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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 MARCH 31, 1999
BUTLER MANUFACTURING COMPANY
Incorporated in State of Delaware
BMA Tower - Penn Valley Park
Post Office Box 419917
Kansas City, Missouri 64141-0917
Phone: (816) 968-3000
I.R.S. Employer Identification Number: 44-0188420
Shares of common stock outstanding at
MARCH 31, 1999: 7,145,331
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.
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INDEX
PART I. - FINANCIAL INFORMATION Page Number
ITEM 1. Financial Statements
(1) Consolidated Financial Statements (unaudited):
Consolidated Statements of Operations for the
Three Month Periods Ended March 31, 1999 and 1998. 3
Consolidated Statements of Comprehensive Income
for the Three Month Periods Ended March 31, 1999
and 1998. 4
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998. 5
Consolidated Statements of Cash Flows for the Three Month
Periods Ended March 31, 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
PART II. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 15
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three month periods ended March 31, 1999 and 1998
(unaudited)
($000's omitted, except for per share data)
Three months ended
March 31,
=========================
1999 1998
---------- ----------
Net sales $ 203,396 $ 193,784
Cost of sales 169,493 161,857
---------- ----------
Gross profit 33,903 31,927
Selling, general and administrative expenses 30,286 28,278
Restructuring charge - Brazilian devaluation loss 1,514 -
---------- ----------
Operating income 2,103 3,649
Other income (expense), net (137) 470
---------- ----------
Earnings before interest and taxes 1,966 4,119
Interest Expense 1,509 1,385
---------- ----------
Pretax earnings 457 2,734
Income tax expense 193 1,575
---------- ----------
Net earnings $ 264 $ 1,159
========== ==========
Basic earnings per common share $ .04 $ .15
========== ==========
Diluted earnings per common share $ .04 $ .15
========== ==========
Basic weighted average number of shares 7,234,201 7,653,321
Diluted weighted average number of shares 7,280,234 7,720,571
See Accompanying Notes to Consolidated Financial Statements.
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three month periods ended March 31, 1999 and 1998
(unaudited)
($000's omitted)
Three months ended
March 31,
-------------------------
1999 1998
---------- ----------
Net earnings $ 264 $ 1,159
Other comprehensive income:
Foreign currency translation adjustment (277) (175)
---------- ----------
Comprehensive income $ (13) $ 984
========== ==========
See Accompanying Notes to Consolidated Financial Statements.
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1999 and December 31, 1998
(unaudited)
($000's omitted)
1999 1998
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 15,698 $ 10,260
Receivables, net 124,052 130,622
Inventories:
Raw materials 28,843 34,509
Work in process 8,043 8,503
Finished goods 35,462 37,417
Lifo reserve (10,303) (10,177)
---------- ----------
Total inventory 62,045 70,252
Real estate developments in progress 16,125 19,139
Deferred tax assets 10,944 10,944
Other current assets 11,470 12,283
---------- ----------
Total current assets 240,334 253,500
Investments and other assets 41,702 38,689
Assets held for sale 4,000 4,000
Property, plant and equipment, at cost 238,911 243,671
Less accumulated depreciation (144,598) (145,967)
---------- ----------
Net property, plant and equipment 94,313 97,704
---------- ----------
$ 380,349 $ 393,893
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 8,049 $ 1,627
Current maturities of long-term debt 5,754 5,832
Accounts payable 69,909 83,710
Dividends payable 1,072 1,092
Accrued liabilities 58,576 62,444
Taxes on income 8,054 6,425
---------- ----------
Total current liabilities 151,414 161,130
Deferred tax liabilities 3,441 3,441
Other noncurrent liabilities 16,965 16,233
Long-term debt, less current maturities 62,691 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 (329) (52)
Retained earnings 177,729 178,536
---------- ----------
190,023 191,107
Less cost of common stock in treasury,
1,942,869 shares in in 1999 and
1,806,202 shares in 1998 44,185 40,919
---------- ----------
Total shareholders' equity 145,838 150,188
---------- ----------
$ 380,349 $ 393,893
========== ==========
See Accompanying Notes to Consolidated Financial Statements.
