10-K405
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10-K405
1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
(Fee Required)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
BUTLER MANUFACTURING COMPANY
BMA TOWER, PENN VALLEY PARK
(P.O. Box 419917)
Kansas City, Missouri 64141-0917
Telephone: (816) 968-3000
Incorporated in the State of Delaware
COMMISSION FILE NO. 0-603
IRS No. 44-0188420
The Company has no securities registered pursuant to Section 12(b) of the
Act. The only class of stock outstanding consists of Common Stock having no
par value, 4,869,915 shares of which were outstanding at December 31, 1994.
The Common Stock is registered pursuant to Section 12(g) of the Act.
The aggregate market value of the Common Stock of the Company held by
non-affiliates, based upon the last sales price of such stock on February 17,
1995 was $174,920,606.
The Registrant 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 has been subject to such filing requirements for the past 90 days.
As indicated by the following check mark, disclosure of delinquent filers
pursuant to Rule 405 of Regulation S-K is not contained herein and will not be
contained to the best of Registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K: X
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The following documents are incorporated herein by reference:
(1) Butler Manufacturing Company 1994 Annual Report, pages 12 through 28
(the "Annual Report" incorporated into Part II).
(2) Butler Manufacturing Company Notice of Annual Meeting and Proxy
Statement, dated March 9, 1995 (the "Proxy Statement" incorporated into
Parts I and III).
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BUTLER MANUFACTURING COMPANY
FORM 10-K
___________________
For the Fiscal Year Ended December 31, 1994
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CONTENTS
PART I Page
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 4 Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . 7
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . 8
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . 8
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . 8
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . 9
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
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PART I
Item 1. Business
(a) General Development of Business
The Company was founded as a partnership in 1901. It was incorporated in
Missouri in 1902 and reincorporated in Delaware in 1969. Its corporate
headquarters are located in Kansas City, Missouri, and principal plants and
offices are operated throughout the continental United States. Principal
international operations are conducted through Butler Building Systems, Ltd., a
wholly owned United Kingdom subsidiary acquired in 1991, and a Saudi Arabian
joint venture.
The Company and its subsidiaries are primarily engaged in the design,
manufacture and sale of systems and components for nonresidential structures.
Products and services fall into three principal business segments: (1)
Building Systems, consisting primarily of custom designed and pre-engineered
steel and wood frame building systems for commercial, community, industrial and
agricultural uses; (2) Construction and construction management services for
purchasers of large, complex or multiple site building projects; and (3) Other
Building Products for low, medium and high-rise nonresidential buildings,
consisting primarily of curtain wall and storefront systems, skylights and roof
vents. This group also includes the manufacture and sale of grain storage bins
and the distribution of grain handling and conditioning equipment.
The Company's products are sold primarily through numerous independent
dealers. Other Company products are sold through a variety of distribution
arrangements.
(b) Financial Information about Industry Segments
The information required by Item 1(b) is hereby incorporated by reference
to page 20 and 21 of the Company's Annual Report furnished to the Commission
pursuant to Rule 14a-3(b) and attached as Exhibit 13.0 to this report (see also
items 6, 7, and 8 of this report).
(c) Narrative Description of Business
Building Systems
The Company's largest segment, Building Systems, includes the U.S. steel
and wood frame pre-engineered building systems; Butler European operations
consisting of 100% wholly owned subsidiaries in the United Kingdom, France, and
Germany; and a 30% owned Saudi Arabian joint venture (Saudi Building Systems,
Ltd.), all of which manufacture and market pre-engineered steel frame building
systems; Butler Real Estate, Inc. a real estate developer; a 45% owned
Japanese joint venture marketing pre-engineered building systems to Japanese
firms to meet their U.S. and international building requirements; sales
offices in Canada and Mexico; and representative offices in China.
The Company's building systems consist primarily of custom designed and
pre-engineered one to five-story steel and one to two-story wood framed
buildings for commercial, community, industrial and agricultural uses such as
office buildings, manufacturing facilities, warehouses, schools, shopping
centers and farm buildings. Principal product components of the systems are
structural members and a variety of pre-engineered wall and roof components.
These are fabricated according to standard or customer specifications and
shipped to building sites for
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assembly by independent dealers. Building components are manufactured in plants
located at Galesburg and Charleston, Illinois; Laurinburg, North Carolina;
Birmingham, Alabama; Visalia, California; Annville, Pennsylvania; San Marcos,
Texas; Lester Prairie, Minnesota; Ottawa, Kansas; and Clear Brook, Virginia.
Butler Building Systems, Ltd. manufactures and markets the Company's
pre-engineered steel frame buildings primarily for the United Kingdom and
European markets from its facility in Kirkcaldy, Scotland. Saudi Building
Systems, Ltd. manufactures and markets pre-engineered steel frame buildings for
Middle Eastern markets at manufacturing facilities located in Jeddah, Saudi
Arabia. The Company serves the Canadian market through a branch office in
Burlington, Ontario.
Building Systems' products are distributed throughout the world by
independent Butler dealers. The dealers provide construction services and in
many cases complete design and engineering capabilities.
Nonresidential pre-engineered buildings compete with ordinary forms of
building construction in the low-rise commercial, community, industrial and
agricultural markets. Competition is primarily based upon cost, time of
construction, appearance, thermal efficiency and other specific customer
requirements.
The Company also competes with numerous pre-engineered steel frame
building manufacturers doing business within the United States, Canada, and the
United Kingdom. Approximately five of these manufacturers account for the
majority of industry sales. The Company believes that its 1994 sales of steel
frame pre-engineered buildings within the United States exceeded those of any
other nonresidential steel frame pre-engineered buildings manufacturer, with
its next largest competitors being Varco-Pruden Buildings, a division of United
Dominion Industries Ltd., Ceco and Star Buildings Systems combined, a division
of Robertson - Ceco Corporation, American Buildings Company, and NCI Building
Systems, Inc. Competition among manufacturers of pre-engineered buildings is
based primarily upon price, service, product design and performance, and
marketing capabilities.
The Company's Lester wood frame buildings business ranks second in sales
to the industry leader, Morton Buildings, Inc., a major manufacturer which
sells direct to the end user.
Butler Real Estate, Inc., a wholly-owned subsidiary of the Company,
provides real estate development services in cooperation with Butler dealers.
On the basis of commitments to lease obtained from credit worthy customers,
Butler Real Estate, Inc. acquires building sites, arranges with Butler dealers
for construction of project improvements, and then sells the completed projects
to investors.
BMC Real Estate, Inc., a wholly-owned subsidiary of the Company,
participates solely in four land development ventures. Three of the ventures
are partnerships with ownership interests ranging from 35% to 50%. The fourth
venture is wholly-owned.
Construction Services
The Company's Construction Services segment consists of a wholly-owned
construction subsidiary, BUCON, Inc. which provides comprehensive design,
planning, execution and construction management services to major purchasers of
construction. Revenues of the segment are derived primarily from general
contracting. In addition, the Construction
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Services segment performs "furnish and erect" and "materials only" subcontracts
using products from several Company divisions, predominantly the Company's
Buildings Division. Competition is primarily based upon price, time necessary
to complete a project, design, and product performance. Construction Services
competes with national, regional, and local general contracting firms, and
whenever possible, performs projects in conjunction with independent Butler
dealers.
Other Building Products
This segment includes the operations of the Vistawall, Walker and Grain
Systems Divisions. The Walker business was sold December 6, 1993. The
Vistawall business designs, manufactures and markets architecturally oriented
component systems for the nonresidential construction market. The Grain
Systems' business manufactures and markets grain storage bins and also
distributes grain conditioning and handling equipment.
The Vistawall Division designs, manufactures and sells aluminum curtain
wall systems for mid and high-rise office markets, and entry doors and other
standard storefront products for low-rise retail and commercial markets. The
products are distributed on a material supply basis to either curtain wall
erection subcontractors or general contractors, and through distribution
warehouses to glazing contractors for the storefront and entry door products.
Manufacturing and distribution facilities are located in Lincoln, Rhode Island;
Atlanta, Georgia; Modesto and Hayward, California; Cincinnati and Cleveland,
Ohio; Terrell, Houston and Dallas, Texas; Tampa, Florida; Washington, D.C.;
Chicago, Illinois; and St. Louis, Missouri. The Division operates in highly
competitive markets with other national manufacturers which operate multiple
plants and distribution facilities, and with regional manufacturers.
Competition is primarily based on cost, delivery capabilities, appearance and
other specific customer requirements.
The Vistawall Division at its Terrell, Texas location also designs,
manufactures and installs Naturalite skylights of all types, from the more
standard designs used in commercial and industrial buildings, to highly complex
engineered solutions for monumental building projects. In addition, the
Division designs and manufactures roof accessories, such as smoke and heat
vents, for conventional and pre-engineered buildings. The Division markets its
Naturalite products through its existing independent representative
organization. There are numerous competitors in this industry with competition
primarily based on price, engineering and installation capabilities, delivery,
and other specific customer requirements.
The Walker Division, which was sold to The Wiremold Company in December,
1993, manufactured a full array of power, lighting, electronics and
communication distribution systems for office, retail, and institutional
buildings. Principal products consisted of underfloor duct and cellular floor
systems.
The Grain Systems Division manufactures and markets grain storage bins
from its Kansas City, Missouri plant. It also distributes grain conditioning
and handling equipment. The Division's products are sold primarily to farmers
and commercial grain elevators through a nationwide network of independent
dealers. Products are also manufactured for export. Grain systems are sold in
highly competitive markets in direct competition with national companies and
smaller regional manufacturers. Competition is principally based on price,
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delivery schedules, and product performance.
Manufacturing and Materials
The Company's manufacturing operations include most conventional metal
fabricating operations, such as punching, shearing, welding, extruding and
forming of sheet and structural steel and aluminum. The Company also operates
painting and anodizing lines for structural steel and aluminum components,
respectively. Wood frame manufacturing operations include sawing and truss
fabrication. The principal materials used in the manufacture of the Company's
products include steel, aluminum, wood, and purchased parts. All materials are
presently available to the Company in sufficient quantities to meet current
needs.
Seasonal Business
Historically, the Company's sales and net earnings have been affected by
cycles in the general economy which influence nonresidential construction
markets (see in particular Item 7 of this report). In addition, the Company's
sales usually reach a peak during the summer when construction activity is
highest. Sales for the first, second, third and fourth quarters of 1994 were
$117 million, $175 million, $190 million and $210 million, respectively.
Backlog
The Company's backlog of orders believed to be firm was $237 million at
December 31, 1994 and $140 million at December 31, 1993. The Construction
Services segment, where margins are significantly lower than those associated
with product sales, accounted for $33 million of the year-end 1994 backlog and
$25 million of the year-end 1993 backlog.
Employees
At December 31, 1994 the Company employed 3,564 persons, 2,565 of whom
were non-union employees, and 999 were hourly paid employees who were members
of four unions. At December 31, 1993 the Company employed 3,064 persons. A
labor agreement with the union at the Buildings Division Galesburg, Illinois
plant will expire in 1995.
Item 2. Properties
The principal plants and physical properties of the Company consist of the
manufacturing facilities described under Item 1, and the Company's executive
offices in Kansas City. The 142,000 square foot Vistawall facility located in
Lincoln, Rhode Island which has light manufacturing and fabrication operations
is classified under "Assets held for sale". The 144,000 square foot Garland,
Texas facility previously used for the operations of Naturalite was sold in
January, 1995 and was recorded in "Investments and other assets". The proceeds
from the sale were used to retire the existing mortgage on the property.
Through a subsidiary, the Company also owns a land development venture with
property located on a 108 acre site in San Marcos, Texas. The property is
recorded in "Assets held for sale" and described in the "Real Estate
Subsidiaries" footnote on page 19 in the Company's Annual Report. All other
plants and offices described under Item 1 are utilized by the Company and are
generally suitable and adequate for the business activity conducted therein.
The Company's manufacturing facilities described under Item 1, along with
current outsourcing agreements with various fabricators, have production
capabilities sufficient to meet current and foreseeable needs.
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Except for leased facilities listed below, all of the Company's principal
plants and offices are owned:
(1) Leased space used for the Company's executive offices in Kansas City,
Missouri (104,524 sq. ft. lease expiring in the year 2001 with an option
to renew).
(2) Leased space used for the Vistawall Division plant in Terrell, Texas
(145,000 sq. ft. and 121,000 sq. ft. with leases expiring in 2006 and
1995, respectively, both containing options to renew), and fabrication
and distribution facilities in Dallas and Houston, Texas; St. Louis,
Missouri; Chicago, Illinois; Washington, D.C.; Cincinnati and
Cleveland, Ohio; Atlanta, Georgia; Tampa, Florida; and Modesto and
Hayward, California (215,000 sq. ft. leased with various expiration
dates).
Item 3. Legal Proceedings.
There are no material legal or environmental proceedings pending as of
March 9, 1995. Proceedings which are pending consist of matters normally
incident to the business conducted by the Company and taken together do not
appear to be material.
Item 4. Submissions of Matters to a Vote of Security Holders.
No matters have been submitted to a vote of stockholders since the last
annual meeting of shareholders on April 19, 1994.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Incorporated by reference to the information under "Quarterly Financial
Information (Unaudited)", "Price Range of Common Stock (Unaudited)" and
"Historical Review 1994-1990" on pages 26 and 28 of the Annual Report.
In September, 1994 the Board of Directors approved the resumption of a
regular cash dividend, at an indicated annual rate of 40 cents per share. The
initial 10 cent quarterly payment was made in October 1994. The Company has
limited restrictions on the payment of dividends based on certain debt
covenants of the Note Agreement dated June 1, 1994, between the Company and
four insurance companies (incorporated by reference to the Form 10-Q for the
quarter ended June 30, 1994, as indicated under Item 14). As of December
31, 1994 the Company had approximately $23.4 million of retained earnings
available for cash dividends.
Item 6. Selected Financial Data.
Incorporated by reference to the information under "Historical
Review 1994-1990" on page 28 of the Annual Report.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Incorporated by reference to the information under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 12 and 13 of the Annual Report.
Item 8. Financial Statements and Supplementary Data.
Incorporated by reference to the consolidated financial statements and
related notes on pages 14 through 27 of the Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information as to Directors is incorporated herein by reference to pages
3 through 5 of the Proxy Statement. The Executive Officers, their ages, their
positions and offices with the Company and their principal occupations during
the past five years are shown below:
Corporate Executive Officers
Robert H. West - age 56, Chairman of the Board and Chief Executive Officer;
Chairman of the Executive Committee and member of the Board Organization
Committee. He joined the Company in 1968, became President in 1978 and
Chairman of the Board in 1986. Mr. West is a director of Commerce Bancshares,
Inc., Santa Fe Pacific Corp., Kansas City Power & Light Company, and St. Luke's
Hospital. He is a trustee of the University of Missouri at Kansas City.
Donald H. Pratt - age 57, President; member of the Executive Committee. He
joined Butler in 1965, became Executive Vice President in 1980, and President
of the Company in 1986. Mr. Pratt is also a director of Union Bancshares,
Inc., Wichita, Kansas, and is a trustee of the Kansas City Art Institute and
Midwest Research Institute. He serves on the FFA Sponsors Advisory Board.
Richard O. Ballentine - age 58, Vice President, General Counsel, and Secretary
since 1978. He joined Butler in 1975 as Vice President - Legal.
John T. Cole - age 44, Controller since 1990. He joined Butler in 1977 and
previously was Corporate Audit Manager.
John J. Holland - age 44, Vice President - Finance since 1990. He joined
Butler in 1980 and became Vice President - Controller in 1986.
