EX-99.1 3 c76518exv99w1.txt FIRST QUARTER 2003 SHAREHOLDERS' LETTER 1 BUTLER MANUFACTURING COMPANY FIRST QUARTER REPORT 2003 THREE MONTHS ENDED MARCH 31, 2003 [BUTLER LOGO] 1540 GENESSEE STREET, KANSAS CITY, MO 64102 To Our Shareholders: First quarter sales were $170 million, 7% lower than a year ago. According to F.W. Dodge, domestic nonresidential construction activity remained weak with total contract awards off 18% through February. Price competition also remained intense and the unabsorbed capacity costs associated with the lower volume resulted in a loss for the quarter of $3.9 million, or $.62 per share, compared with a loss of $5.4 million, or $.85 per share last year. Costs are being well managed as evidenced by the lower expenses for the quarter that more than offset rising health care, pension and general insurance cost increases. Sales in the North American Building Systems segment were approximately $80 million, up nearly 3% compared with a year ago. Our pre-engineered metal buildings sales were up and sales in our Lester wood frame building business were down when compared with last year. Although the domestic market was weaker, we were able to grow the top line and gain market share in the metal building market. However, higher steel costs and continued price competition resulted in an operating loss of $6.4 million compared with an operating loss of $4.9 million last year. The metal building business accounted for the increased loss. We recently announced the decision to build a pre-engineered metal building facility in Northeast Mexico, a necessary step to adjust our sourcing strategy. This investment will support the company's successful historical growth in Mexico and Latin America and enhance our competitiveness and growth prospects in these markets. In addition, the plant will provide a source of lower cost production to serve the US market. The International Building Systems segment sales, all from China in the current year, were approximately $22 million, up 17% compared with a year ago, excluding European sales as that business was sold in July 2002. Operating income was $2.6 million compared with $0.4 million last year. The 2002 results include a loss from Europe of $0.6 million. The market for our products in China remains strong. We intend to build upon Butler's leadership position in the pre-engineered metal building market in China investing in additional capacity, as needed, to support growth and introduce new products to broaden the markets served. The Vistawall Architectural Products segment sales were about $53 million, up 2.5% compared with last year. Operating earnings were $2.1 million compared with $0.9 million a year ago with the improvement driven by increased operating efficiencies and lower operating costs. We opened two additional service centers during the quarter to support the growth strategies in this segment and will use our capacity and low cost structure to continue to target market share gains. Butler Construction's sales were approximately $19 million compared with $38 million last year and operating earnings were $0.3 million compared with $0.8 million in 2002. The drop in earnings was volume related with costs well managed. The Real Estate segment had no sales in the first quarter with none last year as well. The business recorded a pretax loss of $0.6 million compared with pretax earnings of $0.6 million last year. This turnabout was related to lower rental income as well as recording $0.8 million in cumulative depreciation on a project where the prospect for the sale has extended beyond one year. Domestic construction markets remain weak and challenging. Entering April, our backlog was $277 million, down about 2% from a comparable backlog a year ago. Price competition is expected to continue in the second quarter and unabsorbed capacity costs will continue with the likely result of a loss for the quarter. Our higher margin product backlog was approximately 1% lower and construction backlog was down about 4%. We are striking a balance between tough cost management and investment in new products and strategic investments that will position the company for marked improvement when the economy turns around. Cordially yours, /s/ John Holland John Holland Chairman and Chief Executive Officer April 24, 2003 Butler Manufacturing Company
CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, 2003 2002 ------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Net sales $ 169,767 $ 182,852 Cost of sales 148,347 160,733 ------------- ----------- Gross profit 21,420 22,119 Selling, general and administrative expenses 26,542 27,837 ------------- ----------- Operating loss (5,122) (5,718) Other income (expense), net (996) (70) ------------- ----------- Loss before interest and taxes (6,118) (5,788) Interest expense 2,146 1,958 ------------- ----------- Pretax loss (8,264) (7,746) Income tax benefit 4,349 2,378 ------------- ----------- Net loss $ (3,915) $ (5,368) ============= =========== Basic loss per common share $ (0.62) $ (0.85) ============= =========== Diluted loss per common share $ (0.62) $ (0.85) ============= =========== Basic weighted average number of shares 6,335,289 6,290,239 Diluted weighted average number of shares 6,335,289 6,290,239
CONSOLIDATED BALANCE SHEETS ------------------------------------------------------------------------------------------------------------------------------- AT MARCH 31, 2003 2002 2003 2002 ------------------------------------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) LIABILITIES & ASSETS: SHAREHOLDERS' EQUITY: Cash and equivalents $ 62,321 $ 45,263 Short-term debt $ 12,288 $ 7,557 Receivables, net 88,098 94,791 Accounts payable 54,346 55,881 Inventories 61,846 54,548 Accrued liabilities 107,602 89,993 Real estate developments 5,598 23,975 Taxes on income 8,711 5,248 Net current deferred tax assets 26,783 16,635 Dividends payable 1,140 1,134 Other current assets 17,900 9,400 --------- --------- --------- -------- Total current liabilities 184,087 159,813 Total current assets 262,546 244,612 Net noncurrent deferred tax liabilities 4,799 3,683 Investments and other assets 60,245 52,340 Other non-current liabilities 20,408 21,493 Assets held for sale 3,684 3,684 Long-term debt 93,648 98,041 Plant and equipment, net 121,040 141,013 Shareholders' equity 144,573 158,619 --------- -------- --------- --------- $ 447,515 $441,649 $ 447,515 $ 441,649 ========= ======== ========= =========
CONSOLIDATED STATEMENTS OF CASH FLOWS ---------------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, 2003 2002 2003 2002 ---------------------------------------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) CASH FROM CASH FROM OPERATING ACTIVITIES: FINANCING ACTIVITIES: Net loss $ (3,915) $ (5,368) Dividends (1,135) (1,130) Depreciation and amortization 5,538 4,533 Net change in long-term debt 1,121 (203) Change in assets and liabilities (12,125) (1,489) Net change in short-term debt 2,476 (160) Other, net (17) 15 Purchase and sale of --------- -------- treasury stock, net 400 358 Total (10,519) (2,309) --------- --------- --------- -------- Total 2,862 (1,135) --------- --------- CASH FROM INVESTING ACTIVITIES: EFFECT OF EXCHANGE RATE CHANGES 213 54 Capital expenditures - PP&E (4,759) (1,602) --------- --------- Capital expenditures - software (1,254) (2,314) INCREASE (DECREASE) IN --------- -------- CASH AND EQUIVALENTS $ (13,457) $ (7,306) Total (6,013) (3,916) ========= ========= --------- --------