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three month periods ended March 31, 1999 and 1998
(unaudited)
($000's omitted)
1999 1998
---------- ----------
Cash flows from operating activities:
Net earnings $ 264 $ 1,159
Adjustments to reconcile net earnings
to net cash used in operating activities:
Depreciation and amortization 3,919 3,648
Restructuring charge - Brazilian
devaluation loss 1,514 ---
Equity (earnings) loss on joint ventures (30) (168)
Change in asset and liabilities:
Receivables 6,570 (6,280)
Inventories 8,207 (651)
Real estate developments in progress 3,014 (1,523)
Other current assets 813 (45)
Current liabilities excluding
short-term debt (16,040) (7,982)
---------- ----------
Net cash provided (used) in
operating activities 8,231 (11,842)
Cash flows from investing activities:
Capital expenditures (1,710) (5,103)
Other, net (1,742) (2,289)
---------- ----------
Net cash used in investing
activities (3,452) (7,392)
Cash flows from financing activities:
Payment of dividends (1,092) (1,069)
Proceeds from issuance of long-term debt --- 35,000
Repayment of long-term debt (217) (271)
Net change in short-term debt 6,344 (17,350)
Sale and issuance of treasury stock 277 477
Purchase of treasury stock (3,543) ---
Other, net (833) 51
---------- ----------
Net cash provided by financing
activities 936 16,838
Effect of exchange rate changes on cash (277) (175)
---------- ----------
Net increase (decrease) in cash and
cash equivalents 5,438 (2,571)
Cash and cash equivalents at beginning of year 10,260 5,515
---------- ----------
Cash and cash equivalents at March 31 $ 15,698 $ 2,944
========== ==========
See Accompanying Notes to Consolidated Financial Statements.
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED 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 PRONOUNCEMENTS
Accounting for Derivatives and Hedging
- --------------------------------------
In June, 1998 the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities with adoption
required starting in January 1, 2000. The Statement replaces exiting
pronouncements and requires that 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. The Company does not expect adoption of this standard will
have a material effect on the its financial position and results of operations.
NOTE 2 - RESTRUCTURING CHARGES
Restructuring and Asset Impairment Charges
- ------------------------------------------
1998 Charge
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 an outside appraisal and the
Company's experience in selling redundant assets.
The remaining $2.2 million restructuring accrual pertains to severance and
termination costs ($1.1 million), and legal, claims, and other incremental
shut-down costs ($1.1 million) associated with restructuring the Brazilian and
European metal buildings operation. The Company utilized $.091 million of the
restructuring accrual in the first quarter of 1999 for severance and termination
costs as shown in the schedule below.
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Details of the Restructuring Accrual
12/31/1998 3/31/1999
Accrual Utilization Accrual
--------------- ------------- -------------
Severance and termination costs $1,185 $ 91 $1,094
Legal, claims, and other costs 1,092 - 1,092
--------------- ------------- -------------
$2,277 $ 91 $2,186
1999 Charge
During the first quarter 1999 the Company recorded an additional $1.5 million
restructuring charge for currency translation losses on its remaining Brazilian
net asset exposure due to the devaluation of the Brazilian currency caused by
the Brazilian government's decision to let its currency, the real, fluctuate in
value compared to the U.S. dollar. There are no additional restructuring
accruals related to the 1999 first quarter charge.
NOTE 3 - BUSINESS SEGMENTS
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information", which changes 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.
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 construction 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. 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.
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Other represents unallocated corporate expenses and unallocated assets,
including corporate offices, deferred taxes, pension accounts, and intersegment
eliminations. Included also in Other is $1.5 million charge due to Brazilian
currency devaluation.
NET SALES THREE MONTHS ENDED MARCH 31,
(Thousands of dollars) 1999 1998
- -------------------------------------------------------------------------------
Building Systems $ 128,026 $ 128,801
Architectural Products 48,205 42,478
Construction Services 22,926 20,743
Real Estate 9,270 4,980
Other (5,031) (3,218)
-------------------------
$ 203,396 $ 193,784
=========================
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.
PRETAX EARNINGS (LOSSES) THREE MONTHS ENDED MARCH 31,
(Thousands of dollars) 1999 1998
- -------------------------------------------------------------------------------
Building Systems $ (523) $ 1,606
Architectural Products 4,077 2,780
Construction Services 103 (173)
Real Estate 1,324 405
Other (4,524) (1,884)
-------------------------
$ 457 $ 2,734
=========================
TOTAL ASSETS MARCH 31, DECEMBER 31,
(Thousands of dollars) 1999 1998
- -------------------------------------------------------------------------------
Building Systems $ 212,951 $ 227,474
Architectural Products 79,208 80,799
Construction Services 26,007 26,596
Real Estate 23,383 26,303
Other 38,800 32,721
-------------------------
$ 380,349 $ 393,893
=========================
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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net sales of $203 million were up 5% from first quarter 1998 primarily due to
increased sales in the Architectural Products, Construction Services, and Real
Estate segments. The Building System segments sales declined slightly from a
year ago, due to a slower start in the Company's U.S. metal buildings business,
offset somewhat by improved sales in the China metal buildings subsidiary and
the Lester wood frame buildings business. Lester wood frame building losses for
the quarter were comparable to the prior year on higher sales due to competitive
pricing conditions that exist in the markets they serve. The decline in sales in
the Building Systems segment for the quarter ending March 31, 1999 was more than
offset by increases in Architectural Products, Construction Services, and Real
Estate segments.
