<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13
or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 001-12335
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
BUTLER MANUFACTURING COMPANY
Incorporated in the State of Delaware
BMA Tower - Penn Valley Park
Post Office Box 419917
Kansas City, Missouri 64141-0917
Phone: (816) 968-3000
I.R.S. Employer Identification Number: 44-0188420
Shares of common stock outstanding at
SEPTEMBER 30, 1999: 7,035,702
The name, address and fiscal year of the Registrant have not changed since
the last report.
The Registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past 90 days.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I. - FINANCIAL INFORMATION Page Number
-----------
<S> <C>
ITEM 1. Financial Statements
(1) Consolidated Financial Statements (unaudited):
Consolidated Statements of Operations for the Three and Nine Month
Periods Ended September 30, 1999 and 1998. 3
Consolidated Statements of Comprehensive Income for the Nine Month
Periods Ended September 30, 1999 and 1998. 4
Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998. 5
Consolidated Statements of Cash Flows for the Nine Month
Periods Ended September 30, 1999 and 1998. 6
(2) Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk. 12
PART II. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibits Index 15
</TABLE>
Page 2
<PAGE> 3
BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine month periods ended September 30, 1999 and 1998
(unaudited)
($000's omitted except for per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------------ ------------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 266,382 $ 268,054 $ 718,491 $ 700,355
Cost of sales 219,704 222,809 593,431 582,121
--------- --------- --------- ---------
Gross profit 46,678 45,245 125,060 118,234
Selling, general and administrative expenses 33,085 32,007 95,598 91,611
Restructuring charge (credit) (447) - 1,067 -
--------- --------- --------- ---------
Operating income 14,040 13,238 28,395 26,623
Other income (expense), net (53) (245) (286) 406
--------- --------- --------- ---------
Earnings before interest and taxes 13,987 12,993 28,109 27,029
Interest expense 1,439 1,420 4,314 4,288
--------- --------- --------- ---------
Pretax earnings 12,548 11,573 23,795 22,741
Income tax expense (benefit) (1,822) 4,840 2,830 9,931
--------- --------- --------- ---------
Net earnings $ 14,370 $ 6,733 $ 20,965 $ 12,810
========= ========= ========= =========
Basic earnings per common share $ 2.04 $ 0.89 $ 2.95 $ 1.68
========= ========= ========= =========
Diluted earnings per common share $ 2.03 $ 0.88 $ 2.92 $ 1.67
========= ========= ========= =========
Basic weighted average number of shares 7,032,296 7,564,700 7,116,872 7,627,038
Diluted weighted average number of shares 7,094,772 7,618,435 7,174,952 7,691,510
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
Page 3
<PAGE> 4
BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the nine month periods ended September 30, 1999 and 1998
(unaudited)
($000's omitted, except for per share data)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1999 1998
-------- --------
<S> <C> <C>
Net earnings $20,965 $12,810
Other comprehensive income:
Foreign currency translation adjustment (937) (398)
------- -------
Comprehensive income $20,028 $12,412
======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
Page 4
<PAGE> 5
BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and December 31, 1998
(unaudited)
($000's omitted)
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 42,056 $ 10,260
Receivables, net 145,226 130,622
Inventories:
Raw materials 22,075 34,509
Work in process 12,885 8,503
Finished goods 33,462 37,417
Lifo reserve (10,711) (10,177)
------------ ------------
Total inventory 57,711 70,252
Real estate developments in progress 26,444 19,139
Deferred tax assets 16,755 10,944
Other current assets 10,444 12,283
------------ ------------
Total current assets 298,636 253,500
Investments and other assets 42,433 38,689
Assets held for sale 4,000 4,000
Property, plant and equipment, at cost 235,143 243,671
Less accumulated depreciation (143,459) (145,967)
------------ ------------
Net property, plant and equipment 91,684 97,704
------------ ------------
$ 436,753 $ 393,893
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 3,058 $ 1,627
Current maturities of long-term debt 5,701 5,832
Accounts payable 101,080 83,710
Dividends payable 1,126 1,092
Accrued liabilities 75,695 62,444
Taxes on income 8,054 6,425
------------ ------------
Total current liabilities 194,714 161,130
Deferred tax liabilities 3,441 3,441
Other noncurrent liabilities 15,980 16,233
Long-term debt, less current maturities 62,057 62,901
Shareholders' equity:
Common stock, no par value, authorized 20,000,000
shares, issued 9,088,200 shares, at stated value 12,623 12,623
Cumulative foreign currency translation adjustment (989) (52)
Retained earnings 196,162 178,536
------------ ------------
207,796 191,107
Less cost of common stock in treasury, 2,052,498 shares