John W. Huey - age 47, Vice President - Administration since 1993 and Assistant
Secretary since 1987. He joined Butler in 1978 and was previously Assistant
General Counsel.
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Larry C. Miller - age 38, Treasurer since 1989. He joined Butler in 1980 and
became Assistant Treasurer in 1985.
Division Executive Officers
Moufid (Mike) Alossi - age 52, President, Butler World Trade since 1993. He
joined Butler in 1968 and previously was Vice President-International Sales and
Marketing.
William D. Chapman - age 52, President, International Operations since 1992.
He joined Butler in 1979 and was previously Vice President, International
Operations.
Thomas J. Hall - age 49, President, Butler Real Estate, Inc. since 1991. He
joined Butler in 1969, and was named Vice President and General Manager of
Butler Real Estate, Inc. in 1987.
Larry D. Hayes - age 56, President, Lester Building Systems Division since
1991. He joined Butler in 1975 and previously was President, Rural Systems
Division.
Richard S. Jarman - age 48, President, Buildings Division since 1986. He
joined Butler in 1974.
William L. Johnsmeyer - age 47, President Butler Construction (Bucon, Inc.)
since 1990. He joined Butler in 1982 and became President, Walker Division in
1984.
Robert J. Kronschnabel - age 59, President, Grain Systems Division since 1994.
He joined Butler in 1979 and was previously President, Naturalite/EPI in 1988
and became Vice President and General Manager, Grain Systems Division in 1991.
Nelson R. Markel - age 48, Managing Director, Butler Europe since 1991 and was
previously Marketing Manager, Buildings Division.
Ronald F. Rutledge - age 53, President Vistawall Division since 1984 when he
joined Butler.
Item 11. Executive Compensation.
Incorporated by reference to the information under "Report on Executive
Compensation", "Summary Compensation Table" and "Aggregated Option/SAR
Exercises and Fiscal Year-End Option/SAR Value Table" on pages 7 through 11 of
the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated by reference to the information under "Beneficial Ownership
Table" on pages 13 and 14 of the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
Incorporated by reference to the information under "Election of Class C
Directors" on pages 2 through 9 and "Report on Executive Compensation" in the
Proxy Statement.
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
The following documents are filed as part of this report:
(a) Financial Statements:
Consolidated Balance Sheets as of December 31, 1994 and 1993.
Consolidated Statements of Earnings and Retained Earnings - Years Ended
December 31, 1994, 1993 and 1992.
Consolidated Statements of Cash Flow - Years Ended December 31, 1994, 1993
and 1992.
Notes to Consolidated Financial Statements.
The foregoing have been incorporated by reference to the Annual Report as
indicated under Item 8.
(b) Financial Statement Schedules:
Auditors' Report on Financial Statement Schedule
IX - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
information is contained in the consolidated financial statements or notes
thereto.
(c) Exhibits:
3.1 Certificate of Incorporation (incorporated by reference to
Exhibit 3.5 to Company's Form 10-K for year ended,
December 31, 1986).
3.2 Bylaws of Butler Manufacturing Company (incorporated by reference
to Exhibit 3.7 to Company's Form 10-K for year ended
December 31, 1987).
4.1 Note Agreement between the Company and four Insurance Companies
dated as of June 1, 1994 (incorporated by reference to
Exhibit 4 of the Company's Form 10-Q for the quarter ended
June 30, 1994).
10.1 Butler Manufacturing Company Executive Deferred Compensation
Plan as amended (incorporated by reference to Exhibit 10.2 to
the Company's Form 10-K for the year ended December 31, 1989).
10.2 Butler Manufacturing Company Stock Incentive Plan for 1987, as
amended (incorporated by reference to Exhibit 10.1 to the
Company's Form 10-K for the year ended December 31, 1990).
10.3 Butler Manufacturing Company Stock Incentive Plan of 1979, as
amended (incorporated by reference to Exhibit 10.2 to the
Company's Form 10-K for the year ended December 31, 1990).
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10.4 Form of Change of Control Employment Agreements, as amended, between
the Company and each of six executive officers (incorporated by
reference to Exhibit 10.3 to the Company's Form 10-K for the year
ended December 31,1990).
10.5 Copy of Butler Manufacturing Company Supplemental Benefit
Plan as amended and restated.
10.6 Form of Butler Manufacturing Company Split Dollar Life Insurance
Agreement (Collateral Assignment Method; Bonus Arrangement) entered
into between the Company and certain executive officers.
10.7 Form of Butler Manufacturing Company Split Dollar Life Insurance
Agreement (Collateral Assignment Method; Roll Out Arrangement) entered
into between the Company and certain executive officers.
13.0 Butler Manufacturing Company 1994 Annual Report (only the information
expressly incorporated herein by reference).
22.0 Set forth below is a list as of March 9, 1995 of subsidiaries of the
Company and their respective jurisdictions of incorporation.
Subsidiaries not listed, when considered in the aggregate as a single
subsidiary, do not constitute a significant subsidiary.
Jurisdiction of
Subsidiary Incorporation
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Butler Export, Inc. Barbados
Butler Building Systems, Ltd. Scotland
Butler Bausysteme GmbH Germany
Butler Systemes de Construction SARL France
BMC Real Estate, Inc. Delaware
BUCON, Inc. Delaware
Butler Real Estate, Inc. Delaware
Butler Holdings, Inc. Delaware
Lester's of Minnesota, Inc. Minnesota
24.0 Power of Attorney to sign this Report by each director.
27.0 Financial Data Schedule
No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1994.
The calculation of the aggregate market value of the Common Stock of the
Company held by non-affiliates as reflected on the front of the cover page is
based on the assumption that non-affiliates do not include directors. Such
assumption does not reflect a belief by the Company or any director that any
director is an affiliate of the Company.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on this 8th day of
March, 1995.
BUTLER MANUFACTURING COMPANY
BY /S/ Robert H. West
---------------------------------
Robert H. West
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on the dates indicated.
/S/ Robert H. West Chairman of the Board March 8, 1995
------------------------------------------------- (Principal Executive Officer)
Robert H. West
/S/ John J. Holland Vice President-Finance March 8, 1995
------------------------------------------------- (Principal Financial Officer)
John J. Holland
/S/ John T. Cole Controller March 8, 1995
------------------------------------------------- (Principal Accounting Officer)
John T. Cole
/S/ Harold G. Bernthal March 20, 1995
By Richard O. Ballentine,
Attorney-in-fact
------------------------------------------------- Director
Harold G. Bernthal
/S/ Robert E. Cook March 20, 1995
By Richard O. Ballentine,
Attorney-in-fact
------------------------------------------------- Director
Robert E. Cook
/S/ Alan M. Hallene March 11, 1995
------------------------------------------------- Director
Alan M. Hallene
/S/ C.L. William Haw March 17, 1995
------------------------------------------------- Director
C.L. William Haw
/S/ George E. Powell, Jr. March 11, 1995
------------------------------------------------- Director
George E. Powell, Jr.
/S/ Donald H. Pratt March 10, 1995
------------------------------------------------- Director
Donald H. Pratt
/S/ Robert J. Reintjes, Sr. March 10, 1995
------------------------------------------------- Director
Robert J. Reintjes, Sr.
/S/ Judith A. Rogala March 20, 1995
By Richard O. Ballentine,
Attorney-in-fact
------------------------------------------------- Director
Judith A. Rogala
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CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Butler Manufacturing Company
We consent to the incorporation by reference in Registration Statements
Nos. 33-14464, 2-63830, 2-55753 and 2-36370 on Form S-8 and the related
Prospectus dated June 11, 1987, with Appendix dated March 7, 1995, of Butler
Manufacturing Company of our report dated February 3, 1995 which contained an
explanatory paragraph regarding the adoption of Statements of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" and No. 109, "Accounting for Income Taxes",
relating to the consolidated balance sheets of Butler Manufacturing Company and
subsidiaries as of December 31, 1994, and 1993, and the related consolidated
statements of earnings and retained earnings and cash flows and the related
schedule for each of the years in the three-year period ended December 31,
1994, which reports appear in or are incorporated by reference in the Annual
Report on Form 10-K of Butler Manufacturing Company for the fiscal year ended
December 31, 1994. We also consent to the reference to our firm under the
heading "Experts" in the Prospectus to the Registration Statements.
/S/ KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Kansas City, Missouri
March 24, 1995
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BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Financial Statement Schedules
(Form 10-K)
December 31, 1994, 1993 and 1992
(With Auditors' Report Thereon)
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INDEPENDENT AUDITORS' REPORT
The Board of Directors
Butler Manufacturing Company:
Under date of February 3, 1995, we reported on the consolidated balance sheets
of Butler Manufacturing Company and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of earnings and retained earnings
and cash flows for each of the years in the three-year period ended December
31, 1994, as contained in the 1994 Annual Report. That report included an
explanatory paragraph regarding the adoption of Statements of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" and No. 109, "Accounting for Income Taxes".
These consolidated financial statements and our report thereon are incorporated
by reference in the Annual Report on Form 10-K for the year 1994. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedule as listed in item 14. This consolidated financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this consolidated financial statement schedule based on
our audits.
In our opinion, such schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material aspects, the information set forth therein.
/S/ KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Kansas City, Missouri
February 3, 1995
S-1
17
SCHEDULE IX
BUTLER MANUFACTURING COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
(Thousands of Dollars)
Additions Deductions
------------------- --------------------------------
Balance at Charged Credited Charged off Balance
beginning to to net of at close
Description of year earnings Other earnings recoveries Other of year
------------------------------- ------------ -------- ---- --------- ----------- ---- ---------
(B) (A)
Year ended December 31, 1994:
For possible losses on accounts
receivable $1,088 $ 990 $ 10 $ 0 $ 724 $ 0 $1,364
====== ====== ====== ===== ====== ===== ======
Year ended December 31, 1993:
For possible losses on accounts
receivable $1,163 $ 767 $ 99 $ 0 $ 764 $ 177 $1,088
====== ====== ====== ===== ====== ===== ======
Year ended December 31, 1992:
For possible losses on accounts
receivable $1,436 $ 1,109 $ 58 $ 300 $ 1,099 $ 41 $1,163
====== ======== ====== ======= ======== ===== ======
(A) Includes acquisition and disposition of divisions and subsidiaries.
(B) "Credited to earnings" reflects adjustments to the original estimated
loss provision for receivables. This adjustment is due to a reassessment
of the collection status of trade receivables made during the year.
S-2
EX-10.5
2
SUPPLEMENTAL BENEFIT PLAN
1
EXHIBIT 10.5
AMENDED AND RESTATED
BUTLER MANUFACTURING COMPANY
SUPPLEMENTAL BENEFIT PLAN
This Plan, as amended and restated, entered into as of this day of
, 1994, by Butler Manufacturing Company, a corporation organized and existing
under the laws of the State of Delaware (hereinafter called the "Company").
WITNESSETH:
WHEREAS, by virtue of certain of the provisions of the Employee
Retirement Income Security Act of 1974, benefits to certain salaried employees
of the Company to be provided for under the terms of certain defined benefit
and defined contribution plans for salaried employees of the Company, which are
plans qualified under the provisions of Section 401(a) of the Internal Revenue
Code of 1954, as amended by the Internal Revenue Code of 1986 (the "Code"),
collectively referred to herein as "retirement plans", have been limited by
virtue of the application of Section 401(a)(17) or 415 of the Code; and
WHEREAS, as of December 27, 1976, the Company adopted its Supplemental
Benefit Plan as an unfunded supplemental benefit plan so as to provide said
salaried employees with the same benefits as they would have received under the
retirement plans but for the application of Section 415 of the Code; and
WHEREAS, the Company has or is entering into Split Dollar Life
Insurance Agreements with certain of its salaried employees to provide for
certain additional benefits under such Split Dollar Life Insurance Agreements,
and it is desirable to amend and restate the Supplemental Benefit Plan so as to
coordinate with said forms of Split Dollar Life Insurance Agreements and to
further provide said salaried employees with the same benefits they would have
received under the retirement plans but for the application of Section
401(a)(17) or 415 of the Code.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
A. For purposes of this Plan, the following definitions shall apply:
1. Certain Definitions. (a) The "Effective Date" of a Change
of Control shall be the first date during the "Change of Control Period" (as
defined in Section 1(b)) on which a Change of Control occurs. Anything in this
Plan to the contrary notwithstanding, if the employment of an employee with the
Company covered by this Plan is terminated prior to the date on which a Change
of Control occurs, and it is reasonably
-17-
2
demonstrated that such termination (1) was at the request of a third party who
has taken steps reasonably calculated to effect a Change of Control or (2)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Plan, the "Effective Date" shall mean the date
immediately prior to the date of such termination.
(b) The "Change of Control Period" is the period
commencing on September 19, 1990 and ending on the third anniversary of such
date; provided, however, that commencing on September 19, 1991, and on each
anniversary of such date (such date and each annual anniversary thereof is
hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended so as to terminate three years from such
Renewal Date unless at least 60 days prior to the Renewal Date the Company
shall give notice that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Plan, a
"Change of Control" shall mean:
(a) An acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); excluding, however, the following: (i) any acquisition directly
from the Company, other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself acquired
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a reorganization, merger,
consolidation or similar corporate transaction (in each case, a "Corporate
Transaction"), if pursuant to such Corporate Transaction, the conditions
described in clauses (i), (ii) and (iii) of subsection (c) of this Section 2
are satisfied; or
(b) A change in the composition of the Board such
that the individuals who, as of the date hereof, constitute the Board (the
Board as of the date hereof shall be hereinafter referred to as the
-18-
3
("Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, for purposes of this Section 2, that any
individual who becomes a member of the Board subsequent to the date hereof
whose election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of those individuals who are members
of the Board and who were also members of the Incumbent Board (or deemed to be
so pursuant to this proviso) shall be considered as though such individual were
a member of the Incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board shall not be so considered as a member of the Incumbent
Board; or
(c) The approval by the shareholders of the
Company of a Corporate Transaction or, if consummation of such Corporate
Transaction is subject, at the time of such approval by shareholders, to the
consent of any government or governmental agency, the obtaining of such consent
(either explicitly or implicitly by consummation); excluding, however, such a
Corporate Transaction, pursuant to which (i) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own, directly
or indirectly, more than 60% of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction and the
combined voting power of the outstanding voting securities of such corporation
entitled to vote generally in the election of directors, in substantially the
same proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (other than the Company,
and employee benefit plan (or related trust) of the Company or such corporation
resulting from such Corporate Transaction and any Person beneficially owning,
immediately prior to such Corporate Transaction, directly or indirectly, 20% or
more of the Outstanding Company Common Stock or Outstanding Voting Securities,
as the case may be) will beneficially own, directly or indirectly, 20% or more
of, respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined
-19-
4
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (iii) individuals
who were members of the Incumbent Board will constitute at least a majority of
the members of the board of directors of the corporation resulting from such
Corporate Transaction; or
(d) The approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company or the sale or
other disposition of all or substantially all of the assets of the Company or,
if consummation of such liquidation or dissolution or sale or other disposition
is subject, at the time of such approval by shareholders, to the consent of any
government or governmental agency, the obtaining of such consent (either
explicitly or implicitly by consummation); excluding, however, such a sale or
other disposition to a corporation, with respect to which following such sale
or other disposition, (i) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such Corporation entitled to vote
generally in the election of directors will be then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (ii) no Person (other than the Company and any employee
benefit plan (or related trust) of the company or such corporation and any
Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities, as the case may be) will
beneficially own, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (iii) individuals
who were members of the Incumbent Board will constitute at least a majority of
the members of the board of directors of such corporation.
