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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 SEPTEMBER 30, 2000
BUTLER MANUFACTURING COMPANY
Incorporated in State of Delaware
BMA Tower - Penn Valley Park
Post Office Box 419917
Kansas City, Missouri 64141-0917
Phone: (816) 968-3000
I.R.S. Employer Identification Number: 44-0188420
Shares of common stock outstanding at
SEPTEMBER 30, 2000: 6,393,563
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 and
Nine Month Periods Ended September 30, 2000 and 1999. 3
Consolidated Statements of Comprehensive Income for the
Nine Month Periods Ended September 30, 2000 and 1999. 4
Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999. 5
Consolidated Statements of Cash Flows for the Nine Month
Periods Ended September 30, 2000 and 1999. 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. 13
PART II. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibits Index 16
Page 2
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine month periods ended September 30, 2000 and 1999
(unaudited)
($000's omitted except for per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
<S> <C> <C> <C> <C>
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net sales $ 249,671 $ 266,382 $ 712,896 $ 718,491
Cost of sales 202,440 219,704 588,794 593,431
---------- ---------- ---------- ----------
Gross profit 47,231 46,678 124,102 125,060
Selling, general and administrative expenses 30,974 33,085 90,953 95,598
Restructuring charge, (credit) --- (447) (441) 1,067
---------- ---------- ---------- ----------
Operating income 16,257 14,040 33,590 28,395
Other expense, net (491) (53) (862) (286)
---------- ---------- ---------- ----------
Earnings before interest and taxes 15,766 13,987 32,728 28,109
Interest expense 1,406 1,439 4,078 4,314
---------- ---------- ---------- ----------
Pretax earnings 14,360 12,548 28,650 23,795
Income tax (benefit) expense 4,929 (1,822) 10,361 2,830
---------- ---------- ---------- ----------
Net earnings $ 9,431 $ 14,370 $ 18,289 $ 20,965
========== ========== ========== ==========
Basic earnings per common share $ 1.47 $ 2.04 $ 2.78 $ 2.95
========== ========== ========== ==========
Diluted earnings per common share $ 1.47 $ 2.03 $ 2.77 $ 2.92
========== ========== ========== ==========
Basic weighted average number of shares 6,394,939 7,032,296 6,582,966 7,116,872
Diluted weighted average number of shares 6,404,625 7,094,772 6,593,839 7,174,952
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the nine month periods ended September 30, 2000 and 1999
(unaudited)
($000's omitted, except for per share data)
Nine months ended
September 30,
2000 1999
---------- ----------
Net earnings $ 18,289 $ 20,965
Other comprehensive income:
Foreign currency translation adjustment (726) (937)
---------- ----------
Comprehensive income $ 17,563 $ 20,028
========== ==========
See Accompanying Notes to Consolidated Financial Statements.
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2000 and December 31, 1999
($000's omitted)
2000 1999
---------- ----------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 16,927 $ 52,951
Receivables, net 148,530 115,588
Inventories:
Raw materials 21,523 20,620
Work in process 12,196 13,787
Finished goods 31,619 34,924
Lifo reserve (9,749) (9,344)
---------- ----------
Total inventory 55,589 59,987
Real estate developments in progress 45,923 18,725
Deferred tax assets 9,237 9,238
Other current assets 8,527 14,499
---------- ----------
Total current assets 284,733 270,988
Investments and other assets 37,235 36,818
Assets held for sale 5,358 4,000
Property, plant and equipment, at cost 260,063 239,507
Less accumulated depreciation (153,314) (145,456)
---------- ----------
Net property, plant and equipment 106,749 94,051
---------- ---------
$ 434,075 $ 405,857
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 14,669 $ 3,311
Current maturities of long-term debt 5,482 5,676
Accounts payable 82,391 90,422
Dividends payable 1,087 1,100
Accrued liabilities 82,405 69,862
Taxes on income 9,922 4,603
---------- ----------
Total current liabilities 195,956 174,974
Deferred tax liabilities 1,642 1,642
Other noncurrent liabilities 15,209 12,670
Long-term debt, less current maturities 58,414 57,021
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 (1,828) (1,102)
Retained earnings 214,287 199,229
---------- ----------
225,082 210,750
Less cost of common stock in treasury,
2,694,637 shares in 2000 and
2,211,646 shares in 1999 62,228 51,200
---------- ----------
Total shareholders' equity 162,854 159,550
---------- ----------
$ 434,075 $ 405,857
========== ==========
See Accompanying Notes to Consolidated Financial Statements.
