<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 JUNE 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
JUNE 30, 2000: 6,394,063
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 Six Month Periods Ended June 30, 2000 and 1999. 3
Consolidated Statements of Comprehensive Income for
the Six Month Periods Ended June 30, 2000 and 1999. 4
Consolidated Balance Sheets as of June 30, 2000 and
December 31, 1999. 5
Consolidated Statements of Cash Flows for the
Six Month Periods Ended June 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. 12
PART II. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibits Index 15
Page 2
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six month periods ended June 30, 2000 and 1999
(unaudited)
($000's omitted except for per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------- ----------------- ---------------- ----------------
2000 1999 2000 1999
---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 244,036 $ 248,713 $ 463,225 $ 452,109
Cost of sales 201,879 204,234 386,354 373,727
---------------- ----------------- ---------------- ----------------
Gross profit 42,157 44,479 76,871 78,382
Selling, general and administrative expenses 30,482 32,227 59,979 62,513
Restructuring charge, (credit) (441) - (441) 1,514
---------------- ----------------- ---------------- ----------------
Operating income 12,116 12,252 17,333 14,355
Other income (expense), net (132) (96) (371) (233)
---------------- ----------------- ---------------- ----------------
Earnings before interest and taxes 11,984 12,156 16,962 14,122
Interest expense 1,405 1,366 2,672 2,875
---------------- ----------------- ---------------- ----------------
Pretax earnings 10,579 10,790 14,290 11,247
Income tax expense 3,936 4,459 5,432 4,652
---------------- ----------------- ---------------- ----------------
Net earnings $ 6,643 $ 6,331 $ 8,858 $ 6,595
================ ================= ================ ================
Basic earnings per common share $ 1.01 $ 0.89 $ 1.33 $ 0.92
================ ================= ================ ================
Diluted earnings per common share $ 1.01 $ 0.89 $ 1.32 $ 0.91
================ ================= ================ ================
Basic weighted average number of shares 6,598,922 7,084,119 6,676,980 7,159,160
Diluted weighted average number of shares 6,609,374 7,149,851 6,688,477 7,215,043
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
Page 3
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the six month periods ended June 30, 2000 and 1999
(unaudited)
($000's omitted, except for per share data)
<TABLE>
<CAPTION>
Six months ended
June 30,
2000 1999
---------------- ----------------
<S> <C> <C>
Net earnings $ 8,858 $ 6,595
Other comprehensive income:
Foreign currency translation adjustment (118) (591)
---------------- ----------------
Comprehensive income $ 8,740 $ 6,004
================ ================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
Page 4
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and December 31, 1999
(unaudited)
($000's omitted)
<TABLE>
<CAPTION>
2000 1999
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,519 $ 52,951
Receivables, net 137,197 115,588
Inventories:
Raw materials 22,736 20,620
Work in process 13,009 13,787
Finished goods 31,642 34,924
Lifo reserve (9,594) (9,344)
---------- ----------
Total inventory 57,793 59,987
Real estate developments in progress 33,057 18,725
Deferred tax assets 9,237 9,238
Other current assets 9,057 14,499
---------- ----------
Total current assets 263,860 270,988
Investments and other assets 36,844 36,818
Assets held for sale 4,000 4,000
Property, plant and equipment, at cost 253,309 239,507
Less accumulated depreciation (150,841) (145,456)
---------- ----------
Net property, plant and equipment 102,468 94,051
---------- ----------
$ 407,172 $ 405,857
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 9,831 $ 3,311
Current maturities of long-term debt 5,311 5,676
Accounts payable 80,506 90,422
Dividends payable 1,023 1,100
Accrued liabilities 75,089 69,862
Taxes on income 8,705 4,603
---------- ----------
Total current liabilities 180,465 174,974
Deferred tax liabilities 1,642 1,642
Other noncurrent liabilities 13,071 12,670
Long-term debt, less current maturities 56,830 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 (1,220) (1,102)
Retained earnings 205,980 199,229
---------- ----------
217,383 210,750
Less cost of common stock in treasury, 2,694,137 shares
in 2000 and 2,211,646 shares in 1999 62,219 51,200
---------- ----------
Total shareholders' equity 155,164 159,550
---------- ----------
$ 407,172 $ 405,857
========== ==========
</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 six month periods ended June 30, 2000 and 1999