B. This Plan incorporates herein by reference as if fully set
forth herein the terms and provisions of the Butler Manufacturing Company
retirement plans covering salaried employees of the Company, as
-20-
5
they may be amended from time to time hereafter, with the exception of any
provisions of said retirement plans which impose the limitations on benefits
provided by Section 401(a)(17) or 415 of the Code.
C. Notwithstanding the incorporation in this Plan of the
eligibility requirements of the Company's retirement plans covering salaried
employees, this Plan shall extend in its operation to those Employees of the
Company whose benefits under said retirement plans are limited (1) by virtue of
the application of Section 401(a)(17) or 415 of the Code, (2) by virtue of
salary deferrals under the Company's Executive Deferred Compensation Plan and
(3) in addition, those Employees who are granted additional benefits under this
Plan pursuant to the provisions of paragraph J.
D. The Company agrees to pay under the terms of this Plan the
amount of retirement and other benefits as provided for under the terms and
provisions of the retirement plans covering a salaried Employee also covered by
this Plan, with such retirement and other benefits calculated without the
limitations imposed under Section 401(a)(17) or 415 of the Code or as adjusted
by additional benefits provided for under the provisions of paragraph J plus
(i) an amount equal to the Employee's portion of FICA and Medicare taxes, if
any, attributable to payments under this Plan grossed up for federal, state (of
the residence of the Employee) and local income taxes applicable to the payment
of such FICA and Medicare taxes and (ii) an amount equal to the incremental
federal, state (of the residence of the Employee) and local income taxes due as
a result of payment of the benefit in a lump sum in the case of a Change of
Control or in the case of an Employee's receipt of the cash surrender value
under a Policy which is the subject of a Split Dollar Life Insurance Agreement
with the Company; provided, however:
(1) any benefits to be paid under the terms and
provisions of this Plan shall first be offset to the full extent of the accrued
benefits of an Employee or the beneficiary of the Employee under the terms of
the retirement plans covering said salaried employee or beneficiary, and
(2) (a) Further, provided, in the event such Employee
shall be a party to a Split Dollar Life Insurance Agreement with the Company,
any benefits to be paid under the terms of this Plan shall next be offset by
the Employee's share of the cash surrender value of the Policy which is the
subject to such Split Dollar Life Insurance Agreement (the "Policy"), as
follows: Such cash surrender value under the Policy shall be converted to a
monthly amount using the actuarial equivalent of such
-21-
6
accrued benefits (calculated using the actuarial assumptions for lump sum
benefits utilized in the Company's Base Retirement Plan for Salaried Employees
(or any successor plan thereto) (the "Policy Monthly Amount"). The Company's
monthly obligation under this Plan after application of subparagraph D(1) (the
"Monthly Obligation") shall be offset by the Policy Monthly Amount.
(b) Any additional benefit due the Employee after the
offset described in subparagraph D(2)(a) shall be paid to the Employee as
follows: (i) if the Employee's termination of employment is on account of
retirement under the Company's Base Retirement Plan, the balance shall be paid
in monthly installments equal to the Company's Monthly Obligation plus
interest, at the interest rate used in the actuarial assumptions specified in
subparagraph D(2)(a), on the unpaid balance until such balance due is paid;
provided, however, in the event of (A) the total cessation of the business of
the Company, (B) the bankruptcy, receivership or dissolution of the Company or
(C) a Change of Control, the present value of the balance of such installments
shall be paid in a Lump Sum within fifteen days of any such event. or (ii) if
the Employee's employment is terminated due to (A) the total cessation of the
business of the Company, (B) the bankruptcy, receivership or dissolution of the
Company or (C) a Change of Control, the balance shall be paid in a Lump Sum
within fifteen days of any such event.
(c) In the event of the Employee's death prior to
retirement, the portion of the Policy death benefit paid to the Employee's
Second Death Benefit beneficiary, as defined in such Agreement, shall offset
the liability of the Company to the beneficiary under the terms of this Plan,
as provided in subparagraphs (2)(a) and (b) of this paragraph D, substituting,
however, the term "death benefit" for "cash surrender value" in such
subparagraphs for this purpose. The benefits provided for under this Plan and
the offsets provided for under subparagraphs (1) and (2) of this paragraph are
illustrated on Schedules A(1) and (2), whichever is applicable in the case of
an Employee, attached hereto and incorporated by reference. The benefits
provided under this Plan shall be determined and reported to the Company and
the Employee (or the Employee's SBP beneficiary) by the individual actuary or
firm of actuaries which serves as the actuary for the Company's Base Retirement
Plan using the actuarial assumptions for the Base Retirement Plan in effect as
of the first day of the year in which the event occurs which requires a
determination of benefits under this Plan and within thirty days next following
the occurrence of such event. In the event
-22-
7
that such actuary shall fail to make such determination or to make such written
report within such thirty day period, the Employee (or the Employee's SPB
beneficiary) may engage an independent actuary to make such determination and
report at the expense of the Company which agrees to fully cooperate with such
actuary and disclose to such actuary such information as such actuary may
reasonably require to make such determination and report. The term "SPB
beneficiary" shall mean and refer to the Employee's spouse.
E. Notwithstanding the provisions of paragraph D of this Plan,
none of the benefits to be provided to an Employee under this Plan shall be
vested in such Employee until such Employee shall be vested under the Company's
retirement plans covering said Employee.
F. No Employee or any SBP beneficiary of an Employee shall have
any right to commute, sell, assign, transfer, or otherwise convey the right to
receive any payments hereunder, which payments and the right thereto are
expressly declared to be nonassignable and nontransferable, and any such
attempted assignment or transfer shall be void.
G. This Plan shall be binding upon the Company, all Employees and
beneficiaries under this Plan of Employees, and their heirs, executors,
administrators or successors. No Employee or any beneficiary of an Employee
shall have any right to any payments under the terms of this Plan, unless such
Employee or beneficiary of an Employee shall have a right to receive benefits
under the terms of the Company's retirement plans covering such Employee or
beneficiary.
H. This Plan may be amended or terminated at any time or times,
in whole or in part, at the discretion of the Company; provided, however, with
respect to an Employee who has a Change of Control Employment Agreement with
the Company as of the Effective Date of the Change of Control, this Plan may
not be amended or revoked with respect to such Employee. In the event of any
such amendment or termination, an Employee's benefits under this Plan accrued
to the date of such amendment or termination may not be lessened or diminished
by any such amendment or the termination of this Plan.
I. Anything in this Plan to the contrary notwithstanding, upon a
Change of Control, all accrued benefits of each Employee under this Plan shall
become fully vested and the actuarial equivalent of such accrued benefits
(calculated using the actuarial assumptions for lump sum benefits utilized
immediately prior to the Change of Control in the Company's Base Retirement
Plan for Salaried Employees (or any successor plan thereto)) shall be
determined and paid to the Employee in a lump-
-23-
8
sum cash amount within 15 days following the occurrence of the Change of
Control; provided, however if the Employee shall be a party to a Split Dollar
Life Insurance Agreement with the Company, in lieu of the calculation described
in subparagraph D(2)(a), such lump sum cash amount shall be offset by the
Employee's share of the cash surrender value paid to such Employee from the
Policy.
J. The Company reserves the right to provide for additional
benefits under the terms of this Plan for any salaried employee as may be
designated by the Board of Directors of the Company or its designated Committee
(the "Committee") with respect to such Employee which may include, but not be
limited to, granting additional years of service credit under the provisions of
any retirement plan, including granting additional years of service credit so
that such an employee may qualify for the Special Early Pension described in
Section 4.2(b) of the Company's Base Retirement Plan, any such additional
benefits to be as provided in an Addendum to this Plan signed on behalf of the
Company.
K. The Company is hereby designated as the named fiduciary under
this Plan. The named fiduciary shall have authority to control and manage the
operation and administration of this Agreement, and it shall be responsible for
establishing and carrying out a funding policy and method consistent with the
objectives of this Agreement. Any decision by the Company denying a claim by
the employee or the employee's beneficiary for benefits under this Plan shall
be stated in writing and delivered or mailed to the employee or such
beneficiary, within thirty days of the date of written notice of such claim.
Such decision shall set forth the specific reasons for the denial, written to
the best of the Company's ability in a manner that may be understood without
legal or actuarial counsel. In addition, the Company shall afford a reasonable
opportunity to the employee or such beneficiary for a full and fair review of
the decision denying such claim, and such review shall require a written
decision setting forth the specific reasons for the action on the appeal, which
must be rendered within sixty days after written notice to the Company of such
appeal. If no written decision is rendered within such sixty day time period,
the appeal shall be deemed denied.
L. In the event of a dispute or controversy arising out of or
relating to this Plan which has not been resolved pursuant to the provisions of
paragraph K, any such dispute, controversy or alleged breach of this Plan shall
be finally settled by binding arbitration. The arbitration shall be held in
Kansas City, Missouri, and shall be
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9
conducted in accordance with the rules of the American Arbitration Association.
The arbitrator selected must be knowledgeable and competent to resolve disputes
in matters concerning employee benefits, such as those which are the subject of
this Plan. The arbitration award shall grant any remedy or relief legally
available. Such arbitration shall proceed expeditiously and the award rendered
shall be final and binding, and judgment upon the award may be entered in any
court having appropriate jurisdiction. The Company and the employee expressly
waive the jurisdiction of any other forum or domicile other than those agreed
to herein for the resolution of any dispute arising out of or related to this
Plan. Either party may institute a demand for arbitration in accordance with
the provisions of this paragraph at any time after the period for appeal
described in paragraph K, upon thirty days' prior written notice given to the
other party. The prevailing party in any such arbitration shall be entitled to
an award of costs and reasonable attorneys' fees in addition to any other
relief or award granted.
This Plan is amended and restated as of the day and year first above
written.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
BUTLER MANUFACTURING COMPANY
By:__________________________________________
Title:_________________________________________
ATTEST:____________________________________________
Secretary
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10
SCHEDULE A(1)
SBP BENEFIT EXAMPLES
BONUS ARRANGEMENT
The following examples are provided to illustrate how the Supplemental Benefit
Plan ("SBP") operates. The examples are specifically designed to show how the
Split Dollar offset operates given a Bonus arrangement, as described in
Paragraph (D) of the Plan.
Assumptions:
Age at Retirement 60 years (both husband and wife)
Service 30 years
FAMC $35,600 ("Final Average Monthly Compensation")
Life Expectancy 193 months (using the Plans' mortality tables)
Personal Tax Rate 42% (Federal, State, and Local)
PBGC Int. Rate 6.0% (immediate annuity interest rate for converting
the ESOP lump-sum, as well as the cash surrender value
of the monthly insurance benefit)
Survivor Annuity 50% Joint and Survivor
ESOP Balance $526,000 (at date of retirement, market value)
Cash Surrender
Value of Insurance $900,000
Note that the Final Average Monthly Compensation amount has been set at a high
level to facilitate the examples.
The Supplemental Benefit Plan's benefit formula is the same as the Company's
Base Plan formula. The difference in the calculation of the benefit is the
amount of compensation. The Supplemental Plan ignores the compensation
limitations of the tax code that apply to qualified benefit plans. Given the
assumptions above, the Supplemental Benefit Plan Benefit is calculated as
follows:
Gross benefit due to employee, no earnings restrictions $16,500/mo.
Benefit allowed from Qualified Plans
($4,300 ESOP, $1,300 Base Plan) 5,600/mo.
-----
Difference: Supplemental Benefit Plan Benefit $10,900/mo.
For purposes of these illustrations, the cash surrender value of the life
insurance policy is given as $900,000. This amount is converted into a monthly
benefit to determine the value of its offset. Given the assumptions above,
($900,000 cash surrender value, 6.0% interest rate, 193 monthly payments), the
monthly offset benefit of the insurance policy is approximately $7,250 per
month. This leaves a benefit due from the SBP, in cash, of $3,650 per month.
To enhance the security of the employee under the Supplemental Benefit Plan,
the Company will pay out this $3,650 benefit at the $10,900 per month rate
until the present value of the $3,650 per month benefit is paid. To determine
the number of payments this represents, the $3,650 per month benefit due for
193 months is first converted into a present value amount, then amortized at
$10,900 per month. Using the assumptions above, the conversion yields a
present value of $453,000. Amortizing this amount at $10,900 per month yields
approximately 46 monthly payments.
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11
SCHEDULE A
SBP BENEFIT EXAMPLES - BONUS ARRANGEMENT
PAGE 2
The next illustration below illustrates the benefit due a surviving spouse, and
how the Split Dollar Insurance Policy is designed to react in the event that an
employee dies prior to retirement. The Plan, by law, assumes the deceased
employee selected a 50% joint and survivor (J & S) benefit. Given the ages in
this example, and applying the 50% joint and survivor factor, the surviving
spouse benefit would be approximately 45% of the employee's life-only benefit.
Thus:
Gross benefit due to employee, no earnings restrictions $16,500/mo.
Benefit from ESOP: 4,300/mo.
------
Difference: $12,200/mo.
Apply the 50% J & S Factor *.45
------
Amount due from Supplemental Benefit Pension Plan $ 5,500/mo.
Amount payable from Pension Plan ($1,300*.45) $ 600/mo.
------
Difference: Supplemental Benefit Plan Benefit $ 4,900/mo.
Convert the SBP amount to lump-sum benefit, after tax:
(6.0% interest rate, $4,900/mo., 193 months, 42% tax rate): $353,000
--------
In this case, the Supplemental Benefit Plan Benefit would be a lump-sum benefit
to the surviving spouse of $353,000 under the Split Dollar Life Insurance
Agreement. This would be paid directly by the insurance company and would be
an offset to the liability of the Supplemental Benefit Plan. As the proceeds
from an insurance policy death benefit are assumed to be tax free, the proceeds
have been reduced by a 42% tax rate to equal the aftertax benefit due. The
remaining death benefit would revert back to the Company.
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12
SCHEDULE A(2)
SBP BENEFIT EXAMPLES
ROLL OUT ARRANGEMENT
The following examples are provided to illustrate how the Supplemental Benefit
Plan ("SBP") operates. The examples are specifically designed to show how the
Split Dollar offset operates given a Roll Out arrangement, as defined and
described in Paragraph (D) of the Plan.
Assumptions:
Age at Retirement 63 years (both husband and wife)
Service 30 years
FAMC $25,725 ("Final Average Monthly Compensation")
Life Expectancy 178 months (using the Plans' mortality tables)
Personal Tax Rate 42% (Federal, State, and Local)
PBGC Int. Rate 6.0% (immediate annuity interest rate to convert the
ESOP lump-sum, as well as the cash surrender value of
the monthly insurance benefit)
Survivor Annuity 50% Joint and Survivor
ESOP Balance $627,000 (at date of retirement, market value)
Premiums Paid $300,000 (By Employer, and amount owed from policy to Employer)
The Supplemental Benefit Plan's benefit formula is the same as the Company's
Base Plan formula. The difference in the calculation of the benefit is the
amount of compensation. The Supplemental Plan ignores the compensation
limitations of the tax code that apply to qualified benefit plans. Given the
assumptions above, the Supplemental Benefit Plan Benefit is calculated as
follows:
Gross benefit due to Employee, no earnings restrictions $12,000/mo.
Benefit allowed from Qualified Plans
($5,300 ESOP, $3,700 Base Plan) 9,000/mo.
-----
Difference: Supplemental Benefit Plan Benefit $ 3,000/mo.