in 1999 and 1,806,202 shares in 1998 47,235 40,919
------------ ------------
Total shareholders' equity 160,561 150,188
------------ ------------
$ 436,753 $ 393,893
============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
Page 5
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine month periods ended September 30, 1999 and 1998
(unaudited)
($000's omitted)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 20,965 $ 12,810
Adjustments to reconcile net earnings to net cash used
in operating activities:
Depreciation and amortization 11,617 11,012
Restructuring Charge, net 1,067 --
Equity earnings on joint ventures (99) (156)
Change in asset and liabilities, net of businesses acquired and sold:
Receivables (14,604) (28,214)
Inventories 12,681 3,234
Real estate developments in progress (7,305) 748
Other current assets (3,972) 638
Current liabilities excluding short-term debt 32,545 32,591
-------- --------
Net cash provided by operating activities 52,895 32,663
Cash flows from investing activities:
Capital expenditures (6,414) (10,301)
Other, net (2,777) (6,512)
-------- --------
Net cash used in investing activities (9,191) (16,813)
Cash flows from financing activities:
Payment of dividends (3,218) (3,214)
Proceeds from issuance of long-term debt -- 35,000
Repayment of long-term debt (851) (821)
Net increase (decrease) in short-term debt 1,300 (19,766)
Sale and issuance of treasury stock 457 781
Purchase of treasury stock (6,773) (6,121)
Other, net (1,886) (64)
-------- --------
Net cash (used) provided by financing activities (10,971) 5,795
Effect of exchange rate changes on cash (937) (398)
-------- --------
Net increase in cash and cash equivalents 31,796 21,247
Cash and cash equivalents at beginning of year 10,260 5,515
-------- --------
Cash and cash equivalents at September 30 $ 42,056 $ 26,762
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
Page 6
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with the accounting policies described in the
consolidated financial statements and related notes included in Butler
Manufacturing Company's 1998 Form 10-K. It is suggested that those consolidated
statements be read in conjunction with this report. The year-end financial
statements presented were derived from the company's audited financial
statements. In the opinion of management, the accompanying consolidated
financial statements reflect all adjustments necessary for a fair presentation
of the financial position of Butler Manufacturing Company and the results of its
operations.
NOTE 2 - NEW ACCOUNTING PRONOUNCEMENT
Derivative Instruments and Hedging Activities
The Financial Accounting Standards Board (FASB) issued Statement Nos. 133 and
137, "Accounting for Derivative Instruments and Hedging Activities" effective
for fiscal years beginning after June 15, 2000. These new statements replace
existing pronouncements and practices with an integrated accounting and
reporting standard for derivatives and hedging activities. They require every
derivative instrument be recorded in the balance sheet as either an asset or
liability at its fair value, and changes in a derivative's fair value be
recognized in current earnings or other comprehensive income.
NOTE 3 - BUSINESS SEGMENTS
The company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information", which changed the way the company reports information
about its operating segments.
The company groups its operations into four business segments: Building Systems,
Architectural Products, Construction Services, and Real Estate. The Building
Systems segment includes the U.S. and foreign building systems businesses and
the company's international joint venture operations. These business units
supply steel and wood frame pre-engineered building systems for a wide variety
of commercial, community, industrial, and agricultural applications. Also
included in the Building Systems segment are all restructuring charges,
previously included in Other.
The Architectural Products segment includes the operations of the Vistawall
Group. The group's businesses design, manufacture, and market architecturally
oriented component systems for nonresidential construction, including aluminum
curtain wall, storefront systems, windows, doors, skylights, and roof
accessories.
The Construction Services segment provides comprehensive design and construction
planning, execution, and management services for major purchasers of
construction. Projects are usually executed in conjunction with the dealer
representatives of other Butler divisions.
The Real Estate segment provides real estate build-to-suit-to-lease development
services in cooperation with Butler dealers.
The accounting policies for the segments are the same as those described in the
summary of significant accounting policies as included in the company's 1998
form 10-K. Butler Manufacturing 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.
Other represents unallocated corporate expenses and unallocated assets,
including corporate offices, deferred taxes, pension accounts, and intersegment
eliminations.