The Architectural Products segment, which consists of the Vistawall group,
increased sales 13% for the quarter compared with the same period a year ago due
to a good commercial construction market and superior customer service. Sales
increased in most of their product lines. Construction Services and Real Estate
segment sales increased for the first quarter 1999 compared with same period a
year ago.
The Company announced previously that as a consequence of discontinuing
manufacturing operations in Brazil it was expected to recorded a currency
translation loss for the first quarter. A loss of $1.5 million was recorded in
March, 1999 due to the Brazilian government's decision to let its currency, the
real, fluctuate in value compared with the U.S. dollar.
Pretax earnings declined for the quarter ended March 31, 1999 to $.4 million
compared with $2.7 million for the same period a year ago primarily due to
declines in the Building Systems segment, a restructuring charge due to
Brazilian currency devaluation, and higher interest expense. The China metal
building subsidiary's earnings were up for the quarter compared with a year ago
due to higher sales, however lower sales and unabsorbed fixed costs resulted in
lower pretax earnings for the U.S. metal buildings business and a pretax loss
for the segment as a whole.
The Architectural Products, Construction Services, and Real Estate segments
pretax earnings increased significantly in the first quarter 1999 over the same
period a year ago due to higher sales volume and improved operating performance.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents increased $5.4 million in the first three months of 1999,
primarily due to a decrease in working capital requirements in the first quarter
1999 compared with the same period a year-ago, including the sale of several
real estate projects, and an increase in short-term borrowings. 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 three months
ended March 31, 1999, domestic short-term borrowings averaged $6.4 million for
66 days compared to $25.5 million for 90 days in 1998.
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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 March 31, 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.
Butler Building Systems, Ltd., the Company's United Kingdom subsidiary,
maintains a separate line of credit with its local bank for approximately $2.4
million at current exchange rates. Management believes that this separate bank
line of credit is sufficient to meet future liquidity requirements.
Capital expenditures were $1.7 million for the first three months of 1999
compared to $5.1 million in 1998. Total capital expenditures are expected to be
approximately $15 million in 1999 compared with $15 million in 1998 and will be
used to increase capacity in the domestic and international metal buildings
businesses, as well as the architectural products business.
During the first quarter of 1999 the Company also used cash to repurchased
approximately 151,000 shares of Company common stock for the treasury for $3.6
million and to pay dividends of $1.1 million. Total backlog of $315 million
increased 2% from comparable backlog of a year ago.
ACCOUNTING STANDARDS
Accounting for Derivatives and Hedging
In June, 1998 the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities with adoption
required starting in January 1, 2000. The Statement replaces exiting
pronouncements and requires that 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. The Company does not expect adoption of this standard to
have a material effect on the its financial position and results of operations.
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
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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.
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.
The remaining $2.2 million restructuring accrual pertains to severance and
termination costs ($1.1 million), and legal, claims, and other incremental
shut-down costs ($1.1 million) associated with restructuring the Brazilian and
European metal buildings operation. The Company utilized $.091 million of the
restructuring accrual in the first quarter of 1999 for severance and termination
costs as shown in the schedule below.
Details of the Restructuring Accrual
12/31/1998 3/31/1999
Accrual Utilization Accrual
-------------- --------------- -------------
Severance and termination costs $1,185 $ 91 $1,094
Legal, claims, and other costs 1,092 - 1,092
-------------- --------------- -------------
$2,277 $ 91 $2,186
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During the first quarter 1999 the Company recorded an additional $1.5 million
restructuring charge for currency translation losses on its remaining Brazilian
net asset exposure due to the devaluation of the Brazilian currency caused by
the Brazilian government's decision to let its currency, the real, to fluctuate
in value compared to the U.S. dollar. There are no additional restructuring
accruals related to the 1999 first quarter charge.
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 is
in the remediation stage of its Y2K plan and as of the end of the first quarter
1999, has incurred approximately $1.5 million in Y2K compliance costs. It is
anticipated that total costs to attain full Y2K 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.
Company business units are at various stages of compliance. However, it is
estimated that collectively the Company has achieved 68% 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 taken 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 complete and
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remediation is in progress of equipment controls which are non-compliant. To
date the Company is approximately 94% complete with its total 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 74% complete with its Business Issues plan and anticipates 100%
compliance with all phases of the plan during the third quarter of 1999.
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.
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 April 16, 1999 letter to shareholders,
which is attached as exhibit 19.
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PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
19 April 16, 1999 letter to shareholders
27 Financial Data Schedule
(b) Reports on Form 8-K
Butler Manufacturing Company filed a report on Form 8-K dated
January 7, 1999, announcing it would take a $13.6 million
pre-tax charge ($10.7 million after-tax) in the fourth quarter
of 1998 for the restructuring of its South American and
European metal building businesses, and for the impairment of
certain assets.