The benefit due in a Roll Out scenario is tax effected because of the tax free
nature of the distributions from the policy (i.e., policy loans). Therefore,
the Supplemental Benefit Plan Benefit of $3,000 (above) is adjusted to
recognize this. Given the Personal Tax Rate (above) of 42%, the $3,000 benefit
becomes $1,740.
FIRST ILLUSTRATION: CASH SURRENDER VALUE NOT TAXED
For purposes of the first illustration, the cash surrender value of the life
insurance policy is assumed to be $530,000. At retirement, the employer is
expecting to receive the $300,000 in premiums paid. Nevertheless, the security
of the participant is paramount, thus calculations are necessary to determine
how much of the policy's cash surrender value the employer will receive. The
first calculation determines the lump sum necessary to satisfy the liability of
the Supplemental Benefit Plan Benefit ("SBPB"). Given the assumptions above,
($1,740 SBPB , 6.0% interest rate, 178 monthly payments), the lump sum is
approximately $206,000. Thus, the policy would be split such that the Employee
receives $206,000 of cash surrender value. The employer would receive the
remaining $324,000.
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13
SCHEDULE A PAGE 2
SBP BENEFIT EXAMPLES - ROLL OUT ARRANGEMENT
SECOND ILLUSTRATION: CASH SURRENDER VALUE PARTIALLY TAXED
For purposes of the second illustration, all assumptions are the same as in the
first illustration, except that the cash surrender value of the life insurance
policy is assumed to be $490,000. The Employee is owed a lump sum of $206,000,
but the Employer cannot cede to the Employee more than $190,000 ($490,000 Cash
Surrender Value less $300,000 premiums paid) without creating a taxable event.
This $190,000 is defined as the "Gain Amount" for purposes of this
illustration.
Again, as the Employee's security is paramount, the Employee will receive as
much of the Cash Surrender Value of the policy as is available to provide the
benefit. To accommodate this mandate, the Company gives up its right to
receive that portion of the premiums paid to make the Employee whole. Given
that whatever amount of premiums ceded to the Employee is immediate taxable
income to the Employee, the amount ceded must be tax affected. The calculation
is elementary; the difference between the amount owed and the amount of the
premiums ceded is 'grossed up' for the effect of taxes. That amount is added
to the $190,000 Gain Amount to arrive at the amount of Cash Surrender Value
that is split for the Employee. The calculation follows:
Amount of Supplemental Benefit Plan Benefit $206,000
Gain Amount 190,000
-------
Difference $ 16,000
-------
Adjusted for taxes (divided by .58) $ 27,600
Add Back Gain Amount 190,000
-------
Cash Surrender Value Split for Employee $217,600
-------
The Employee would pay immediate taxes on $27,600, and the employer would
receive a tax deduction. Assuming the 42% Employee tax rate, the net to the
Employee is $217,600.
THIRD ILLUSTRATION: DEATH BENEFIT EXAMPLE
The third illustration below depicts the benefit due a surviving spouse, and
how the Split Dollar Insurance Policy is designed to react in the event that an
employee dies prior to retirement. The Plan, by law, assumes the deceased
employee selected a 50% joint and survivor (J & S) benefit. Given the ages in
this example, and applying the 50% joint and survivor factor, it is assumed the
surviving spouse benefit would be approximately 45% of the employee's life-only
benefit. Thus:
Gross benefit due to employee, no earnings restrictions $12,000/mo.
Benefit from ESOP: 5,300/mo.
------
Difference: $ 6,700/mo.
Apply the 50% J & S Factor *.45
------
Amount due from Supplemental Benefit Pension Plan $ 3,015/mo.
Amount payable from Pension Plan ($3,015*.45) $ 1,355/mo.
------
Difference: Supplemental Benefit Plan Benefit $ 1,660/mo.
Remembering that the benefit due in a Roll Out scenario is tax effected because
of the tax free nature of the distributions from the policy, the Supplemental
Benefit Plan Benefit of $1,660 (above) is adjusted to recognize this. Given
the Personal Tax Rate (above) of 42%, the benefit is $963. Given the
assumptions, ($963 SBPB, 6.0% interest rate, 178 monthly payments), the lump
sum is approximately $114,000. Thus, the policy would be split such that the
Employee receives the first $114,000
-29-
14
SCHEDULE A PAGE 3
SBP BENEFIT EXAMPLES - ROLL OUT ARRANGEMENT
of the Death Benefit. The employer would receive the remaining Death Benefit.
-30-
EX-10.6
3
SPLIT DOLLAR LIFE INS AGREEMT/BONUS
1
EXHIBIT 10.6
SPLIT DOLLAR LIFE INSURANCE AGREEMENT
(Collateral Assignment Method)
(Bonus Arrangement)
THIS AGREEMENT, made and entered into as of this _____ day of
_________________, 1994, by and between BUTLER MANUFACTURING COMPANY, a
Delaware corporation (hereinafter referred to as the "Corporation"),
and___________________(hereinafter referred to as the "Employee),
WITNESSETH:
WHEREAS, the Employee is employed by the Corporation;
WHEREAS, the Employee wishes to provide life insurance protection for
the Employee's family in the event of the Employee's death, under a policy of
life insurance insuring the Employee's life (hereinafter referred to as the
"Policy"), which is described in Exhibit A attached hereto and by this
reference made a part hereof, and which is being issued by Northwestern Mutual
Life Insurance Company (hereinafter referred to as the "Insurer");
WHEREAS, the Employee will be the owner of the Policy and, as such,
will possess all incidents of ownership in and to the Policy; and
WHEREAS, the Employee is or may be covered under the Corporation's
Supplemental Benefit Plan (the "SBP") first implemented by the Corporation in
1976, as amended from time to time thereafter;
WHEREAS, the Corporation is willing to pay the premiums due on the
Policy as an additional employment benefit for the Employee, on the terms and
conditions hereinafter set forth; provided that a portion of the cash value of
the Policy shall be an offset toward the Corporation's obligations under the
SBP;
NOW, THEREFORE, in consideration of these premises and of the mutual
promises contained herein, the parties hereto agree as follows:
Insurance Policy. The Employee will contemporaneously herewith
purchase the Policy from the Insurer in the total face amount of
$_____________. The parties hereto agree that they will take all necessary
action to cause the Insurer to issue the Policy, and shall take any further
action which may be necessary to cause the Policy to conform to the provisions
of this Agreement. The parties hereto agree that the Policy shall be subject
to the terms and conditions of this Agreement and of the Collateral Assignment,
attached hereto as Exhibit B and incorporated herein by reference and filed
with the Insurer relating to the Policy.
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2
Policy Ownership. The Employee shall be the sole and
absolute owner of the Policy, and may exercise all ownership rights granted to
the owner thereof by the terms of the Policy, except as may otherwise be
provided herein.
Policy Dividends. Any dividend declared on the Policy
shall be applied to purchase additional paid-up insurance on the life of the
Employee. The parties hereto agree that the dividend election provisions of
the Policy shall conform to the provisions hereof.
Premium Payments. On or before the due date of each
Policy premium, or within the grace period provided therein, the Corporation
shall pay the full amount of the premium to the Insurer, and shall not later
than fourteen days prior to the end of said grace period furnish the Employee
written evidence of timely payment of such premium. The Corporation further
will cause the Insurer to give the Employee notice of the Insurer's receipt of
each such premium payment. The Corporation shall, on or prior to March 1 each
year, furnish the Employee a statement of the amount of income reportable by
the Employee for federal, state and local income tax purposes, as a result of
its payment of such premium.
Collateral Assignment. Merely for the purpose of securing
certain specific rights of the Corporation in the Policy to the extent provided
in this Agreement, the Employee has contemporaneously herewith executed a
Collateral Assignment form relating to the Policy, substantially in the form of
Exhibit B. Except as provided herein and provided the Corporation has met its
obligations under the terms of this Agreement, the collateral assignment will
not be terminated, altered or amended without the consent of the Corporation.
The parties hereto agree to take all action necessary to cause such collateral
assignment to conform to the provisions of this Agreement.
Policy Rights.
Except as otherwise provided herein, the Employee may
sell, assign, transfer, borrow against, surrender or cancel the Policy, change
the beneficiary designation provision thereof, or terminate the dividend
election thereof, in any such case, only with the express written consent of
the Corporation provided that the Corporation has met its obligations under the
terms of this Agreement.
The Employee shall have the right, without the
Corporation's consent, to absolutely and irrevocably give to a donee all of the
Employee's right, title and interest in and to the Policy, subject only to the
rights of the Corporation under said collateral
-32-
3
assignment of the Policy; provided, however, the Employee's spouse must consent
to a gift of the death benefit described in paragraph 7c in an instrument in
writing delivered to the Corporation and Insurer for such gift to be effective.
The Employee may exercise this right by executing a written transfer of
ownership in the form prescribed by the Insurer for irrevocable gifts of
insurance policies, and delivering this form to the Corporation. Upon receipt
of such form, executed by the Employee and duly accepted by the donee thereof,
the Corporation and the Insurer shall thereafter treat the Employee's donee as
the sole owner of all of the Employee's right, title and interest in and to the
Policy, subject only to this Agreement and the collateral assignment of the
Policy.
Death Proceeds.
Upon the death of the Employee prior to the
Employee's termination of employment, the parties shall promptly take all
action necessary to obtain the death benefit provided under the Policy.
The death benefit shall be paid by the Insurer, in separate checks, to
the following parties, in the following order and in the amounts indicated:
First, the Employee's First Death Benefit beneficiary
shall have the unqualified right to receive a portion of the death benefit
equal to three (3) times the average of the Employee's annual total
compensation for the five calendar years next preceding the year in which the
death of the Employee occurs, or, if the total death benefit is less than said
amount, then the entire death benefit. For this purpose the term
"compensation" means all remuneration paid to the Employee directly (i) for the
performance of duties with respect to each such calendar year, including salary
deferral contributions to (a) the Corporation's Employees' Savings Trust, (b)
any plan described in Section 125 of the Internal Revenue Code of 1986 (or any
successor thereto) and (c) the Corporation's Executive Deferred Compensation
Plan, (2) for reasons such as vacation, sickness, disability any any similar
period of nonworking time for which payment is made directly by the Corporation
other than for the performance of duties and (3) including unpaid bonuses for
such calendar year even though such bonuses may be actually determined by the
Corporation in a subsequent calendar year and paid in such subsequent calendar
year. The phrase "First Death Benefit beneficiary" shall mean and refer to the
beneficiary designated under the Policy with respect to the benefit described
in this subparagraph.
c. Second, the Insurer will issue an additional check to the
Employee's beneficiary under the Supplemental Benefit Plan, or, if the
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4
Employee has given his right, title and interest in and to the Policy, pursuant
to paragraph 6b, to such donee ("Second Death Benefit beneficiary") for an
amount equal to the Corporation's obligation, as certified in writing to the
Insurer by the actuary under the SBP or, if the balance of the death benefit is
less than said amount, then the balance of the death benefit.
d. Third and last, the balance of any death benefit payable under
the Policy shall be paid to the Corporation.
The parties agree that the beneficiary designation provision of the
Policy shall conform to the provisions hereof.
Termination and Amendment.
This Agreement shall terminate during the life of the
Employee upon the occurrence of any of the following events: (a) the total
cessation of the business of the Corporation; (b) the bankruptcy, receivership
or dissolution of the Corporation; (c) a Change of Control as defined in
paragraph 11 of this Agreement; (d) the termination of Employee's employment;
or (e) the Employee's retirement under the Corporation's qualified plan known
as the Base Retirement Plan. In the event of the occurrence of the events
described in subparagraphs (a), (b) and (c) of this paragraph, the collateral
assignment of the Policy shall also terminate and the Corporation shall have no
further rights with respect to the Policy. In the event of the occurrence of
the events described in subparagraphs (d) or (e) of this paragraph, the parties
shall have the rights in the Policy described in paragraph 9 of this Agreement.
The Corporation may amend this Agreement at any time with the
Employee's written consent thereto. In addition the Corporation, upon
ten days' prior written notice to the Employee, may terminate this Agreement.
In the event of such termination of this Agreement, the collateral assignment
of the Policy shall also terminate and the Corporation shall have no further
rights with respect to the Policy. Any such termination or amendment shall be
effective as of the date specified in such notice, in the case of termination
of this Agreement, and as provided in the Employee's written consent in the
case of any amendment. No amendment nor termination of this Agreement shall
affect the Employee's right to any benefits accrued at the time of such
amendment or termination. This Agreement may not be amended, altered, modified
or terminated except as provided in this Section 8.
-34-
5
Release of Collateral Assignment.
In the event that this Agreement terminates during the life of
the Employee due to either of the events described in subparagraphs (d) or (e)
of paragraph 8a., if at such time the cash surrender value of the Policy
exceeds the amount of the Corporation's obligations to the Employee under the
SBP, after the offset of the accrued benefit under the terms of the
Corporation's retirement plans covering said Employee or beneficiary (the "SBP
Benefit"), such excess shall become the property of the Corporation. In the
event that such excess shall become the property of the Corporation, the
collateral assignment shall thereupon terminate.
If at such time the cash surrender value of the Policy does not exceed
the amount of the Corporation's obligations to the Employee under the SBP,
after the offset of the accrued benefit under the terms of the Corporation's
retirement plans covering said Employee or beneficiary (the "SBP Benefit"), the
collateral assignment shall thereupon terminate; provided, however, if the
release or termination of the collateral assignment would cause the Employee to
recognize taxable income in an amount which would not be deductible by the
Corporation because of the application of Section 162(m) of the Internal
Revenue Code of 1986 (or any successor thereto) [the "Code"], such collateral
assignment shall not be automatically released or terminated in its entirety,
but shall be released or terminated partially in a subsequent year or years so
that such taxable amount will not be barred from deductibility by the
Corporation under said Section 162(m); further, provided, such collateral
assignment shall be released or terminated in its entirety in the event that
the Corporation's independent firm of auditors determines that such amount will
be permanently barred from deductibility by virtue of said Section 162(m) or
any other provision of the Code.
The amount of the SBP Benefit shall be certified in writing to the
Insurer by the actuary under the SBP, at the expense of the Corporation.
Illustrations of the operations of paragraphs 7 and 9 of this
Agreement are set out on Schedule C attached hereto and incorporated herein by
reference.
Failure to Pay Premiums. If the Corporation fails to pay any
Policy premium when due as required under this Agreement, and fails to pay such
premium within the grace period of the Policy, the collateral assignment shall
automatically terminate, and the Corporation shall not be entitled to any
payments hereunder and shall have no further rights
-35-
6
in the Policy.
Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean:
(a) An acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of
common stock of the Corporation (the "Outstanding Corporation Common Stock") or
(ii) the combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors (the
"Outstanding Corporation Voting Securities"); excluding, however, the
following: (i) any acquisition directly from the Corporation, other than an
acquisition by virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the Corporation,
(ii) any acquisition by the Corporation, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Corporation or
any corporation controlled by the Corporation or (iv) any acquisition by any
corporation pursuant to a reorganization, merger, consolidation or similar
corporate transaction (in each case, a "Corporate Transaction"), if pursuant to
such Corporate Transaction, the conditions described in clauses (i), (ii) and
(iii) of subsection (c) of this Section 11 are satisfied; or
(b) A change in the composition of the Board such
that the individuals who, as of the date of this Agreement, constitute the
Board (the Board as of the date hereof shall be hereinafter referred to as the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, for purposes of this Section 11, that any
individual who becomes a member of the Board subsequent to the date hereof
whose election, or nomination for election by the Corporation's shareholders,
was approved by a vote of at least a majority of those individuals who are
members of the Board and who were also members of the Incumbent Board (or
deemed to be so pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; but, provided further, that
any such individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf
-36-
7
of a Person other than the Board shall not be so considered as a member of the
Incumbent Board; or
(c) The approval by the shareholders of the
Corporation of a Corporate Transaction or, if consummation of such Corporate
Transaction is subject, at the time of such approval by shareholders, to the
consent of any government or governmental agency, the obtaining of such consent
(either explicitly or implicitly by consummation); excluding, however, such a
Corporate Transaction, pursuant to which (i) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the
Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities immediately prior to such Corporate Transaction will beneficially
own, directly or indirectly, more than 60% of, respectively, the outstanding
shares of common stock of the Corporation resulting from such Corporate
Transaction and the combined voting power of the outstanding voting securities
of such corporation entitled to vote generally in the election of directors, in
substantially the same proportions as their ownership, immediately prior to
such Corporate Transaction, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be, (ii) no Person
(other than the Corporation, and employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such Corporate Transaction
and any Person beneficially owning, immediately prior to such Corporate
Transaction, directly or indirectly, 20% or more of the Outstanding Corporation
Common Stock or Outstanding voting Securities, as the case may be) will
beneficially own, directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the Corporation resulting from such
Corporate Transaction or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors and (iii) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of the board of
directors of the Corporation resulting from such Corporate Transaction; or
(d) The approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the Corporation or the
sale or other disposition of all or substantially all of the assets of the
Corporation or, if consummation of such liquidation or dissolution or sale or
other disposition is subject, at the time of such approval by shareholders, to
the consent of any government or governmental agency, the obtaining of such
consent (either explicitly or implicitly by
-37-
8
consummation); excluding, however, such a sale or other disposition to a
corporation, with respect to which following such sale or other disposition,
(i) more than 60% of, respectively, the then outstanding shares of common stock
of such corporation entitled to vote generally in the election of directors
will be then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting Securities, as the
case may be, (ii) no Person (other than the Corporation and any employee
benefit plan (or related trust) of the Corporation or such corporation and any
Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities, as the case may be)
will beneficially own, directly or indirectly, 20% or more of, respectively,
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and (iii)
individuals who were members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of such corporation.
(e) Anything in this Agreement to the contrary
notwithstanding, upon a Change of Control, the collateral assignment of the
Policy shall terminate and the Corporation shall have no further rights with
respect to the Policy.
Insurer. The Insurer shall be fully discharged from its obligations
under the Policy by payment of the Policy death benefit as provided in
paragraph 7 of this Agreement or as provided in paragraph 9 of this Agreement,
as the case may be. No provision of this Agreement, nor of any modification
or amendment hereof, shall in any way be construed as enlarging, changing,
varying, or in any other way affecting the obligations of the Insurer
as expressly provided in the Policy, except insofar as the provisions hereof
are made a part of the Policy by the collateral assignment executed by the
Employee and filed with the Insurer.
-38-
9
Administration.
The Corporation is hereby designated as the named
fiduciary under this Agreement. The named fiduciary shall have authority to
control and manage the operation and administration of this Agreement, and it
shall be responsible for establishing and carrying out a funding policy and
method consistent with the objectives of this Agreement.
Any decision by the Corporation denying a claim by the
Employee or the Employee's beneficiary for benefits under this Agreement shall
be stated in writing and delivered or mailed to the Employee or such
beneficiary, within thirty days of the date of written notice of such claim.
Such decision shall set forth the specific reasons for the denial, written to
the best of the Corporation's ability in a manner that may be understood
without legal or actuarial counsel. In addition, the Corporation shall afford
a reasonable opportunity to the Employee or such beneficiary for a full and
fair review and appeal of the decision denying such claim, and such review
shall require a written decision setting forth the specific reasons for the
action on the appeal, which must be rendered within sixty days after written
notice to the Corporation of such appeal. If no written decision is rendered
within such sixty day time period, the appeal shall be deemed denied.
Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of the Corporation and its successors and assigns, and the
Employee, the Employee's successors, assigns, heirs, executors, administrators
and beneficiaries.
Notice. Any notice, consent or demand required or permitted
to be given under the provisions of this Agreement shall be in writing, and
shall be signed by the party giving or making the same. If such notice,
consent or demand is mailed to a party hereto, it shall be sent by United
States certified mail, postage prepaid, addressed to such party's last known
address as shown on the records of the Corporation. The date of receipt of
such mailing shall be deemed the date of notice, consent or demand.
Governing Law. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance with the laws of
the State of Missouri.
17. Damages For Breach. In the event of a breach of this Agreement
by the Corporation, the Corporation shall be liable to the Employee for all
damages related to such breach (and Employee shall not be required to mitigate
any such damages) and all of Employee's
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10
reasonable attorneys' fees and costs relating to the assertion of such breach
whether or not requiring any court proceeding.
18. Arbitration. In the event of a dispute or controversy arising
out of or relating to this Agreement which has not been resolved pursuant to
the provisions of paragraph 13, any such dispute, controversy or alleged breach
of this Agreement shall be finally settled by binding arbitration. The
arbitration shall be held in Kansas City, Missouri, and shall be conducted in
accordance with the rules of the American Arbitration Association. The
arbitrator selected must be knowledgeable and competent to resolves disputes in
manners concerning employee benefits, such as those which are the subject of
this Agreement. The arbitration award shall grant any remedy or relief legally
available. Such arbitration shall proceed expeditiously and the award rendered
shall be final and binding, and judgment upon the award may be entered in any
court having appropriate jurisdiction. The Corporation and the Employee
expressly waive the jurisdiction of any other forum or domicile other than
those agreed to herein for the resolution of any dispute arising out of or
related to this Agreement. Either party may institute a demand for arbitration
in accordance with the provisions of this paragraph at any time after the
period for appeal described in paragraph 13, upon thirty days' prior written
notice given to the other party. The prevailing party in any such arbitration
shall be entitled to an award of costs and reasonably attorneys' fees in
addition to any other relief or award granted.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
in duplicate, as of the day and year first above written. THIS CONTRACT
CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
BUTLER MANUFACTURING COMPANY
By _______________________________________
Print Name:
Print Name:
Print Title:
"Employee"
"Corporation"
-40-
11
EXHIBIT A
The following life insurance policy is subject to the attached
Split-Dollar Agreement:
Insurer: Northwestern Mutual Life Insurance Company
Insured: _________________________________________________________
Policy Number: ____________________________________________________
Face Amount: $_____________________________________________________
Date of Issue: ____________________________________________________
-41-
12
EXHIBIT B
COLLATERAL ASSIGNMENT
___________________________________________________ (the "Employee") and Butler
Manufacturing Company, a Delaware corporation (the "Corporation" or "Assignee")
are the parties to that certain Split Dollar Life Insurance Agreement dated as
of ______________________, 199___ ("Split Dollar Agreement"), and this
Assignment is executed merely to secure the Corporation's specific rights as
set forth in the Split Dollar Agreement.
FOR VALUE RECEIVED, the Employee hereby assigns, transfers and sets
over to the Corporation, certain rights in and to Policy No.__________
issued by the Northwestern Mutual Life Insurance Company (herein
called the "Insurer"), and any supplementary contracts issued in
connection therewith (said policy and contracts being herein called
the "Policy"), upon the life of the Employee, solely for the purpose
of securing the Corporation's specific rights as set forth in the
Split Dollar Agreement, subject to all the terms and conditions of the
Policy and to all superior liens, if any, which the Insurer may have
against the Policy.
The following specific rights are included in this Assignment and pass
by virtue hereof, provided that the Corporation shall exercise such
rights only to the extent necessary in enforcing its specific rights
under the Split Dollar Agreement:
Solely as provided in paragraph 7 of the Split Dollar
Agreement, the right to collect a portion of the death benefit
under the Policy from the Insurer upon the Employee's death
prior to such Employee's termination of employment.
Solely as provided in paragraph 9 of the Split Dollar
Agreement, the right to receive a portion of the cash
surrender value of the Policy.
It is expressly agreed that all other rights are reserved by the
Employee and excluded from this Assignment and do not pass by virtue
hereof, including but not limited to:
The right of the Employee's beneficiary to collect
such beneficiary's portion of the death benefit under the
Policy from the Insurer upon the Employee's death as provided
in the Split Dollar Agreement.
The right to receive a portion of the cash surrender
value of the Policy as provided in the Split Dollar Agreement
in the event the Split Dollar Agreement terminates during the
life of the Employee.
The right to collect from the Insurer any disability
benefit payable in cash that does not reduce the amount of
insurance;
The right to designate and change the beneficiary;
The right to elect any optional mode of settlement
permitted by the Policy or allowed by the Insurer.
-42-
13
Any designation or change of beneficiary or election of a mode of
settlement shall be made subject to this Assignment and to the
specific rights of the Corporation under the Split Dollar Agreement.
The Corporation shall cooperate with the Employee to any extent
necessary to allow the Employee to exercise any of the Employee's
rights under the Policy and the Split Dollar Agreement.
Signed this _______ day of ________________, 199___.
___________________________
Witness Employee
___________________________
___________________________
Address Address
STATE OF _____________________________ )
) SS.
COUNTY OF ____________________________ )
On this ___________ day of ________________________________, 199____,
before me personally appeared _________________________________, to me known to
be the individual described in and who executed the foregoing Assignment and
acknowledged to me that he executed the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal on the day and year first above written.
Notary Public
My Commission Expires:______________________________________
BUTLER MANUFACTURING COMPANY
By: _______________________________________________
Print Name: _______________________________________
Print Title: ______________________________________
STATE OF _____________________________ )
) SS.
COUNTY OF ____________________________ )
On this ___________ day of ________________________________, 199____,
before me personally appeared _________________________________, who being by
me first duly sworn did depose and state that he is the duly authorized
__________________________ of Butler Manufacturing Company and that he executed
the foregoing Assignment on behalf of said corporation, and acknowledged to me
that he executed the same as his free act and deed on behalf of said
-43-
14
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal on the day and year first above written.
Notary Public
My Commission Expires:
___________________________________________
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15
EXHIBIT C
SBP BENEFIT EXAMPLES
BONUS ARRANGEMENT
The following examples are provided to illustrate how the Supplemental Benefit
Plan ("SBP") operates. The examples are specifically designed to show how the
Split Dollar offset operates given a Bonus arrangement, as described in
Paragraphs 7 and 9 of this Agreement.
Assumptions:
Age at Retirement 60 years (both husband and wife)
Service 30 years
FAMC $35,600 ("Final Average Monthly Compensation")
Life Expectancy 193 months (using the Plans' mortality tables)
Personal Tax Rate 42% (Federal, State, and Local)
PBGC Int. Rate 6.0% (immediate annuity interest rate for converting the
ESOP lump-sum, as well as the cash surrender value
of the monthly insurance benefit)
Survivor Annuity 50% Joint and Survivor
ESOP Balance $526,000 (at date of retirement, market value)
Cash Surrender
Value of Insurance $900,000
Note that the Final Average Monthly Compensation amount has been set at a high
level to facilitate the examples.
The Supplemental Benefit Plan's benefit formula is the same as the Company's
Base Plan formula. The difference in the calculation of the benefit is the
amount of compensation. The Supplemental Plan ignores the compensation
limitations of the tax code that apply to qualified benefit plans. Given the
assumptions above, the Supplemental Benefit Plan Benefit is calculated as
follows:
Gross benefit due to employee, no earnings restrictions $16,500/mo.
Benefit allowed from Qualified Plans
($4,300 ESOP, $1,300 Base Plan) 5,600/mo.
-----
Difference: Supplemental Benefit Plan Benefit $10,900/mo.
For purposes of these illustrations, the cash surrender value of the life
insurance policy is given as $900,000. This amount is converted into a monthly
benefit to determine the value of its offset. Given the assumptions above,
($900,000 cash surrender value, 6.0% interest rate, 193 monthly payments), the
monthly offset benefit of the insurance policy is approximately $7,250 per
month. This leaves a benefit due from the SBP, in cash, of $3,650 per month.
To enhance the security of the employee under the Supplemental Benefit Plan,
the Company will pay out this $3,650 benefit at the $10,900 per month rate
until the present value of the $3,650 per month benefit is paid. To determine
the number of payments this represents, the $3,650 per month benefit due for
193 months is first converted into a present value amount, then amortized at
$10,900 per month. Using the assumptions above, the conversion yields a
present value of $453,000. Amortizing this amount at $10,900 per month yields
approximately 46 monthly payments.
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16
EXHIBIT C
SBP BENEFIT EXAMPLES - BONUS ARRANGEMENT
PAGE 2
The next illustration below illustrates the benefit due a surviving spouse, and
how the Split Dollar Insurance Policy is designed to react in the event that an
employee dies prior to retirement. The Plan, by law, assumes the deceased
employee selected a 50% joint and survivor (J & S) benefit. Given the ages in
this example, and applying the 50% joint and survivor factor, the surviving
spouse benefit would be approximately 45% of the employee's life-only benefit.
Thus:
Gross benefit due to employee, no earnings restrictions $16,500/mo.
Benefit from ESOP: 4,300/mo.
------
Difference: $12,200/mo.
Apply the 50% J & S Factor *.45
------
Amount due from Supplemental Benefit Pension Plan $ 5,500/mo.
Amount payable from Pension Plan ($1,300*.45) $ 600/mo.
------
Difference: Supplemental Benefit Plan Benefit $ 4,900/mo.
Convert the SBP amount to lump-sum benefit, after tax:
(6.0% interest rate, $4,900/mo., 193 months, 42% tax rate): $353,000
-------
In this case, the Supplemental Benefit Plan Benefit would be a lump-sum benefit
to the surviving spouse of $353,000 under the Split Dollar Life Insurance
Agreement. This would be paid directly by the insurance company and would be
an offset to the liability of the Supplemental Benefit Plan. As the proceeds
from an insurance policy death benefit are assumed to be tax free, the proceeds
have been reduced by a 42% tax rate to equal the aftertax benefit due. The
remaining death benefit would revert back to the Company.
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EX-10.7
4
SPLIT DOLLAR LIFE INS AGREEMT/ROLL OUT
1
EXHIBIT 10.7
SPLIT DOLLAR LIFE INSURANCE AGREEMENT
(Collateral Assignment Method)
(Roll Out Arrangement)
THIS AGREEMENT, made and entered into as of this __________day of
__________________________, 1994, by and between BUTLER MANUFACTURING COMPANY,
a Delaware corporation (hereinafter referred to as the "Corporation"), and
_______________________________(hereinafter referred to as the "Employee),
WITNESSETH:
WHEREAS, the Employee is employed by the Corporation;
WHEREAS, the Employee wishes to provide life insurance protection for
the Employee's family in the event of the Employee's death, under a policy of
life insurance insuring the Employee's life (hereinafter referred to as the
"Policy"), which is described in Exhibit A attached hereto and by this
reference made a part hereof, and which is being issued by Northwestern Mutual
Life Insurance Company (hereinafter referred to as the "Insurer");
WHEREAS, the Employee will be the owner of the Policy and, as such,
will possess all incidents of ownership in and to the Policy; and
WHEREAS, the Employee is or may be covered under the Corporation's
Supplemental Benefit Plan (the "SBP") first implemented by the Corporation in
1976, as amended from time to time thereafter;
WHEREAS, the Corporation is willing to pay the premiums due on the
Policy as an additional employment benefit for the Employee, on the terms and
conditions hereinafter set forth; provided that the Corporation may recover
premiums which it pays as provided in this Agreement;
NOW, THEREFORE, in consideration of these premises and of the mutual
promises contained herein, the parties hereto agree as follows:
Insurance Policy. The Employee will contemporaneously
herewith purchase the Policy from the Insurer in the total face amount of
$_____________. The parties hereto agree that they will take all necessary
action to cause the Insurer to issue the Policy, and shall take any further
action which may be necessary to cause the Policy to conform to the provisions
of this Agreement. The parties hereto agree that the Policy shall be subject
to the terms and conditions of this Agreement and of the Collateral Assignment,
attached hereto as Exhibit B and incorporated herein by reference and filed
with the Insurer relating to the Policy.