Page 7
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<TABLE>
<CAPTION>
Three Months Nine Months
NET SALES Ended September 30, Ended September 30,
(Thousands of dollars) 1999 1999 1999 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Building Systems $ 177,374 $ 184,930 $ 465,822 $ 469,109
Architectural Products 50,830 48,560 149,459 133,417
Construction Services 49,963 42,219 115,662 99,997
Real Estate 0 0 12,630 18,155
Other (11,785) (7,655) (25,082) (20,323)
--------------------------------------------------------------
$ 266,382 $ 268,054 $ 718,491 $ 700,355
==============================================================
</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>
<CAPTION>
Three Months Nine Months
PRETAX EARNINGS (LOSSES) Ended September 30, Ended September 30,
(Thousands of dollars) 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Building Systems $ 10,141 $ 11,149 $ 16,941 $ 21,453
Architectural Products 5,356 3,470 14,892 8,481
Construction Services 1,377 771 2,504 1,732
Real Estate 239 178 2,096 2,113
Other (4,565) (3,995) (12,638) (11,038)
--------------------------------------------------------------
$ 12,548 $ 11,573 $ 23,795 $ 22,741
==============================================================
</TABLE>
<TABLE>
<CAPTION>
TOTAL ASSETS September 30, December 31,
(Thousands of dollars) 1999 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Building Systems $ 225,228 $ 227,474
Architectural Products 81,056 80,799
Construction Services 40,611 26,596
Real Estate 30,284 26,303
Other 59,574 32,721
--------------------------------
$ 436,753 $ 393,893
================================
</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.
NOTE 4 - 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. Estimates of
realizable sales values were obtained from outside appraisal and the company's
experience in selling redundant assets.
Page 8
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The remaining $1 million restructuring accrual at the end of the third quarter
pertains to severance and termination costs ($.3 million), and legal, claims,
and other incremental shut-down costs ($.7 million) associated with
restructuring the Brazilian and European metal buildings operations. The company
utilized $1.0 million of the 1998 restructuring accrual through the end of the
third quarter of 1999 with $.1 million utilized in the first quarter, and $.6
million in the second quarter and $.3 million third quarters of 1999.
<TABLE>
<CAPTION>
Details of the 1998 Restructuring Accrual
12/31/1998 Less: 09/30/99
Accrual Utilization Recoveries Accrual
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Severance and termination costs $1,185 $867 $ --- $318
Legal, claims, and other costs 1,092 121 295 676
---------------------------------------------------------------
$2,277 $988 $295 $994
===============================================================
</TABLE>
During the first quarter of 1999 the company recorded an additional $1.5 million
restructuring charge for currency translation losses on its remaining Brazilian
net asset exposure. In the third quarter $.4 million of the restructuring charge
was taken to income, due to better than expected recovery on redundant and
impaired assets. Current year restructuring charges net of recoveries totaled
$1.1 million through the third quarter of 1999, and are reflected in the
Building Systems segment.
NOTE 5 - SALE OF BUSINESS
In September 1999 the company sold the shares of its United Kingdom metal
buildings business, Butler Building Systems Ltd., to Aerpac Investment Holding
UK Ltd. The company recorded a one-time gain of $5.8 million as a carryback of
the businesses capital losses. The gain is reflected as a tax benefit in the
September 30, 1999 Consolidated Statement of Operations.
Page 9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the third quarter of $266 million decreased 1% from a year ago
primarily due to decreased sales in the Building Systems segment. This decrease
was partially offset by recorded sales increases in the Architectural Products
and Construction Services segments. For the nine months ended September 30, 1999
net sales were $718 million compared with $700 million for the same period in
1998, an increase of 3%. The Architectural Products and Constructions Services
segments recorded increases while sales in the Building Systems segment were
comparable with the prior nine month period. Butler Real Estate sales were lower
than those of 1998 due to lower project sales.
The Architectural Products segment, which consists of the Vistawall group,
reported a 12% increase in sales for the first nine months of 1999 compared with
same period a year ago, due to a good commercial construction market and
excellent customer service, while the Construction Services segment sales for
the first nine month period of 1999 increased 16% compared with the prior year.
Building Systems segment sales were comparable with the same period a year ago.
An increase in internationally-based metal building sales over the prior nine
month period more than offset a slight decline in domestic metal building
systems sales compared with a year ago.
Pretax earnings for the quarter ended September 30, 1999 were $12.5 million
compared with $11.6 million for the same period a year ago. The increase is
attributable to the Architectural Products segment's strong performance. Pretax
earnings for the nine month period ending September 30, 1999 were $23.8 million
compared to $22.7 million in the previous year. Increases in the Architectural
Products segment more than offset the lower Building Systems segment results and
the restructuring charge activity.