(unaudited)
($000's omitted)
<TABLE>
<CAPTION>
2000 1999
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 8,858 $ 6,595
Adjustments to reconcile net earnings to net cash provided (used)
in operating activities:
Depreciation and amortization 7,804 7,751
Restructuring Charge, Net (441) 1,514
Equity earnings on joint ventures (91) (40)
Change in asset and liabilities, net of businesses acquired and sold:
Receivables (21,972) (6,853)
Inventories 2,192 12,507
Real estate developments in progress (14,332) (3,510)
Other current assets 5,443 2,205
Current liabilities excluding short-term debt 123 20,244
--------------- --------------
Net cash provided (used) in operating activities (12,416) 40,413
Cash flows from investing activities:
Capital expenditures (14,950) (4,557)
Other, net (988) (3,765)
--------------- --------------
Net cash (used) by investing activities (15,938) (8,322)
Cash flows from financing activities:
Payment of dividends (2,168) (2,164)
Proceeds from issuance of long-term debt 58 ---
Repayment of long-term debt (249) ( 615)
Net increase (decrease) in short-term debt 6,155 (378)
Sale and issuance of treasury stock 547 299
Purchase of treasury stock (11,566) (6,773)
Other, net 471 (460)
--------------- --------------
Net cash (used) by financing activities (6,752) (10,091)
Effect of exchange rate changes on cash (326) (591)
--------------- --------------
Net increase (decrease) in cash and cash equivalents (35,432) 21,409
Cash and cash equivalents at beginning of year 52,951 10,260
--------------- --------------
Cash and cash equivalents at June 30 $ 17,519 $ 31,669
=============== ==============
</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 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 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 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 effect
of implementing FASB No. 133 is still under evaluation. It is believed that its
implementation will not have a material effect on the company's financial
statements.
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.
Page 7
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<TABLE>
<CAPTION>
Three Months Six Months
NET SALES Ended June 30, Ended June 30,
(Thousands of dollars) 2000 1999 2000 1999
---------------------------------------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Building Systems $142,825 $160,420 $281,395 $288,447
Architectural Products 55,744 50,424 109,694 98,629
Construction Services 44,306 42,773 76,534 65,699
Real Estate 7,152 3,360 7,366 12,630
Other (5,991) (8,264) (11,764) (13,296)
-------- ------- -------- --------
$244,036 $248,713 $463,225 $452,109
======== ======== ======== ========
</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 Six Months
PRETAX EARNINGS (LOSSES) Ended June 30 Ended June 30
(Thousands of dollars) 2000 1999 2000 1999
---------------------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Building Systems $ 8,943 $ 8,837 $ 11,875 $ 6,800
Architectural Products 4,756 5,459 8,586 9,536
Construction Services 771 1,023 1,290 1,126
Real Estate 814 533 1,190 1,857
Other (4,705) (5,062) (8,651) (8,072)
--------- --------- -------- ---------
$ 10,579 $ 10,790 $ 14,290 $ 11,247
========= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
TOTAL ASSETS June 30, December 31,
(Thousands of dollars) 1999 1999
---------------------------------------- --------- ------------
<S> <C> <C>
Building Systems $214,663 $212,652
Architectural Products 90,425 83,315
Construction Services 36,175 27,369
Real Estate 37,914 22,731
Other 27,995 59,790
-------- --------
$407,172 $405,857
======== ========
</TABLE>
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.
<TABLE>
<CAPTION>
Restructuring Charge and Accrual Activity through 2nd Quarter, 2000
12/31/1998 Less: 06/30/2000
Accrual Utilization Recoveries Accrual
<S> <C> <C> <C> <C>
Severance and termination costs $1,185 $ (973) $ (212) $---
Legal, claims, and other costs 1,092 (389) (703) ---
----------------- ----------------- ------------------ -----------------
$2,277 $(1,362) $ (915) $---
----------------- ----------------- ------------------ -----------------
</TABLE>
<TABLE>
<CAPTION>
Summary of Restructuring Activity since 12/31/98
<S> <C> <C> <C>
1999 2000 Total
Restructuring accrual recorded 12/98 $2,277
Utilization (1,097) (265) (1,362)
------------------ ----------------- -----------------
Recovery on restructuring accrual (295) (620) (915)
Redundant - worthless asset activity (152) 179 27
Foreign currency devaluation - Brazil 1,514 --- 1,514
------------------ ----------------- -----------------
Restructuring charge, (reversal) $ 1,067 $(441) $ 626
------------------ ----------------- -----------------
</TABLE>
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.