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2
Policy Ownership. The Employee shall be the sole and
absolute owner of the Policy, and may exercise all ownership rights granted to
the owner thereof by the terms of the Policy, except as may otherwise be
provided herein.
Policy Dividends. Any dividend declared on the Policy
shall be applied to purchase additional paid-up insurance on the life of the
Employee. The parties hereto agree that the dividend election provisions of
the Policy shall conform to the provisions hereof.
Premium Payments. On or before the due date of each
Policy premium, or within the grace period provided therein, the Corporation
shall pay the full amount of the premium to the Insurer, and shall not later
than fourteen days prior to the end of said grace period furnish the Employee
written evidence of timely payment of such premium. The Corporation further
will cause the Insurer to give the Employee notice of the Insurer's receipt of
each such premium payment. The Corporation shall, on or prior to March 1 each
year, furnish the Employee a statement of the amount of income reportable by
the Employee for federal, state and local income tax purposes, as a result of
its payment of such premium.
Collateral Assignment. Merely for the purpose of securing
the Corporation's rights to be repaid for the premiums on the Policy paid by it
to the extent provided in this Agreement, the Employee has contemporaneously
herewith executed a Collateral Assignment form relating to the Policy,
substantially in the form of Exhibit B. Except as provided herein and provided
the Corporation has met its obligations under the terms of this Agreement, the
collateral assignment will not be terminated, altered or amended without the
consent of the Corporation. The parties hereto agree to take all action
necessary to cause such collateral assignment to conform to the provisions of
this Agreement.
Policy Rights.
Except as otherwise provided herein, the Employee may
sell, assign, transfer, borrow against, surrender or cancel the Policy, change
the beneficiary designation provision thereof, or terminate the dividend
election thereof, in any such case, only with the express written consent of
the Corporation provided that the Corporation has met its obligations under the
terms of this Agreement.
The Employee shall have the right without the
Corporation's consent to absolutely and irrevocably give to a donee all of the
Employee's right, title and interest in and to the Policy, subject only to the
rights of the Corporation under said collateral
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3
assignment of the Policy; provided, however, the Employee's spouse must consent
to a gift of the death benefit described in paragraph 7c in an instrument in
writing delivered to the Corporation and Insurer for such gift to be effective.
The Employee may exercise this right by executing a written transfer of
ownership in the form prescribed by the Insurer for irrevocable gifts of
insurance policies, and delivering this form to the Corporation. Upon receipt
of such form, executed by the Employee and duly accepted by the donee thereof,
the Corporation and Insurer shall thereafter treat the Employee's donee as the
sole owner of all of the Employee's right, title and interest in and to the
Policy, subject to this Agreement and the collateral assignment of the Policy.
Death Proceeds.
Upon the death of the Employee prior to the
Employee's termination of employment, the parties shall promptly take all
action necessary to obtain the death benefit provided under the Policy.
The death benefit shall be paid by the Insurer, in separate checks, to
the following parties, in the following order and in the amounts indicated:
First, the Employee's First Death Benefit beneficiary
shall have the unqualified right to receive a portion of the death benefit
equal to three (3) times the average of the Employee's annual total
compensation for the five calendar years next preceding the year in which the
death of the Employee occurs, or, if the total death benefit is less than said
amount, then the entire death benefit. For this purpose the term
"compensation" means all remuneration paid to the Employee directly (i) for the
performance of duties with respect to each such calendar year, including salary
deferral contributions to (a) the Corporation's Employees' Savings Trust, (b)
any plan described in Section 125 of the Internal Revenue Code of 1986 (or any
successor thereto) and (c) the Corporation's Executive Deferred Compensation
Plan, (2) for reasons such as vacation, sickness, disability any any similar
period of nonworking time for which payment is made directly by the Corporation
other than for the performance of duties and (3) including unpaid bonuses for
such calendar year even though such bonuses may be actually determined by the
Corporation in a subsequent calendar year and paid in such subsequent calendar
year. The phrase "First Death Benefit beneficiary" shall mean and refer to the
beneficiary designated under the Policy with respect to the benefit described
in this subparagraph.
c. Thereafter, first, the amount of the Corporation's
obligations to the Employee's SBP beneficiary, after the offset of the
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4
accrued benefit under the terms of the Corporation's retirement plans covering
said Employee or beneficiary shall be determined (the "SBP Benefit"), second,
the SBP Benefit shall be reduced to reflect the Employee's combined federal,
state (of the residence of the Employee) and local income tax bracket for the
year in which the Employee's death occurs, calculated on the assumption that
the Employee is filing tax returns as married filing jointly (the "adjusted SBP
Benefit), third, the adjusted SBP Benefit shall be converted to a lump sum
using the actuarial equivalent of such accrued benefits (calculated using the
actuarial assumptions for lump sum benefits utilized in the Corporation's Base
Retirement Plan (or any successor plan thereto) (the "lump sum SBP Benefit"),
and, fourth, (a) if amount due the Second Death Benefit beneficiary under the
Policy exceeds the lump sum SBP Benefit, the Corporation shall receive such
excess death benefit and thereupon the collateral assignment shall be released
or (b) if amount due the Second Death Benefit Beneficiary under the Policy
shall be less than the lump sum SBP Benefit, the collateral assignment shall be
released, and the Corporation shall have no further rights to such death
benefit. The phrase "Second Death Benefit beneficiary" shall mean and refer to
the beneficiary designated under the Policy, other than the First Death Benefit
beneficiary.
The parties agree that the beneficiary designation provision of the
Policy shall conform to the provisions hereof. The amounts of the SBP Benefit,
adjusted SBP Benefit and lump sum SBP Benefit shall be certified in writing to
the Insurer by the actuary under the SBP, at the expense of the Corporation.
Termination and Amendment.
This Agreement shall terminate during the life of the
Employee upon the occurrence of any of the following events: (a) the total
cessation of the business of the Corporation; (b) the bankruptcy, receivership
or dissolution of the Corporation; (c) a Change of Control as defined in
paragraph 11 of this Agreement; (d) the termination of Employee's employment;
or (e) the Employee's retirement under the Corporation's qualified plan known
as the Base Retirement Plan. In the event of the occurrence of the events
described in subparagraphs (a), (b) and (c) of this paragraph, the collateral
assignment of the Policy shall also terminate and the Corporation shall have no
further rights with respect to the Policy. In the event of the occurrence of
the events described in subparagraphs (d) or (e) of this paragraph, the parties
shall have the rights in the Policy described in paragraph 9 of
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5
this Agreement.
The Corporation may amend this Agreement at any time
with the Employee's written consent thereto. In addition the Corporation, upon
ten days' prior written notice to the Employee, may terminate this Agreement.
In the event of such termination of this Agreement, the collateral assignment
of the Policy shall also terminate and the Corporation shall have no further
rights with respect to the Policy. Any such termination or amendment shall be
effective as of the date specified in such notice, in the case of termination
of this Agreement, and as provided in the Employee's written consent in the
case of any amendment. No amendment nor termination of this Agreement shall
affect the Employee's right to any benefits accrued at the time of such
amendment or termination. This Agreement may not be amended, altered, modified
or terminated except as provided in this Section 8.
Release of Collateral Assignment.
In the event that this Agreement terminates during the life of
the Employee due to either of the events described in subparagraphs (d) or (e)
of paragraph 8a., first, the amount of the Corporation's obligations to the
Employee under the SBP, after the offset of the accrued benefit under the terms
of the Corporation's retirement plans covering said Employee or beneficiary
shall be determined (the "SBP Benefit"), second, to the extent to which
distributions from the Policy to the Employee would not be subject to federal
income tax liability, the SBP Benefit shall be reduced to reflect the
Employee's combined federal, state (of the residence of the Employee) and local
income tax bracket for the year in which the event occurs, calculated on the
assumption that the Employee is filing tax returns as married filing jointly
(the "adjusted SBP Benefit"), third, the adjusted SBP Benefit shall be
converted to a lump sum using the actuarial equivalent of such accrued benefits
(calculated using the actuarial assumptions for lump sum benefits utilized in
the Corporation's Base Retirement Plan (or any successor plan thereto) (the
"lump sum SBP Benefit"), and, fourth, (a) if the cash surrender value of the
Policy exceeds the lump sum SPB Benefit, the Corporation shall receive such
excess from such cash surrender value and thereupon the collateral assignment
shall be released or (b) if the cash surrender value of the Policy shall be
less than the lump sum SPB Benefit, the collateral assignment shall be
released, and the Corporation shall have no further rights to such cash
surrender value; provided, however, if the release or termination of the
collateral assignment would cause the Employee to recognize taxable
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6
income in an amount which would not be deductible by the Corporation because of
the application of Section 162(m) of the Internal Revenue Code of 1986 (or any
successor thereto) [the "Code"], such collateral assignment shall not be
automatically released or terminated in its entirety, but shall be released or
terminated partially in a subsequent year or years so that such taxable amount
will not be barred from deductibility by the Corporation under said Section
162(m); further, provided, such collateral assignment shall be released or
terminated in its entirety in the event that the Corporation's independent firm
of auditors determines that such amount will be permanently barred from
deductibility by virtue of said Section 162(m) or any other provision of the
Code.
The amounts of the SBP Benefit, adjusted SBP Benefit and lump sum SBP
Benefit shall be certified in writing to the Insurer by the actuary under the
SBP, at the expense of the Corporation.
Illustrations of the operations of paragraphs 7 and 9 of this
Agreement are set out on Schedule C attached hereto and incorporated herein by
reference.
Failure to Pay Premiums. If the Corporation fails to pay any
Policy premium when due as required under this Agreement, and fails to pay such
premium within the grace period of the Policy, the collateral assignment shall
automatically terminate, and the Corporation shall not be entitled to any
payments hereunder and shall have no further rights in the Policy.
Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean:
(a) An acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of
common stock of the Corporation (the "Outstanding Corporation Common Stock") or
(ii) the combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors (the
"Outstanding Corporation Voting Securities"); excluding, however, the
following: (i) any acquisition directly from the Corporation, other than an
acquisition by virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the Corporation,
(ii) any acquisition by the Corporation, (iii) any acquisition by any employee
benefit plan (or
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7
related trust) sponsored or maintained by the Corporation or any corporation
controlled by the Corporation or (iv) any acquisition by any corporation
pursuant to a reorganization, merger, consolidation or similar corporate
transaction (in each case, a "Corporate Transaction"), if pursuant to such
Corporate Transaction, the conditions described in clauses (i), (ii) and (iii)
of subsection (c) of this Section 11 are satisfied; or
(b) A change in the composition of the Board such
that the individuals who, as of the date of this Agreement, constitute the
Board (the Board as of the date hereof shall be hereinafter referred to as the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, for purposes of this Section 11, that any
individual who becomes a member of the Board subsequent to the date hereof
whose election, or nomination for election by the Corporation's shareholders,
was approved by a vote of at least a majority of those individuals who are
members of the Board and who were also members of the Incumbent Board (or
deemed to be so pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; but, provided further, that
any such individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board shall not be so considered as a member of the Incumbent
Board; or
(c) The approval by the shareholders of the
Corporation of a Corporate Transaction or, if consummation of such Corporate
Transaction is subject, at the time of such approval by shareholders, to the
consent of any government or governmental agency, the obtaining of such consent
(either explicitly or implicitly by consummation); excluding, however, such a
Corporate Transaction, pursuant to which (i) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the
Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities immediately prior to such Corporate Transaction will beneficially
own, directly or indirectly, more than 60% of, respectively, the outstanding
shares of common stock of the Corporation resulting from such Corporate
Transaction and the combined voting power of the outstanding voting securities
of such corporation entitled to vote generally in the election of directors, in
substantially the same proportions as their
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8
ownership, immediately prior to such Corporate Transaction, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting Securities, as the
case may be, (ii) no Person (other than the Corporation, and employee benefit
plan (or related trust) of the Corporation or such corporation resulting from
such Corporate Transaction and any Person beneficially owning, immediately
prior to such Corporate Transaction, directly or indirectly, 20% or more of the
Outstanding Corporation Common Stock or Outstanding Voting Securities, as the
case may be) will beneficially own, directly or indirectly, 20% or more of,
respectively, the outstanding shares of common stock of the Corporation
resulting from such Corporate Transaction or the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) individuals who were members
of the Incumbent Board will constitute at least a majority of the members of
the board of directors of the Corporation resulting from such Corporate
Transaction; or
(d) The approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the Corporation or the
sale or other disposition of all or substantially all of the assets of the
Corporation or, if consummation of such liquidation or dissolution or sale or
other disposition is subject, at the time of such approval by shareholders, to
the consent of any government or governmental agency, the obtaining of such
consent (either explicitly or implicitly by consummation); excluding, however,
such a sale or other disposition to a corporation, with respect to which
following such sale or other disposition, (i) more than 60% of, respectively,
the then outstanding shares of common stock of such corporation entitled to
vote generally in the election of directors will be then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting Securities
immediately prior to such sale or other disposition in substantially te same
proportion as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities,
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9
as the case may be, (ii) no Person (other than the Corporation and any employee
benefit plan (or related trust) of the Corporation or such corporation and any
Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the Outstanding Corporation
Common Stock or Outstanding Corporation Voting Securities, as the case may be)
will beneficially own, directly or indirectly, 20% or more of, respectively,
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and (iii)
individuals who were members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of such corporation.
(e) Anything in this Agreement to the contrary
notwithstanding, upon a Change of Control, the collateral assignment of the
Policy shall terminate and the Corporation shall have no further rights with
respect to the Policy.
Insurer. The Insurer shall be fully discharged from
its obligations under the Policy by payment of the Policy death benefit as
provided in paragraph 7 of this Agreement or as provided in paragraph 9 of this
Agreement, as the case may be. No provision of this Agreement, nor of any
modification or amendment hereof, shall in any way be construed as enlarging,
changing, varying, or in any other way affecting the obligations of the Insurer
as expressly provided in the Policy, except insofar as the provisions hereof
are made a part of the Policy by the collateral assignment executed by the
Employee and filed with the Insurer.
Administration.
The Corporation is hereby designated as the named fiduciary
under this Agreement. The named fiduciary shall have authority to control and
manage the operation and administration of this Agreement, and it shall be
responsible for establishing and carrying out a funding policy and method
consistent with the objectives of this Agreement.
Any decision by the Corporation denying a claim by the
Employee or the Employee's beneficiary for benefits under this Agreement shall
be stated in writing and delivered or mailed to the Employee or such
beneficiary, within thirty days of the date of written notice of such claim.
Such decision shall set forth the specific reasons for the denial, written to
the best of the Corporation's ability in a manner that may be understood
without legal or actuarial counsel. In addition, the Corporation shall afford
a reasonable opportunity to the Employee or such beneficiary for a full and
fair review and appeal of the decision denying such claim, and such review
shall require a written decision setting forth the specific reasons for the
action on the appeal, which must be rendered within sixty days after written
notice to the
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10
Corporation of such appeal. If no written decision is rendered within such
sixty day time period, the appeal shall be deemed denied.
