 $ 61,625
Service cost-benefits earned during the period 3,420 2,669
Interest cost on projected benefit obligation 5,288 4,472
Amendments to plans 49 -
Actuarial (gain) loss 10,665 5,158
Benefits paid (2,662) (3,508)
-------- --------
Projected benefit obligation at December 31 $ 87,176 $ 70,416
======== ========
Reconciliation of fair value of plan assets
Fair value of plan assets at January 1 $ 57,190 $ 48,431
Actual return on plan assets 6,877 7,152
Employer contribution 5,790 5,115
Benefits paid (2,662) (3,508)
-------- --------
Fair value of plan assets at December 31 $ 67,195 $ 57,190
======== ========
Vested and accumulated benefit obligations
(For service and compensation through December 31)
Vested benefit obligation $ 56,134 $ 47,536
======== ========
Accumulated benefit obligation $ 58,024 $ 49,305
======== ========
Funded status and prepaid benefit cost at December 31
Projected benefit obligation (greater) less
than plan assets $(19,981) $(13,226)
Unrecognized net transition obligation cost 472 669
Unrecognized prior service cost 1,716 1,870
Unrecognized net actuarial (gain) loss 23,736 15,397
-------- --------
Prepaid benefit cost $ 5,943 $ 4,710
======== ========
</TABLE>
Page 28
<PAGE>
The annual net pension cost of the defined benefit plans is presented below.
<TABLE>
Components of Net Pension Cost
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 3,420 $ 2,669 $ 2,268
Interest cost on the projected
benefit obligation 5,288 4,472 4,096
Expected return on plan assets (5,366) (4,047) (3,581)
Amortization of transition obligation 197 197 197
Amortization of prior service cost 202 202 225
Amortization of net actuarial loss 816 749 933
-------- -------- --------
Net pension cost $ 4,557 $ 4,242 $ 4,138
======== ======== ========
Assumptions used to determine net pension cost
and benefit obligations:
Discount rate of future benefit obligation 7.25% 7.50% 7.50%
Long-term expected return on plan assets 9.50% 8.50% 8.50%
Long-term rate of increase
in compensation levels 5.50% 5.50% 5.50%
</TABLE>
Other Benefit Plans. The company sponsors the Butler Employees Savings Trust, a
savings plan under section 401(k) of the Internal Revenue Code. All salaried
and nonunion hourly employees are eligible to participate in this plan. Under
its terms the company will match 30% of the first 6% of employees'
contributions to the plan if certain profitability levels are attained. In
1998, 1997, and 1996 the company reached the defined profitability goals and
accordingly expensed $1.5 million, $1.5 million, and $1.1 million,
respectively, as a matching contribution to the plan. In addition, the company
sponsors 401(k) savings plans for its bargaining unit employees.
The company sponsors a supplemental retirement plan for certain executives.
Life insurance arrangements have been purchased which name the company as
beneficiary to meet the liabilities of the plan. The company expensed $.8
million, $.7 million, and $.3 million in 1998, 1997, and 1996, respectively,
related to this plan.
Postretirement Benefits. The company currently provides certain health care and
life insurance benefits for retired employees and their dependents.
Substantially all employees become eligible for these benefits if they reach
retirement age while still working for the company and have at least ten years
of service. Company contributions toward these benefits have been set to fixed
amounts per participant not to exceed 175% of 1993 costs. Election of health
care and life insurance benefit coverage for retirees and dependents is
optional, and requires contributions by the retiree towards the cost of these
coverages. The company reserves the right to change or terminate all employee
benefits, including postretirement benefits.
A reconciliation of benefit obligations and the funded status and the accrued
benefit liability is presented below.