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUTLER MANUFACTURING COMPANY
May 14, 1999 /S/ Larry C. Miller
- ----------------------- --------------------------------------
Date Larry C. Miller
Vice President - Finance
and Chief Financial Officer
May 14, 1999 /S/ John W. Huey
- ----------------------- --------------------------------------
Date John W. Huey
Vice President, General Counsel
and Secretary
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Exhibit 99
EXHIBIT INDEX
Exhibit
Number Description
- ------ ---------------------------------------------
19 April 16, 1999 letter to shareholders
27 Financial Data Schedule
<PAGE> 1
Exhibit 19
BUTLER MANUFACTURING COMPANY
1ST QUARTER SHAREHOLDER LETTER
Butler's first quarter sales of $203 million were up 5% compared with a year
ago. Net earnings from operations were $1.2 million, or $.17 per share compared
with $1.2 million, or $.15 per share, last year. After considering the currency
translation loss in Brazil of $1 million, or $.13 per share, total net earnings
were $.3 million, or $.04 per share for the quarter.
The increase in earnings per share is attributable to our share repurchase
program. During the first quarter this year we acquired approximately 151,000
shares of Butler stock for a total investment of approximately $3.6 million.
This was in addition to the 400,000 shares of stock we acquired in the latter
half of 1998, totaling about $10.3 million.
The quarter benefited from improved results at our Vistawall group, our China
metal buildings subsidiary, and our Butler Real Estate and Butler Construction
operations. However these improvements were offset by decreased sales and
earnings in our U. S. Building Systems group and disappointing results in
Europe.
We had previously announced that as a consequence of discontinuing manufacturing
operations in Brazil, we expected a currency translation loss in the first
quarter of up to $2 million due to the Brazilian government's decision to let
its currency, the real, fluctuate in value compared with the U.S. dollar. In
fact, the real recovered modestly since the announced devaluation, which led to
the smaller loss reflected in first quarter results. The currency loss is a
non-cash charge against earnings.
Operating results for the Building Systems group were mixed. Our U.S. metal
buildings business sales were down 7%, and earnings, while positive, were off
significantly compared with the first quarter last year. Lower shipments early
in the quarter, and the attendant unabsorbed fixed costs, led to the earnings
decline. U.S. building orders strengthened each month of the quarter, and the
business had a record backlog at the end of March. Lester wood frame building
sales were up 7%, but their operating loss was about the same as last year,
indicative of the tougher pricing conditions that exist in the markets served.
While the Lester backlog was up 40% at the end of March, the outlook for the
balance of the year remains challenging because of weak economic conditions in
the general agricultural and confinement hog building markets, both of which are
important to Lester.
Our metal building subsidiary in China enjoyed a stellar quarter. Sales more
than doubled and the business was solidly profitable compared with a loss in the
first quarter last year. Backlog was up 37%, as this business continues to gain
momentum and greater capability day by day. Europe had slightly lower sales and
a higher operating loss compared with the first quarter last year. The backlog
in this business is well below the level of a year ago, and we anticipate the
second quarter loss will be greater as a result. The move of manufacturing
operations from the United Kingdom to our lower cost plant in Hungary is on
schedule and will be complete by mid-1999. We expect to begin to realize the
savings related to this move during the second half of the year. The operating
loss in our Brazilian subsidiary was relatively minor, as expected, and
substantially lower than the loss a year ago. All remaining projects in Brazil
will be completed in the second quarter.
<PAGE> 2
The Vistawall group had an outstanding quarter with sales up 13% and operating
earnings up 45% compared with a year ago. Superior customer service and a good
commercial construction market were the primary ingredients fueling the success.
Backlog is solid and up 8% compared with the first quarter last year.
Butler Real Estate had an excellent quarter with operating earnings three times
greater than last year. Butler Construction's results improved with first
quarter sales of approximately $23 million, 11% ahead of last year. This
business was solidly profitable compared with a first quarter loss in 1998.
Backlog in the construction business is up 21% compared to a year ago.
Overall operating results were good in the first quarter, particularly
considering the slower start of our core U.S. metal buildings business. Butler's
results demonstrate the improved earnings stability that is achievable by
serving diverse segments of the domestic nonresidential construction markets and
select international markets. The outlook for the year remains promising. We
enter the second quarter with an excellent backlog of $315 million, an increase
of 2% compared with a year ago, and expect 1999 annual operating earnings to
show substantial improvement over 1998.
Cordially yours,
John Holland
President and Chief Executive Officer
April 16, 1999
Butler Manufacturing Company
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BUTLER
MANUFACTURING COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE QUARTER
ENDED MARCH 31, 1999, AND CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<NAME> BUTLER MANUFACTURING COMPANY
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