In the third quarter of 1999 the company realized a one-time gain of $5.8
million reflected as a tax benefit from the sale of Butler Building Systems,
Ltd., its United Kingdom metal buildings subsidiary.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents increased $31.8 million for the first nine months of 1999
due to a decrease in working capital attributed to better working capital
management. Principal uses of cash were to fund operations, capital
expenditures, the repurchase of company shares for the treasury, and the payment
of dividends. For the nine months ended September 30, 1999, domestic short-term
borrowings averaged $6 million for 101 days compared to $20 million for 118 days
in 1998.
In March, 1998 the company completed a $35 million private placement of senior
unsecured notes due March 20, 2013. The notes carry a fixed interest rate of
6.57%, and are payable in equal annual installments of $3.5 million beginning in
2004. Proceeds from the private placement were used to pay down the company's
short-term line of credit and to fund future investment opportunities. The
company continues to maintain domestic bank credit facilities aggregating $40
million to meet the needs of the company. As of June 30, 1999, $1.8 million of
the credit line was utilized to provide a bank letter of credit to secure
insurance obligations. Management believes the company's operating cash flow,
along with the bank credit lines, are sufficient to meet future liquidity
requirements.
The company's foreign operations maintain separate lines of credit with local
banks of approximately $7 million at current exchange rates. Management believes
that the bank lines along with parent company loans, if any, are sufficient to
meet future liquidity requirements.
Capital expenditures were $6.4 million for the first nine months of 1999
compared to $10.3 million for the same period in 1998. Total capital
expenditures are expected to be approximately $13 million in 1999 compared with
$15 million in 1998, and will be used to increase capacity in the domestic and
international metal buildings and architectural products businesses.
Through the third quarter of 1999 the company repurchased for the treasury
approximately 268,000 shares of company's common stock for $6.8 million and paid
dividends of $3.2 million. Total backlog of $343 million increased 8% from
comparable backlog of a year ago.
Page 10
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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. 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. The fair value of aluminum contracts and their
associated risk are immaterial. 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.
Interest Rates: The majority 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.
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.
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. The fair value of such contracts are immaterial.
YEAR 2000 STATUS
As of the end of the third quarter the company has completed remediation and
compliance testing of mission critical business, manufacturing, and engineering
systems, and has developed contingency plans in the unlikely event an
interruption or failure occurs in any mission critical system. The contingency
plans also address year 2000 compliance of the company's critical product and
service providers. To date the majority of all critical suppliers have confirmed
their year 2000 readiness. For those who have not, contingency plans have been
developed and alternative year 2000 compliant product and service providers have
been identified and contacted. If critical company suppliers, who have indicated
their compliance, incur year 2000 business interruptions that materially impact
their ability to provide products and services, their failure to provide
products and services could have a material adverse effect on the company's
business, results of operations, and financial condition.
The company will monitor compliance of suppliers well into the subsequent year.
Roll-over plans are in place to monitor and report year 2000 interruptions, or
failures of critical systems and suppliers through January, 2000, should they
occur.
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.
For additional comments, refer to the October 15, 1999 letter to shareholders,
which is attached as exhibit 19.
Page 11
<PAGE> 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There are no material changes to the disclosure made in the Annual Report on
Form 10-K for the year ended December 31, 1998 regarding this matter. See
discussion about market risk under Item 2. Management Discussion and Analysis on
page 10 of this document.
Page 12
<PAGE> 13
PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(19) October 15, 1999 letter to shareholders
(27) Financial Data Schedule
(b) Reports on Form 8-K.
The company has not filed any reports on Form 8-K during the
quarter ended September 30, 1999.
Page 13
<PAGE> 14
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUTLER MANUFACTURING COMPANY
November 12,1999 /s/ Larry C. Miller
- ---------------- ---------------------------------------
Date Larry C. Miller
Vice President - Finance,
and Chief Financial Officer
November 12, 1999 /s/ John W. Huey
- ----------------- ---------------------------------------
Date John W. Huey
Vice President, General Counsel
and Secretary
Page 14
<PAGE> 15
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------------------------------------------
19 October 15, 1999 Letter to Shareholders
27 Financial Data Schedule
15
<PAGE> 1
EXHIBIT 19
Butler
Manufacturing
Company
THIRD
QUARTER
REPORT 1999
Nine Months Ended
September 30, 1999
BMA TOWER PENN VALLEY PARK KANSAS CITY, MO 64108
To Our Shareholders:
Third quarter sales were $266 million, nearly the same as last year. Quarterly
net earnings were $14.4 million, or $2.03 per share compared with $6.7 million,
or $.88 per share a year ago. The 1999 third quarter net earnings includes a
one-time gain of $5.8 million, or $.81 per share. The one-time gain was realized
from the sale in late September of Butler Building Systems, Ltd., our former
United Kingdom metal buildings subsidiary, to a Dutch firm engaged in an
unrelated manufacturing business. As previously reported, we established a new
metal buildings business in Hungary to serve the continent and United Kingdom
markets.