Binding Agreement. This Agreement shall be binding upon
and inure to the benefit of the Corporation and its successors and assigns, and
the Employee, the Employee's successors, assigns, heirs, executors,
administrators and beneficiaries.
Notice. Any notice, consent or demand required or permitted
to be given under the provisions of this Agreement shall be in writing, and
shall be signed by the party giving or making the same. If such notice,
consent or demand is mailed to a party hereto, it shall be sent by United
States certified mail, postage prepaid, addressed to such party's last known
address as shown on the records of the Corporation. The date of receipt of
such mailing shall be deemed the date of notice, consent or demand.
Governing Law. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance with the laws of
the State of Missouri.
17. Damages For Breach. In the event of a breach of this
Agreement by the Corporation, the Corporation shall be liable to the Employee
for all damages related to such breach (and Employee shall not be required to
mitigate any such damages) and all of Employee's reasonable attorneys' fees and
costs relating to the assertion of such breach whether or not requiring any
court proceeding.
18. Arbitration. In the event of a dispute or controversy
arising out of or relating to this Agreement which has not been resolved
pursuant to the provisions of paragraph 13, any such dispute, controversy or
alleged breach of this Agreement shall be finally settled by binding
arbitration. The arbitration shall be held in Kansas City, Missouri, and shall
be conducted in accordance with the rules of the American Arbitration
Association. The arbitrator selected must be knowledgeable and competent to
resolves disputes in manners concerning employee benefits, such as those which
are the subject of this Agreement. The arbitration award shall grant any
remedy or relief legally available. Such arbitration shall proceed
expeditiously and the award rendered shall be final and binding, and judgment
upon the award may be entered in any court having appropriate jurisdiction.
The Corporation and the Employee expressly waive the jurisdiction of any other
forum or domicile other than those agreed to herein for the resolution of any
dispute arising out of or related to this Agreement. Either party may
institute a demand for arbitration in accordance with
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11
the provisions of this paragraph at any time after the period for appeal
described in paragraph 13, upon thirty days' prior written notice given to the
other party. The prevailing party in any such arbitration shall be entitled to
an award of costs and reasonable attorneys' fees in addition to any other
relief or award granted.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
in duplicate, as of the day and year first above written.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.
BUTLER MANUFACTURING COMPANY
By
Print Name:
Print Name:
Print Title:
"Employee"
"Corporation"
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12
EXHIBIT A
The following life insurance policy is subject to the attached
Split-Dollar Agreement:
Insurer: Northwestern Mutual Life Insurance Company
Insured: ___________________________________________________________
Policy Number:______________________________________________________
Face Amount: $______________________________________________________
Date of Issue: _____________________________________________________
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13
EXHIBIT B
COLLATERAL ASSIGNMENT
___________________________________________________ (the "Employee") and Butler
Manufacturing Company, a Delaware corporation (the "Corporation" or "Assignee")
are the parties to that certain Split Dollar Life Insurance Agreement dated as
of,_________________199___ ("Split Dollar Agreement"), and this Assignment is
executed merely to secure the Corporation's specific rights as set forth in the
Split Dollar Agreement.
FOR VALUE RECEIVED, the Employee hereby assigns, transfers and sets
over to the Corporation, certain rights in and to Policy No.___________
issued by the Northwestern Mutual Life Insurance Company (herein
caller the "Insurer"), and any supplementary contracts issued in
connection therewith (said policy and contracts being herein called the
"Policy"), upon the life of the Employee, solely for the purpose of
securing the Corporation's specific rights as set forth in the Split
Dollar Agreement, subject to all the terms and conditions of the
Policy and to all superior liens, if any, which the Insurer may have
against the Policy.
The following specific rights are included in this Assignment and pass
by virtue hereof, provided that the Corporation shall exercise such
rights only to the extent necessary in enforcing its specific rights
under the Split Dollar Agreement:
Solely as provided in paragraph 7 of the Split Dollar
Agreement, the right to collect a portion of the death benefit
under the Policy from the Insurer upon the Employee's death
prior to such Employee's termination of employment.
Solely as provided in paragraph 9 of the Split Dollar
Agreement, the right to receive a portion of the cash
surrender value of the Policy.
It is expressly agreed that all other rights are reserved by the
Employee and excluded from this Assignment and do not pass by virtue
hereof, including but not limited to:
The right of the Employee's beneficiary to collect
such beneficiary's portion of the death benefit under the
Policy from the Insurer upon the Employee's death as provided
in the Split Dollar Agreement.
The right to receive a portion of the cash surrender
value of the Policy as provided in the Split Dollar Agreement
in the event the Split Dollar Agreement terminates during the
life of the Employee.
The right to collect from the Insurer any disability
benefit payable in cash that does not reduce the amount of
insurance;
The right to designate and change the beneficiary;
The right to elect any optional mode of settlement
permitted by the Policy or allowed by the Insurer.
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14
Any designation or change of beneficiary or election of a mode of
settlement shall be made subject to this Assignment and to the
specific rights of the Corporation under the Split Dollar Agreement.
The Corporation shall cooperate with the Employee to any extent
necessary to allow the Employee to exercise any of the Employee's
rights under the Policy and the Split Dollar Agreement.
Signed this _______ day of ________________, 199___.
____________________________
Witness Employee
____________________________
____________________________
Address Address
STATE OF _____________________________ )
) SS.
COUNTY OF ____________________________ )
On this ___________ day of ________________________________, 199____,
before me personally appeared _________________________________, to me known to
be the individual described in and who executed the foregoing Assignment and
acknowledged to me that he executed the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal on the day and year first above written.
Notary Public
My Commission Expires:
___________________________________________
BUTLER MANUFACTURING COMPANY
By: ____________________________________________
Print Name: ____________________________________
Print Title: ___________________________________
STATE OF _____________________________ )
) SS.
COUNTY OF ____________________________ )
On this ___________ day of ________________________________, 199____,
before me personally appeared _________________________________, who being by
me first duly sworn did depose and state that he is the duly authorized
______________________________ of Butler Manufacturing Company and that he
executed the foregoing Assignment on behalf of said corporation, and
acknowledged to me that he executed the same as his free act and deed on behalf
of said corporation.
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15
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal on the day and year first above written.
Notary Public
My Commission Expires:
___________________________________________
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16
EXHIBIT C
SBP BENEFIT EXAMPLES
ROLL OUT ARRANGEMENT
The following examples are provided to illustrate how the Supplemental Benefit
Plan ("SBP") operates. The examples are specifically designed to show how the
Split Dollar offset operates given a Roll Out arrangement, as defined and
described in Paragraphs 7 and 9 of this Agreement.
Assumptions:
Age at Retirement 63 years (both husband and wife)
Service 30 years
FAMC $25,725 ("Final Average Monthly Compensation")
Life Expectancy 178 months (using the Plans' mortality tables)
Personal Tax Rate 42% (Federal, State, and Local)
PBGC Int. Rate 6.0% (immediate annuity interest rate to convert the
ESOP lump-sum, as well as the cash surrender value
of the monthly insurance benefit)
Survivor Annuity 50% Joint and Survivor
ESOP Balance $627,000 (at date of retirement, market value)
Premiums Paid $300,000 (By Employer, and amount owed from policy to Employer)
The Supplemental Benefit Plan's benefit formula is the same as the Company's
Base Plan formula. The difference in the calculation of the benefit is the
amount of compensation. The Supplemental Plan ignores the compensation
limitations of the tax code that apply to qualified benefit plans. Given the
assumptions above, the Supplemental Benefit Plan Benefit is calculated as
follows:
Gross benefit due to Employee, no earnings restrictions $12,000/mo.
Benefit allowed from Qualified Plans
($5,300 ESOP, $3,700 Base Plan) 9,000/mo.
-----
Difference: Supplemental Benefit Plan Benefit $ 3,000/mo.
The benefit due in a Roll Out scenario is tax effected because of the tax free
nature of the distributions from the policy (i.e., policy loans). Therefore,
the Supplemental Benefit Plan Benefit of $3,000 (above) is adjusted to
recognize this. Given the Personal Tax Rate (above) of 42%, the $3,000 benefit
becomes $1,740.
FIRST ILLUSTRATION: CASH SURRENDER VALUE NOT TAXED
For purposes of the first illustration, the cash surrender value of the life
insurance policy is assumed to be $530,000. At retirement, the employer is
expecting to receive the $300,000 in premiums paid. Nevertheless, the security
of the participant is paramount, thus calculations are necessary to determine
how much of the policy's cash surrender value the employer will receive. The
first calculation determines the lump sum necessary to satisfy the liability of
the Supplemental Benefit Plan Benefit ("SBPB"). Given the assumptions above,
($1,740 SBPB , 6.0% interest rate, 178 monthly payments), the lump sum is
approximately $206,000. Thus, the policy would be split such that the Employee
receives $206,000 of cash surrender value. The employer would receive the
remaining $324,000.
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EXHIBIT C PAGE 2
SBP BENEFIT EXAMPLES - ROLL OUT ARRANGEMENT
SECOND ILLUSTRATION: CASH SURRENDER VALUE PARTIALLY TAXED
For purposes of the second illustration, all assumptions are the same as in the
first illustration, except that the cash surrender value of the life insurance
policy is assumed to be $490,000. The Employee is owed a lump sum of
$206,000, but the Employer cannot cede to the Employee more than $190,000
($490,000 Cash Surrender Value less $300,000 premiums paid) without creating a
taxable event. This $190,000 is defined as the "Gain Amount" for purposes of
this illustration.
Again, as the Employee's security is paramount, the Employee will receive as
much of the Cash Surrender Value of the policy as is available to provide the
benefit. To accommodate this mandate, the Company gives up its right to
receive that portion of the premiums paid to make the Employee whole. Given
that whatever amount of premiums ceded to the Employee is immediate taxable
income to the Employee, the amount ceded must be tax affected. The calculation
is elementary; the difference between the amount owed and the amount of the
premiums ceded is 'grossed up' for the effect of taxes. That amount is added
to the $190,000 Gain Amount to arrive at the amount of Cash Surrender Value
that is split for the Employee. The calculation follows:
Amount of Supplemental Benefit Plan Benefit $206,000
Gain Amount 190,000
-------
Difference $ 16,000
-------
Adjusted for taxes (divided by .58) $ 27,600
Add Back Gain Amount 190,000
-------
Cash Surrender Value Split for Employee $217,600
-------
The Employee would pay immediate taxes on $27,600, and the employer would
receive a tax deduction. Assuming the 42% Employee tax rate, the net to the
Employee is $217,600.
THIRD ILLUSTRATION: DEATH BENEFIT EXAMPLE
The third illustration below depicts the benefit due a surviving spouse, and
how the Split Dollar Insurance Policy is designed to react in the event that an
employee dies prior to retirement. The Plan, by law, assumes the deceased
employee selected a 50% joint and survivor (J & S) benefit. Given the ages in
this example, and applying the 50% joint and survivor factor, it is assumed the
surviving spouse benefit would be approximately 45% of the employee's life-only
benefit. Thus:
Gross benefit due to employee, no earnings restrictions $12,000/mo.
Benefit from ESOP: 5,300/mo.
------
Difference: $ 6,700/mo.
Apply the 50% J & S Factor *.45
------
Amount due from Supplemental Benefit Pension Plan $ 3,015/mo.
Amount payable from Pension Plan ($3,015*.45) $ 1,355/mo.
------
Difference: Supplemental Benefit Plan Benefit $ 1,660/mo.
Remembering that the benefit due in a Roll Out scenario is tax effected because
of the tax free nature of the distributions from the policy, the Supplemental
Benefit Plan Benefit of $1,660 (above) is adjusted to recognize this. Given
the Personal Tax Rate (above) of 42%, the benefit is $963. Given the
assumptions, ($963 SBPB, 6.0% interest rate, 178
-63-
18
EXHIBIT C PAGE 3
SBP BENEFIT EXAMPLES - ROLL OUT ARRANGEMENT
monthly payments), the lump sum is approximately $114,000. Thus, the policy
would be split such that the Employee receives the first $114,000 of the Death
Benefit. The employer would receive the remaining Death Benefit.
-64-
EX-13
5
ANNUAL REPORT
1
Exhibit 13
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Company sales for 1994 were $692 million compared with $576 million in 1993,
an increase of 20%. Net of the Walker Division, which was sold in December
1993, revenues increased in each segment of the Company's business.
Sales in the Building Systems Segment were $482 million in 1994 compared with
$367 million in 1993, an increase of 31%. Increases occurred in both the steel
and wood frame building product lines due to generally higher levels of market
demand, gains in domestic market share, and increased export sales. Butler
Europe recorded sales approximately equal to those achieved in 1993 as
construction markets remained weak in the United Kingdom and Europe.
The Construction Services Segment reported sales of $122 million in 1994
compared to $93 million in 1993, an increase of 31%. The improvement was
primarily due to the continued formation and servicing of strategic alliances
with large multinational corporations.
Sales in the Other Building Products Segment were $123 million in 1994 and
$141 million in 1993, a decrease of 13%. Net of the Walker Division, which
recorded $40 million in sales for 1993, sales in the Other Building Products
Segment increased $22 million or 22% in 1994 compared to 1993. Sales of the
Vistawall Division increased significantly due to improvement in market demand
for its products and the continuing consolidation of the architectural metals
industry. Grain Systems' sales improved over 1993 due primarily to increased
commercial grain storage demand.
The Company's consolidated sales in 1993 were $576 million compared to $500
million in 1992, an increase of 15%. The Building Systems Segment was the
primary contributor to the increase in 1993 revenues, through improved market
share and export sales. The Construction Services Segment also contributed to
the increase in 1993 revenues due primarily to repeat sales of construction
services to large corporations who have ongoing construction needs at multiple
locations throughout the United States.
Gross profit in 1994 was $120 million or 17.3% of sales compared to $97
million or 16.8% of sales in 1993. Net of the Walker Division, the 1993 gross
profit was $82 million or 15.3% of sales. The increase was due to a greater
volume of sales and improved pricing in all segments and an improved
nonresidential construction market. In 1994 the use of the LIFO accounting
method decreased gross profit by $2.1 million, due to an increase in inventory
levels.
Gross profit in 1992 was $83 million or 16.6% of sales. Gross profit improved
in 1993 compared to 1992 due to improved sales and margins in all segments. In
1992, $1 million of the $83 million in gross profit was generated by a
reduction in inventories and the LIFO method of inventory accounting. In 1993
the effect of LIFO accounting was not significant.
In 1994 selling, general, and administrative expenses were $87 million
compared to $81 million in 1993, or 12.6% and 14.1% of 1994 and 1993 sales,
respectively. Selling, general, and administrative expenses decreased as a
percent of total sales due to good cost controls and the relative fixed nature
of these expenses to changes in sales volume.
In 1992 selling, general, and administrative expenses were $72 million or
14.4% of 1992 sales. The Building Systems Segment was the primary contributor
to the dollar increase, due to the higher sales volume of that Segment and
increased expense levels to fund export market development activities in
several countries.
In 1994 the Company recorded net other expense of $.9 million compared to
income of $18.4 million in 1993. In 1993 the Company recognized an $18 million
pre-tax gain associated with the sale of the Walker Division.
In 1992 the Company recorded net other expense of $2 million. In 1992 the
earnings realized from other international joint ventures were more than
offset by the $3.6 million pretax write-off associated with Canadian Building
Systems, Inc., a joint venture which discontinued operations in Canada in
early 1992 due to insolvency.