Page 9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net sales of $244 million were down 2% from second quarter 1999 primarily due to
decreased sales in the Building Systems segments. The Architectural Products and
Constructions Services segments both had increased sales for the quarter over
the prior year of 11% and 4% respectively. The Real Estate segments sales
increased from a year ago, due to increased project sales. For the six months
ended June 30, 2000 net sales were $463 million compared with $452 million in
1999, an increase of 3%. The Architectural Products and Constructions Services
segments had increased sales while the Building Systems segment sales decreased
slightly when compared with the prior six month period. For the six months ended
June 30, 2000, the Real Estate segments sales decreased substantially from a
year ago, due to lower first quarter project sales.
For the first six months, Building Systems segment sales were down 2% compared
with the prior year. The U.S. metal buildings business sales were 4% ahead of
last year while sales in the International metal buildings business were
approximately 18% below comparable sales in 1999. This decrease is primarily due
to lower volume in the Americas region. The Architectural Products segment,
which consists of the Vistawall group, reported a 11% increase in sales for the
first six months of 2000 compared with same period a year ago, with continued
strong demand for storefront and curtainwall product. Construction Services
segment sales for the first quarter of 2000 increased 17% compared with the
prior year primarily reflective of increased activity. The Real Estate segment
closed only one project in the first six months compared to two project sales in
1999 and sales were down $5 million as a result.
Pretax earnings for the quarter ended June 30, 2000 were $10.6 million compared
with $10.8 million, a 2% decrease from the same period a year ago. For the six
months ended June 30, 2000, pretax earnings were $14.3 million versus $11.2
million in 1999. The 1999 results include a $1.5 million restructuring charge
for currency translation losses related to the company's former Brazilian
operation, 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 was up 34% versus 1999 first half results. Improved focus on
providing customers with new and enhanced products and service while maintaining
heightened cost control contributed to this increase.
LIQUIDITY AND CAPITAL RESOURCES
Since December 1999, cash and equivalents decreased $35 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 six months ended June 30, 2000,
domestic short-term borrowings averaged $11 million for 108 days compared to $6
million for 101 days in 1999.
The company continues to maintain domestic bank credit facilities aggregating
$40 million. As of June 30, 2000, domestic borrowings of $8 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 June 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 $15 million for the first six months of 2000 compared
to $5 million for the same period in 1999. Total capital expenditures for 2000
are expected to be $38 million, and will be used primarily to increase capacity
in the Building Systems and Architectural Products business segments.
A 35-acre site in Greene County, Tennessee, has been acquired and construction
has begun on a new $24 million architectural aluminum extrusion and finishing
plant for the Vistawall Architectural Products division. The division is one of
the nation's largest manufacturers of engineered windows, curtain wall,
storefront and skylight systems for the nonresidential building construction
market. The 240,000 square foot plant will primarily serve the eastern United
States beginning in the first quarter of 2001.
During the first six months of 2000, the company repurchased for the treasury
approximately 506,000 shares of company's common stock for $11.6 million and
paid dividends of $2.2 million. Total backlog of $336 million is comparable to
backlog of a year ago.
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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 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 are immaterial.
OTHER
In April 2000, the board of directors elected two new directors: Susan F. Davis,
vice president, human resources for Johnson Controls, Inc. and William D.
Zollars, chairman, president and chief executive officer of Yellow Corporation.
Alan M. Hallene retired from the board of directors in April 2000 after 20 years
of service.
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.
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 July 17, 2000 letter to shareholders,
which is attached as exhibit 19.
Page 11
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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.
Page 12
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PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(19) July 17, 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 June 30, 2000.
Page 13
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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
August 7, 2000 /s/ Larry C. Miller
---------------- ---------------------------
Date Larry C. Miller
Vice President - Finance,
and Chief Financial Officer
August 9, 2000 /s/ John W. Huey
---------------- -------------------------------
Date John W. Huey
Vice President, General Counsel
and Secretary
Page 14
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EXHIBIT INDEX
Exhibit
Number Description
-------------- ------------------------------------
19 July 17, 2000 Letter to Shareholders
27 Financial Data Schedule
Page 15