Sales for the nine months through September were $718 million, an increase of 3%
over the same period last year. Net earnings for the first three quarters were
$21 million, or $2.92 per share compared with the $12.8 million, or $1.67 per
share earned in 1998 through September. The 1999 results include the one-time
gain mentioned previously.
Sales in the U. S. metal buildings business were about 4% lower through
September and operating earnings, while solidly profitable, were down
considerably from the same period last year. F. W. Dodge reports that
manufacturing construction awards, which is an important building market for
this business, were off 13% through August of this year compared with 1998. We
have reduced operating expenses and are aggressively pursuing sales
opportunities to help offset the decline in the manufacturing building sector.
The international metal building businesses continue to make progress. Our China
operation is performing exceptionally well. Through September, sales have more
than doubled compared with last year and the operating earnings contribution was
substantial as opposed to a loss in 1998. In order to sustain the positive
operating performance and capture the significant growth potential we foresee in
China, the board of directors approved an investment of $5 million in September
to increase production capacity. We expect to complete this expansion by the
middle of next year. Europe is beginning to realize the benefits operating from
its lower cost base in Hungary. However, sales through September were below the
level of last year, reflecting the slower economy in Europe and the interruption
of expanding our manufacturing plant. As a result, the current year operating
loss in Europe was greater than the loss recorded last year.
The Lester wood frame building business continues to trail results from last
year. Sales are down 11% and the business operated at a modest loss through
September. Our dependence on the very depressed hog confinement building market
coupled with the much slower general agricultural economy has eroded Lester
operating performance in 1999. We have reduced operating expenses in response to
the lower market opportunity and redirected resources to the commercial building
market.
Our Vistawall Architectural Products group continues its strong performance with
sales through September of $149 million, 12% ahead of a year ago. Operating
earnings were up 74% compared with 1998, as the commercial construction market
remains robust. We are evaluating options to increase our capacity to grow this
business and sustain the high service levels that Vistawall customers expect.
Butler Construction continued its positive operating trend through September
compared with last year. Sales increased 16% to $116 million while operating
earnings increased 34%. Butler Real Estate's 1999 performance matched its
earnings contribution from 1998. These businesses form the essential components
that support our strategy of construction and real estate leasing services for
Butler dealers and major corporate customers.
<PAGE> 2
We expected to show significant earnings improvement this year compared to 1998
and we have. The diversity of operating earnings, both geographically and by
market segment, is a unique strength of Butler Manufacturing Company. In
addition to our solid financial results, we achieved a new milestone in
outstanding safety performance, a tribute to our training and the dedication to
safe work practices of Butler associates throughout the world. At the end of
September, total backlog was $343 million, 8% ahead of the comparable backlog of
$316 million last year. Product backlog was up 3% and construction backlog up
40%. We anticipate a solid finish to 1999.
Cordially yours,
/s/John Holland
John Holland
President and Chief Executive Officer
October 15, 1999
Butler Manufacturing Company
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Butler
Manufacturing Company Consolidated Statements of Operations for the quarter
ended September 30, 1999, and Consolidated Balance Sheet as of September 30,
1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000015840
<NAME> BUTLER MANUFACTURING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 42,056
<SECURITIES> 0
<RECEIVABLES> 145,226
<ALLOWANCES> 0
<INVENTORY> 57,711
<CURRENT-ASSETS> 298,636
<PP&E> 235,143
<DEPRECIATION> 143,459
<TOTAL-ASSETS> 436,753
<CURRENT-LIABILITIES> 194,714
<BONDS> 62,057<F1>
12,623
0
<COMMON> 0
<OTHER-SE> 207,796<F2>
<TOTAL-LIABILITY-AND-EQUITY> 436,753
<SALES> 718,491
<TOTAL-REVENUES> 718,205<F3>
<CGS> 593,431
<TOTAL-COSTS> 593,431
<OTHER-EXPENSES> 95,598<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,314
<INCOME-PRETAX> 23,795
<INCOME-TAX> 2,830
<INCOME-CONTINUING> 20,965
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,965
<EPS-BASIC> 2.95
<EPS-DILUTED> 2.92
<FN>
<F1>Reflects long-term debt, less current maturities
<F2>Reflects other stockholders' equity before deduction of $47.2 million cost of
treasury stock
<F3>Reflects net sales plus net international joint venture income less net other
expense
<F4>Consists of selling, general and administrative expense
</FN>
</TABLE>