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine month periods ended September 30, 2000 and 1999
(unaudited)
($000's omitted)
2000 1999
--------- ---------
Cash flows from operating activities:
Net earnings $ 18,289 $ 20,965
Adjustments to reconcile net earnings
to net cash provided (used) in
operating activities:
Depreciation and amortization 11,277 11,617
Restructuring charge, net (441) 1,067
Equity earnings on joint ventures (121) (99)
Change in asset and liabilities:
Receivables (33,305) (14,604)
Inventories 4,396 12,681
Real estate developments in progress (27,198) (7,305)
Other current assets 5,973 (3,972)
Current liabilities excluding
short-term debt 10,541 32,545
--------- ---------
Net cash provided (used) in
operating activities (10,589) 52,895
Cash flows from investing activities:
Capital expenditures (24,560) (6,414)
Other, net (712) (2,777)
--------- ---------
Net cash used by investing
activities (25,272) (9,191)
Cash flows from financing activities:
Payment of dividends (3,191) (3,218)
Proceeds from issuance of long-term debt 1,650 ---
Repayment of long-term debt (257) (851)
Net increase in short-term debt 11,164 1,300
Sale and issuance of treasury stock 616 457
Purchase of treasury stock (11,644) (6,773)
Other, net 2, 225 (1,886)
--------- ---------
Net cash provided (used) by
financing activities 563 (10,971)
Effect of exchange rate changes on cash (726) (937)
--------- ---------
Net increase (decrease) in cash
and cash equivalents (36,024) 31,796
Cash and cash equivalents at beginning of year 52,951 10,260
--------- ---------
Cash and cash equivalents at September 30 $ 16,927 $ 42,056
========= =========
See Accompanying Notes to Consolidated Financial Statements.
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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 1999 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 Statements 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 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 enters into forward currency exchange contracts and hedge contracts
for certain commodities used in its trade or business. Currently, gains or
losses on open contracts are not reflected in the company's financial
statements, but are recorded only at their contract settlement date. The company
will adopt this standard on January 1, 2001. The evaluation of implementing FASB
No. 133 has not been finalized. However, it is believed that its implementation
will not have a material effect on the company's financial position or results
of operations.
NOTE 3 - BUSINESS 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 architectural
aluminum systems for nonresidential construction, including 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 1999
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.
The Other classification represents unallocated corporate expenses and
unallocated assets, including corporate offices, deferred taxes, pension
accounts, interest expense, and intersegment eliminations.
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Three Months Nine Months
NET SALES Ended September 30, Ended September 30,
(Thousands of dollars) 2000 1999 2000 1999
-----------------------------------------------------------------------------
Building Systems $ 172,048 $ 177,374 $ 453,443 $ 465,822
Architectural Products 56,969 50,830 166,663 149,459
Construction Services 31,825 49,963 108,359 115,662
Real Estate 316 0 7,682 12,630
Other (11,487) (11,785) (23,251) (25,082)
-------------------------------------------------
$ 249,671 $ 266,382 $ 712,896 $ 718,491
------------------------------------------------
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.
Three Months Nine Months
PRETAX EARNINGS (LOSSES) Ended September 30 Ended September 30
(Thousands of dollars) 2000 1999 2000 1999
-----------------------------------------------------------------------------
Building Systems $ 13,449 $ 10,141 $ 25,324 $ 16,941
Architectural Products 4,600 5,356 13,186 14,892
Construction Services 598 1,377 1,888 2,504
Real Estate 714 239 1,904 2,096
Other (5,001) (4,565) (13,652) (12,638)
------------------------------------------------
$ 14,360 $ 12,548 $ 28,650 $ 23,795
------------------------------------------------
TOTAL ASSETS September 30, December 31,
(Thousands of dollars) 2000 1999
-----------------------------------------------------------------------------
Building Systems $ 223,827 $ 212,652
Architectural Products 100,431 83,315
Construction Services 30,885 27,369
Real Estate 48,242 22,731
Other 30,690 59,790
----------------------
$ 434,075 $ 405,857
----------------------
Assets represent both tangible and intangible assets used by each business
segment. Other represents 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 repositioning
of European operations. Estimates of realizable asset sales values were
obtained from outside appraisals and the company's experience in selling
redundant assets.
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.
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At the end of the first quarter 2000, $.9 million of the restructuring accrual
remained. Final activities related to restructuring were completed in the second
quarter 2000, resulting in a $.4 million reversal of the remaining accrual.
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 related to the
carryback of its capital loss.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Third quarter net sales were $250 million in 2000 compared with $266 million a
year ago, a decrease of 6%. The decline in sales between years was primarily due
to lower sales in the Construction Services segment. The Architectural Products
segment third quarter 2000 sales increased 12% compared with the same period a
year ago, while the Buildings System segment sales decreased 3% over the same
period. Sales for the nine months through September 30, 2000, were $713 million,
slightly lower than the $718 million recorded in the same period last year.
Increased sales in the Architectural Products segment for the nine month period
through September 30, 2000 were more than offset by decreased sales in other
segments over the same period.