<TABLE>
Reconciliation of Benefit Obligations and the Funded Status and Accrued Benefit
Liability
<CAPTION>
(Thousands of dollars) 1998 1997
-------- --------
<S> <C> <C>
Reconciliation of projected benefit obligation
(Actuarial present value of future benefits)
Projected benefit obligation at January 1 $ 13,386 $ 12,673
Service cost-benefits earned during the period 360 339
Interest cost on projected benefit obligation 965 912
Actuarial (gain) loss (228) 1,210
Benefits paid (2,296) (2,021)
Participant contributions 853 846
Curtailments - (573)
-------- --------
Projected benefit obligation at December 31 $ 13,040 $ 13,386
======== ========
Funded Status at December 31
Projected benefit obligation, unfunded $ 13,040 $ 13,386
Less: Unrecognized net transition obligation cost (6,689) (7,167)
Less: Unrecognized net actuarial loss (2,738) (3,067)
-------- --------
Accrued benefit liability $ 3,613 $ 3,152
======== ========
</TABLE>
The components of the annual net benefit cost are presented below.
<TABLE>
Components of Net Benefit Cost
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 360 $ 339 $ 295
Interest cost on the projected
benefit obligation 965 912 956
Amortization of transition obligation 478 504 504
Amortization of net actuarial loss 101 37 100
-------- -------- --------
Net benefit cost $ 1,904 $ 1,792 $ 1,855
======== ======== ========
</TABLE>
Page 29
<PAGE>
For measurement purposes, a 5% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 1998. The rate was assumed to
remain at 5% for the years 1999 through 2001 when it is anticipated that the
plan will reach the cost cap of 175% of 1993 costs.
The discount rate assumption was 7.25% in 1998 and 7.5% in both 1997 and 1996.
The rate of future compensation increases has no impact on the plan. The return
on plan assets is not applicable since the plan is unfunded and benefits are
paid when claims are submitted.
The effect of a 1% change in health care costs on the December 31, 1998
projected benefit obligation would be $.3 million, with less than $ .1 million
effect on net benefit cost.
Stock Incentive Plans
Stock options are presently outstanding under the Stock Incentive Plans of
1996, 1987, and 1979. The 1996 Plan covering 600,000 shares was approved in
April, 1996. Both the 1987 and 1979 plans were terminated upon the approval of
the respective successor plan except for outstanding qualified and nonstatutory
stock options and stock appreciation rights.
At December 31, 1998, 1997, and 1996, 267,521, 176,302, and 222,281 shares,
respectively, under option were exercisable and 388,393, 486,342, and 592,978
shares, respectively, were available for grant. Below is a summary of stock
option activity for the three years ended December 31, 1998. All options have a
fixed exercise price.
<TABLE>
Summary of Stock Option Activity
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
Weighted- Weighted- Weighted-
average average average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Outstanding
at beginning
of year 306,126 $22.86 262,764 $13.98 320,113 $11.64
Granted 103,000 $32.19 113,000 $38.37 28,000 $31.59
Exercised (22,775) $13.44 (62,472) $12.03 (84,349) $10.84
Forfeited (7,835) $34.71 (7,166) $36.26 (1,000) $23.00
------- ------- -------
Outstanding
at end of year 378,516 $25.72 306,126 $22.86 262,764 $13.98
======= ======= =======
</TABLE>
Nonqualified stock options were granted by the company in 1998, 1997, and 1996
to key employees under the 1996 and 1987 stock option plans. Options are
granted at fair market value and expire between five and ten years from the
date of grant. Prior to 1997 options vested in three equal annual installments
commencing one year from the date of grant. Options granted in 1998 and 1997
vest one year after date of grant and are fully exercisable thereafter.
The per share weighted-average fair value of stock options granted during 1998,
1997, and 1996 was $10, $14, and $15, respectively, on the date of grant using
the Black Scholes option pricing model with the following weighted average
assumptions: 1998 - expected dividend yield of 1.9%, risk-free interest rate of
4.6%, expected volatility factor of 36%, and an expected life of five years;
1997 - expected dividend yield of 1.6%, risk-free interest rate of 5.7%,
expected volatility factor of 39%, and an expected life of five years; 1996 -
expected dividend yield of 1.7%, risk-free interest rate of 6.4%, expected
volatility factor of 43%, and an expected life of five years.