The Architectural Products segment, which consists of the Vistawall group,
reported a 12% increase in sales for the first nine months of 2000 compared with
same period a year ago, with continued strong demand for storefront,
entranceways, skylights and curtainwall product. For the first nine months,
Building Systems segment sales were down 3% compared with the prior year. The
U.S. metal buildings business sales were slightly ahead of last year, while
sales in the International metal buildings business were approximately 15% below
comparable sales in 1999, primarily due to continued weak demand in the Latin
American region. Sales in the Lester wood buildings business were slightly ahead
of those for the same period a year ago. For the nine months ended September 30,
2000, the Real Estate segment sales decreased substantially from a year ago, due
to lower project sales. The Real Estate segment closed one project in the first
nine months compared to two project sales in 1999. Construction Services segment
sales for the first three quarters of 2000 decreased by 6% compared with the
prior year. The Real Estate and Construction Services segments are project-based
operations, and their revenues and earnings are not as comparable period to
period as are those of Butler's other segments.
Pretax earnings for the quarter ended September 30, 2000 were $14.4 million
compared with $12.5 million, a 15.2% increase from the same period a year ago.
For the nine months ended September 30, 2000, pretax earnings were $28.7 million
versus $23.8 million in 1999 reflecting a 20% increase over the prior year. The
1999 results include a $1.1 million net restructuring charge, while the 2000
results include a restructuring reversal of $.4 million. The restructuring
amounts were recorded in the Building Systems segment. Absent these charges,
comparable pretax earnings for the Building Systems segment were up 38% compared
to the nine months ended September 30, 1999. Better management of both margins
and costs provided the favorable profit comparison.
The Architectural Products segment's pretax earnings were 12% lower for the nine
months ended September 30, 2000 over the comparable 1999 record results.
Vistawall's lower profitability was primarily a result of purchasing third-party
extrusion and finishing capacity to meet customer demand while awaiting the
completion of the division's second major manufacturing facility.
LIQUIDITY AND CAPITAL RESOURCES
Since December 1999, cash and equivalents decreased $36 million. Increases in
working capital and spending for treasury share purchases, capital expenditures,
and the payment of dividends were the primary uses of cash. Sources of cash were
operations and short-term borrowings. For the nine months ended September 30,
2000, domestic short-term borrowings averaged $12 million for 199 days compared
to $6 million for 101 days in 1999.
The company continues to maintain domestic bank credit facilities aggregating
$40 million. As of September 30, 2000, domestic borrowings of $13 million were
outstanding. The company's foreign operations maintain separate lines of credit
with local banks of approximately $7 million, with $2 million utilized at
current exchange rates at September 30, 2000. Management believes the company's
operating cash flow, along with the bank credit lines, are sufficient to meet
future liquidity requirements.
Capital expenditures were $25 million for the first nine months of 2000 compared
to $6 million for the same period in 1999. The increase in capital expenditures
is due to the construction of Vistawall's new extrusion and finishing plant and
the expansion of the company's manufacturing facility in China. Total capital
expenditures for 2000 are expected to be $40 million, and will be used primarily
to increase capacity in the Building Systems and Architectural Products business
segments.
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During the year, a 35-acre site in Greene County, Tennessee was acquired and
construction began on a new $24 million architectural aluminum extrusion and
finishing plant for the Vistawall Architectural Products division. The 240,000
square foot plant will primarily serve the eastern United States, and will
provide additional capacity to support Vistawall's growth and reduce their
dependence on third party suppliers. The new plant is expected to begin
production in the first quarter of 2001.
During the first nine months of 2000, the company repurchased for the treasury
approximately 509,600 shares of company's common stock for $11.6 million and
paid dividends of $3.2 million.
Total backlog of $332 million is slightly lower than the $343 million of a year
ago. Both product and construction backlog declined 3% compared with the prior
year.
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 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 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
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 less than one year duration are purchased to cover the
exposure. The fair value of such contracts is immaterial.
OTHER
The board of directors also authorized, in April 2000, the repurchase of 750,000
shares of Butler common stock, to be used for employee benefit plans and other
corporate purposes. Purchases will be made from time to time in the open market
and in private transactions at prevailing market prices. This authorization
replaces the company's previous share repurchase authorization announced in
January 1999.
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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 16, 2000 letter to shareholders,
which is attached as exhibit 19.
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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, 1999 regarding this matter. See
discussion about market risk under Item 2. Management Discussion and Analysis on
page 11 of this document.
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PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(19) October 16, 2000 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, 2000.
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUTLER MANUFACTURING COMPANY
November 13, 2000 /s/ Larry C. Miller
------------------ -------------------------------
Date Larry C. Miller
Vice President - Finance,
and Chief Financial Officer
November 13, 2000 /s/ John W. Huey
----------------- -------------------------------
Date John W. Huey
Vice President, General Counsel
and Secretary
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EXHIBIT INDEX
Exhibit
Number Description
-------------- ---------------------------------------------------
19 October 16, 2000 Letter to Shareholders
27 Financial Data Schedule
Page 16