Since the company applies APB 25 in accounting for its plans, no compensation
cost has been recognized for stock options in net income. Stock-based
compensation cost if recorded under Statement of Financial Accounting Standard
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), would have
decreased the company's net income and earnings per share by $.6 million and
$.08 per share in 1998, $.9 million and $.11 per share in 1997, and $.2 million
and $.02 per share in 1996.
The full impact of calculating compensation costs for stock options under SFAS
123 is not reflected in the pro forma net income amounts presented above, as
compensation cost is reflected over the option's vesting period.
<TABLE>
Stock Options Outstanding
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------------------- -----------------------
Weighted-
Average Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 12/31/98 Life in Years Price at 12/31/98 Price
- ------------ ------- --- ------ ------- ------
<S> <C> <C> <C> <C> <C>
$ 8.00-12.00 134,766 1.4 $10.72 134,766 $10.72
$12.00-18.00 7,750 5.0 $17.50 7,750 $17.50
$18.00-27.00 6,000 6.1 $23.00 6,000 $23.00
$27.00-38.75 230,000 3.8 $34.73 119,005 $37.40
378,516 3.0 $25.72 267,521 $23.06
</TABLE>
Page 30
<PAGE>
<TABLE>
Treasury Stock Activity
<CAPTION>
(Thousands of dollars) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Common stock held in treasury:
Balance, January 1 $ 31,456 $ 30,632 $ 29,749
Purchases 10,260 6,179 2,543
Sales or issues (797) (5,355) (1,660)
-------- -------- --------
Balance, December 31 $ 40,919 $ 31,456 $ 30,632
======== ======== ========
</TABLE>
Purchases of treasury stock were made in 1998, 1997, and 1996 of 391,513,
189,369, and 87,822 common shares, respectively. Sales or issues of treasury
stock were 36,516, 264,899, and 84,349 common shares in 1998, 1997, and 1996,
respectively. As a result of options exercised, the company recognized a tax
benefit of $.2 million, $.6 million, and $.8 million in 1998, 1997, and 1996,
respectively, which was credited directly to retained earnings in the treasury
stock transactions.
<TABLE>
Quarterly Financial Information (Unaudited)
(Thousands of dollars except per share amounts)
Quarter Ended
-----------------------------------------
1998 March 31 June 30 Sept. 30 Dec. 31 Annual
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales $193,784 $238,517 $268,054 $261,808 $962,163
Gross profit 31,927 41,062 45,245 43,622 161,856
Net earnings (loss) 1,159 4,918 6,733 (5,831) 6,979
Basic earnings
(loss) per share .15 .64 .89 (.80) .92
Diluted earnings
(loss) per share .15 .64 .88 (.79) .92
Dividends
per share . 14 .14 .15 .15 .58
Quarter ended December 31 and annual net earnings and earnings per share
amounts include the restructuring and asset impairment charge of $10.7 million
or $1.41 per share.
Annual earnings per share do not equal the sum of the quarterly earnings per
share because of the timing of net earnings and the purchase of common shares
during the year.
Quarter Ended
-----------------------------------------
1997 March 31 June 30 Sept. 30 Dec. 31 Annual
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales $188,102 $241,078 $241,031 $254,435 $924,646
Gross profit 32,077 41,326 43,882 46,640 163,925
Net earnings 1,896 18,992 6,806 6,690 34,384
Basic earnings per share .25 2.49 .87 .87 4.48
Diluted earnings per share .25 2.46 .86 .86 4.43
Dividends
per share .12 .12 .14 .14 .52
</TABLE>
Second quarter ended June 30 and annual net earnings and earnings per share
amounts include the gain on the sale of the Grain Systems division of $13.3
million or $1.72 per share.
<TABLE>
Price Range of Common Stock (Unaudited)
The company's common stock is traded on the New York Stock Exchange. The table
below summarizes the high and low prices as reported on the exchange.
<CAPTION>
1998 1997
-------------------- -----------------
Quarter High Low High Low
--------- -------- ------- -------
<S> <C> <C> <C> <C>
First $36 $31 3/16 $41 7/8 $35 3/8
Second 37 11/16 33 3/8 36 3/4 31 1/4
Third 35 1/16 23 1/8 37 1/4 33 1/8
Fourth 24 7/16 20 34 1/2 31 3/8
</TABLE>
Page 31
<PAGE>
<TABLE>
Historical Review (1998-1994)
<CAPTION>
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net sales $962,163 $924,646 $870,162 $826,538 $692,190
Net earnings 6,979 34,384 25,763 23,432 15,355
As a percent of sales 0.7% 3.7% 3.0% 2.8% 2.2%
As a percent of average
shareholders' equity 4.6% 24.5% 22.7% 25.8% 21.8%
Per share of common stock:
Basic earnings $ 0.92 $ 4.48 $ 3.39 $ 3.14 $ 2.13
Diluted earnings 0.92 4.43 3.35 3.07 2.07
Cash dividends declared 0.58 .52 .44 .37 .13
Cash dividends paid 0.57 .50 .42 .33 .07
======== ======== ======== ======== ========
Financial Position At Year-End
Assets
Current assets $253,500 $233,323 $222,061 $187,303 $188,652
Property, plant, and
equipment, net 97,704 96,339 77,398 63,407 48,526
Total assets 393,893 374,972 337,420 282,869 271,136
Working capital
Net working capital $ 92,370 $ 68,819 $ 61,182 $ 61,171 $ 52,572
Ratio of current assets
to current liabilities 1.6 1.4 1.4 1.5 1.4
Financial structure
Long-term debt, less
current maturities $ 62,901 $ 33,918 $ 38,397 $ 42,613 $ 40,263
Total debt 68,733 39,780 43,861 47,064 42,737
Shareholders' equity 150,188 156,566 124,442 102,423 79,102
Per common share,
year end 20.62 20.50 16.46 13.54 10.83
Total debt as a percent
of total capital 31% 20% 26% 32% 35%
======== ======== ======== ======== ========
General Statistics
Depreciation and
amortization $ 14,923 $ 12,474 $ 9,737 $ 8,861 $ 7,776
Capital expenditures $ 14,800 $ 30,249 $ 22,670 $ 22,663 $ 13,663
Basic shares
outstanding, average 7,553 7,668 7,590 7,458 7,201
Diluted shares
outstanding, average 7,612 7,754 7,693 7,630 7,407
Common shares
outstanding, year end 7,282 7,637 7,561 7,565 7,305
Common shareholders,
year end 2,210 2,310 2,345 2,411 2,473
Number of employees,
year end 5,171 5,117 4,162 3,966 3,564
======== ======== ======== ======== ========
<FN>
1. In thousands except per share amounts for common stock and the number of
shareholders and employees.
2. The 1994 basic and diluted earnings per share and all other share amounts
have been restated to reflect the effect of the June, 1995 3-for-2 stock split.
3. The 1997 net earnings include an after-tax gain on the sale of the Grain
Systems division of $13.3 million or $1.72 per share.
4. The 1998 net earnings include a restructuring and asset impairment charge of
$10.7 million or $1.41 per share.
5. Earnings per share have been restated to reflect the provisions of Statement
of Financial Accounting Standard No. 128 - Earnings Per Share.
</TABLE>
Page 32
<PAGE> 1
EXHIBIT 13.2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Butler Manufacturing Company:
We have audited the consolidated statement of earnings and retained earnings and
cash flows of Butler Manufacturing Company and subsidiaries for the year ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit 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 audit provides reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Butler Manufacturing Company and subsidiaries at December 31, 1996, in
conformity with generally accepted accounting principles.
/S/ KPMG LLP
____________
KPMG LLP
Kansas City, Missouri
February 3, 1997
<PAGE> 1
EXHIBIT 24.0
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned hereby
constitutes and appoints Richard O. Ballentine and John Huey, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and revocation in each, for him/her and in his/her name, place and
stead, to sign any or all reports (including reports on Form 10-K, Form 3, Form
4, Form 5, Schedule 13-D, Schedule 13-G, and Form 144), and any amendments
thereto, required or permitted to be filed by him under the Securities and
Exchange Act of 1934, or the Securities Act of 1933, with respect to beneficial
ownership of, and transactions in, equity securities of BUTLER MANUFACTURING
COMPANY, a Delaware corporation (the "Company"), and with respect to other
matters relating to the Company, and to file the same, with all documents
required or permitted to be filed in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
DATED: January 19, 1999 /S/ HAROLD G. BERNTHAL
___________________________________
HAROLD G. BERNTHAL
DATED: January 19, 1999 /S/ GARY M. CHRISTENSEN
___________________________________
GARY M. CHRISTENSEN
DATED: January 18, 1999 /S/ ALAN M. HALLENE
___________________________________
ALAN M. HALLENE
DATED: January 18, 1999 /S/ C.L. WILLIAM HAW
___________________________________
C.L. WILLIAM HAW
DATED: February 5, 1999 /S/ JOHN J. HOLLAND
___________________________________
JOHN J. HOLLAND
DATED: January 15, 1999 /S/ ROBERT J. NOVELLO
___________________________________
ROBERT J. NOVELLO
DATED: January 18, 1999 /S/ DONALD H. PRATT.
___________________________________
DONALD H. PRATT
DATED: January 13, 1999 /S/ ROBERT J. REINTJES, SR.
___________________________________
ROBERT J. REINTJES, SR.
DATED: January 13, 1999 /S/ JUDITH A. ROGALA
___________________________________
JUDITH A. ROGALA
DATED: January 15, 1999 /S/ GARY L. TAPELLA
___________________________________
GARY L. TAPELLA
DATED: January 18, 1999 /S/ ROBERT H. WEST
___________________________________
ROBERT H. WEST
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Butler
Manufacturing Company Consolidated Statements of Operations for the year ended
December 31, 1998, and Consolidated Balance Sheet as of December 31, 1998, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 10,260
<SECURITIES> 0
<RECEIVABLES> 134,413
<ALLOWANCES> 3,791
<INVENTORY> 70,252
<CURRENT-ASSETS> 253,500
<PP&E> 243,671
<DEPRECIATION> 145,967
<TOTAL-ASSETS> 393,893
<CURRENT-LIABILITIES> 161,130
<BONDS> 62,901<F1>
12,623
0
<COMMON> 0
<OTHER-SE> 178,536<F2>
<TOTAL-LIABILITY-AND-EQUITY> 393,893
<SALES> 962,163
<TOTAL-REVENUES> 962,163<F3>
<CGS> 800,307
<TOTAL-COSTS> 800,307
<OTHER-EXPENSES> 125,291<F4>
<LOSS-PROVISION> 13,616<F5>
<INTEREST-EXPENSE> 5,667
<INCOME-PRETAX> 17,675
<INCOME-TAX> 10,696
<INCOME-CONTINUING> 6,979
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,979
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
<FN>
<F1>Reflects long-term debt, less current maturities.
<F2>Reflects other stockholders' equity before deduction of $40.9 million treasury
stock and foreign currency translation adjustments.
<F3>Reflects net sales plus net international joint venture income less net other
expense.
<F4>Consists of selling, general, and administrative expense.
<F5>Includes restructuring and asset impairment charges of $7.1 million and 6.5
million, respectively.
</FN>
</TABLE>