Interest expense in 1994 decreased to $3.9 million from the $4.6 million
recorded in 1993, principally due to a lower average debt balance for all of
1994. Interest expense declined $1.4 million between 1993 and 1992 due
primarily to lower interest rates.
The Company's effective tax rates were 46.4% in 1994, 39.2% in 1993, and 55.9%
in 1992. The higher effective tax rates in 1994 and 1992 were due to
nondeductible operating losses incurred by Butler Europe and other
nondeductible items for which no tax benefits were recognized. Taxes in 1992
were offset in part by a $2.6 million tax benefit recognized from the write-
off associated with Canadian Building Systems, Inc.
Page 12
Liquidity and Capital Resources
The Company's cash balance decreased $9.6 million in 1994 compared to an
increase of $7.2 million in 1993 and an increase of $1.5 million in 1992. On
December 6, 1993 the Company sold the business and substantially all of the
assets and liabilities of the Walker Division to The Wiremold Company for
$34.6 million in cash and the assumption of certain liabilities. The cash
proceeds after taxes and transaction expenses were used to reduce long-term
debt by $25 million. In 1994 the Company paid $8.5 million in taxes related to
the Walker Division sale.
Cash flow from operations was $9.7 million in 1994 compared with $9.3 million
in 1993 and $2.9 million in 1992. In 1994, 1993, and 1992 working capital
increased to accommodate the higher sales levels. The Company's total debt to
total capital ratio was 35.1% in 1994 compared with 40.3% in 1993 and 62.9% in
1992.
In 1993 the Company, as lessor, entered into a facility lease agreement where
the lessee was granted an option to purchase the leased facility for the
Company's book value of $2.2 million. The facility was previously recorded in
"Assets held for sale." The asset was transferred to "Investments and other
assets" at December 31, 1993, and was sold in January, 1995.
In June, 1994 the Company concluded a refinancing of its long-term bank debt
and bank credit facilities. The Company obtained $35 million through a private
placement of unsecured notes with four insurance companies. The notes carry a
fixed interest rate of 8.02% and have an average life of six and one-half
years. The bulk of the proceeds of the borrowings were used to retire existing
bank debt. As of December 31, 1994 the Company was in compliance with all
covenants of the credit agreement.
In addition, the Company replaced two domestic credit agreements with a single
$50 million revolving credit facility, provided by four banking institutions,
to meet the needs of the Company and its subsidiaries. As of December 31, 1994
the Company was utilizing $9 million of the credit facility to provide a bank
letter of credit arrangement to secure insurance obligations.
Butler Building Systems, Ltd., a European subsidiary, maintains a separate
bank line of credit of approximately $2.3 million at current exchange rates.
In 1994 the Company invested cash of $2.1 million in Butler Building Systems,
Ltd. and other European operations to reduce debt and increase equity.
Capital expenditures were $13.7 million in 1994, $6.5 million in 1993, and $5
million in 1992. The majority of expenditures in 1994 were used to increase
capacity in the metal building systems business.
In 1989 the Company's Board of Directors approved a 500,000 share stock
repurchase authorization for its common stock. The Company repurchased 15,902
of its common shares in 1994, 5,783 shares in 1993, and 420 shares in 1992.
Shares repurchased in all three years were deposited in the Company's
treasury. The Company issued 163,501, 162,950, and 9,955 treasury shares in
connection with stock option exercises in 1994, 1993, and 1992, respectively.
In September, 1994 the Board of Directors approved the resumption of a regular
cash dividend, at an indicated annual rate of 40 cents per share. The initial
10 cent quarterly payment was made in October, 1994.
The Company believes that working capital needs and capital expenditure
requirements for the foreseeable future can be met by funds from operations
and current credit arrangements.
Other
The U.S. inflation rate continued to grow at a moderate pace in 1994. The
Company accounts for inventory at LIFO cost, which in general allows for
current earnings to approximate the earnings which would be reported if
measured in terms of current value dollars.
In 1994 the Company adopted Statement of Financial Accounting Standard (SFAS)
No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments." The Company's purchase of derivatives was limited to
aluminum metal contracts, which were utilized to hedge architectural aluminum
product backlog, and certain foreign currency forward contracts, which hedged
the Company's limited foreign currency exposure.
Outlook
The rate of economic growth in the U.S. economy is forecast by many
economists to slow in 1995. Increasing the Company's market share
domestically, expanding export opportunities, focusing on the new and
replacement roof market, and accelerating the growth of the wood frame
building systems business appear to be the greatest areas of potential growth
in 1995 for the Company. Order backlog totaled $237 million at year-end
compared with $140 million a year ago, an increase of 69%.
Page 13
Consolidated Balance Sheets
(Thousands of dollars)
At December 31 1994 1993
-------- --------
Assets
Current assets:
Cash and cash equivalents $ 5,284 $ 14,853
Receivables:
Trade 95,357 61,508
Other 1,284 1,182
-------- --------
96,641 62,690
Less allowance for possible losses 1,364 1,088
-------- --------
Net receivables 95,277 61,602
Inventories 58,906 37,426
Real estate developments in progress 15,985 2,987
Deferred tax assets 7,538 7,216
Other current assets 5,662 4,182
-------- --------
Total current assets 188,652 128,266
-------- --------
Investments and other assets 20,371 22,106
Assets held for sale 13,587 13,587
Property, plant, and equipment, at cost:
Land 2,583 2,501
Buildings 47,184 44,715
Machinery, tools, and equipment 105,378 98,527
Office furniture and fixtures 27,923 23,549
Transportation equipment 1,508 1,992
-------- --------
184,576 171,284
Less accumulated depreciation 136,050 129,756
-------- --------
Net property, plant, and equipment 48,526 41,528
-------- --------
$271,136 $205,487
======== ========
See Accompanying Notes to Consolidated Financial Statements.
Page 14
At December 31 1994 1993
-------- --------
Liabilities & Shareholders' Equity
Current liabilities:
Notes payable to banks $ 70 $ 1,556
Current maturities of long-term debt 2,474 11,368
Accounts payable 81,092 41,777
Dividends payable 487 -
Accrued taxes and other expenses 27,019 23,052
Accrued payroll and pension expense 10,886 5,732
Billings in excess of costs
and estimated earnings 9,082 4,791
Taxes on income 4,970 9,918
-------- --------
Total current liabilities 136,080 98,194
-------- --------
Deferred tax liabilities 4,685 4,601
Other noncurrent liabilities 11,006 10,638
Long-term debt, less current maturities 40,263 30,345
Shareholders' equity:
Common stock, no par value,
authorized 13,000,000 shares,
issued 6,058,800 shares, at stated value 12,623 12,623
Foreign currency translation adjustment 194 183
Retained earnings 99,579 86,332
-------- --------
112,396 99,138
Less cost of common stock in treasury,
1,188,885 shares in 1994 and
1,336,484 shares in 1993 33,294 37,429
-------- --------
Total shareholders' equity 79,102 61,709
-------- --------
Commitments and contingencies $271,136 $205,487
======== ========
Page 15
Consolidated Statements of Earnings and Retained Earnings
(Thousands of dollars, except per share amounts)
Years ended December 31 1994 1993 1992
-------- -------- --------
Net sales $692,190 $575,847 $500,177
Cost of sales 572,227 479,312 417,583
-------- -------- --------
Gross profit 119,963 96,535 82,594
Selling, general, and administrative
expenses 86,506 80,603 72,165
-------- -------- --------
Operating income 33,457 15,932 10,429
Other income (expense):
International joint venture income (loss) 998 1,314 (1,789)
Interest and finance charges earned 403 660 592
Sundry, net (2,302) (1,525) (819)
Gain on sale of Walker Division - 18,000 -
-------- -------- --------
(901) 18,449 (2,016)
-------- -------- --------
Operating and other income 32,556 34,381 8,413
Interest expense 3,895 4,622 5,966
-------- -------- --------
Pretax earnings 28,661 29,759 2,447
Income taxes 13,306 11,661 1,368
-------- -------- --------
Net earnings 15,355 18,098 1,079
Retained earnings at beginning of year 86,332 69,711 68,783
-------- -------- --------
101,687 87,809 69,862
Dividends declared:
Common stock, $.20 per share (972) - -
Net change in retained earnings due to
treasury stock transactions (1,136) (1,477) (151)
-------- -------- --------
Retained earnings at end of year $ 99,579 $ 86,332 $ 69,711
======== ======== ========
Earnings per common share $ 3.13 $ 3.84 $ 0.25
======== ======== ========
See Accompanying Notes to Consolidated Financial Statements.
Page 16
Consolidated Statements of Cash Flows
(Thousands of dollars)
Years ended December 31 1994 1993 1992
-------- -------- --------
Cash flows from operating activities:
Net earnings $ 15,355 $ 18,098 $ 1,079
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 7,776 9,605 10,155
Gain from sale of business - (18,000) -
Equity in earnings of international
joint ventures (495) (890) (1,446)
Change in assets and liabilities,
net of sale or purchase of
new businesses:
Receivables (34,477) (9,166) 260
Inventories (21,480) (4,242) (3,693)
Real estate developments
in progress (12,998) (2,987) -
Deferred taxes (238) 618 343
Other current assets (1,480) (968) (577)
Current liabilities excluding
short-term debt 57,719 17,222 (3,211)
-------- -------- --------
Net cash provided by
operating activities 9,682 9,290 2,910
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (13,663) (6,460) (5,026)
Cash received (paid) on sale of business (8,651) 34,600 -
Net change in other noncurrent assets 119 (6,704) 3,597
Distributions from international
joint ventures 1,000 1,440 -
-------- -------- --------
Net cash provided (used) by
investing activities (21,195) 22,876 (1,429)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 35,490 906 1,344
Repayment of long-term debt (25,572) (37,681) (1,885)
Net change in short-term debt (10,380) 9,376 (9,382)
Dividends paid (485) - -
Sale and issuance of treasury stock 3,442 3,091 129
Purchase of treasury stock (443) (152) (6)
Net change in other noncurrent liabilities (119) (673) 8,104
-------- -------- --------
Net cash provided (used) by
financing activities 1,933 (25,133) (1,696)
-------- -------- --------
Effect of exchange rate changes 11 121 1,725
-------- -------- --------
Net change in cash and
cash equivalents (9,569) 7,154 1,510
Cash and cash equivalents at
beginning of year 14,853 7,699 6,189
-------- -------- --------
Cash and cash equivalents
at end of year $ 5,284 $ 14,853 $ 7,699
======== ======== ========
See Accompanying Notes to Consolidated Financial Statements.
Page 17
Notes to Consolidated Financial Statements
Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include all subsidiaries which are more
than 50% owned. Corporations in which the Company has stock ownership of at
least 20% but not over 50% are accounted for using the equity method. All
significant intercompany profits, account balances, and transactions are
eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents are defined as all demand deposits and overnight
investments.
Inventories
Inventories are valued at the lower of cost or market. The last-in, first-out
(LIFO) method of determining cost is used for substantially all domestic
inventories. If the first-in, first-out method had been used for all
locations, inventories would have been $9.4 million, $7.3 million, and $9.7
million higher than those reported at December 31, 1994, 1993, and 1992,
respectively.
The use of the LIFO method decreased net earnings by $1.1 million ($.23 per
share) in 1994, and increased net earnings $.3 million ($.05 per share) in
1993 and $.6 million ($.13 per share) in 1992. Included in these amounts are
the effects of decreased inventory levels at certain divisions in 1993 and
1992, causing results of operations to be charged with prior years' inventory
costs. These costs were lower than current year costs. The effect of the
decreased inventory levels had no effect on net earnings in 1993, and
increased net earnings in 1992 by $.4 million ($.09 per share).
Inventories by Component
(Thousands of dollars) 1994 1993
------- -------
Raw materials $34,732 $25,309
Work in process 5,462 3,766
Finished goods 28,105 15,670
------- -------
68,299 44,745
LIFO reserve (9,393) (7,319)
------- -------
$58,906 $37,426
======= =======
Property, Plant, and Equipment
Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets. Expenditures for maintenance and repairs are
charged to expense as incurred. Upon sale or retirement of assets, the cost
and the accumulated depreciation amounts are removed from the accounts.
Research and Development Costs
Costs incurred in the creation and start-up of new products or changes of
existing products are charged to expense as incurred. The Company incurred
$2.2 million of research and development costs in 1994, $2.3 million in 1993,
and $1.9 million in 1992.
Stock Option Plans
No charges are made to earnings in accounting for stock options granted
because all options are granted at fair market value. If the amounts received
when options are exercised are different than the carrying value of treasury
stock issued, the difference is recorded in retained earnings.
Deferred Charges
Incremental costs related to the development of major computer programs
expected to reduce costs in future periods have been capitalized, are
included in "Investments and other assets" in the consolidated balance sheets
($3.6 million and $3 million at December 31, 1994 and 1993, respectively),
and are being amortized on a straight-line basis over periods not exceeding
ten years. In 1989 debt origination and issuance costs to the Company's Bank
Loan were capitalized. In 1993 the remaining balance of $2.3 million was
charged to expense due to a substantial repayment of the Bank Loan.
Earnings Per Share
Earnings per common share are based upon the average common and common
equivalent shares outstanding during each year. Employee stock options are
the Company's only common stock equivalents; there are no other potentially
dilutive securities. Earnings per common share were based on 4,902,782,
4,715,993, and 4,569,288 common equivalent shares for the years 1994, 1993,
and 1992, respectively.
Foreign Currency Translation
The value of the U.S. dollar fluctuates on foreign currency exchanges which
creates exchange gains or losses on the Company's international investments.
These investments and the related equity earnings (loss) are translated into
U.S. dollars at year-end and average exchange rates, respectively. The gains
or losses that result from translation are shown in the shareholders' equity
section of the consolidated balance sheets. Foreign currency exchange
transaction gains or losses for 1994, 1993, and 1992 were insignificant.
Page 18
Financial Instruments
The Company's financial instruments have fair values which are not materially
different than their carrying values. Short-term investments are carried at
amortized cost because it is the Company's intent to hold the securities to
maturity.
In December, 1994 the Financial Accounting Standards Board issued Statement
No. 119 dealing with "Disclosure about Derivative Financial Instruments and
the Fair Value of Financial Instruments." The Company has entered into
derivative transactions for purposes other than trading as a means of
managing risk of loss of underlying assets. Aluminum metal hedge contracts of
less than one year's duration are utilized to hedge architectural aluminum
product backlog against losses caused by changes in aluminum costs. Certain
foreign currency forward contracts of less than one year's duration are used
to hedge the Company's limited foreign currency exposure. The fair value of
open aluminum metal hedge contracts and foreign currency hedges at December
31, 1994 was immaterial.
The Company has no significant off-balance sheet risks or concentrations of
credit.
Construction Contracts
The Company recognizes earnings on construction contracts using the
percentage of completion method based upon its estimate of the completion of
each project. Costs and estimated earnings in excess of billings at December
31, 1994 and 1993 were $1.5 million and $.6 million, respectively, and are
reflected in the consolidated balance sheets under the caption "Inventories."
Total receivables due under construction contracts, included as trade
receivables, were $21.3 million and $11.3 million at December 31, 1994 and
1993, respectively. Included in the contract receivables were $2.3 million
and $2.9 million at December 31, 1994 and 1993, respectively, for amounts
billed but not collected pursuant to retainage provisions. These amounts are
due upon completion of the contracts.
Acquisition of New Businesses
All acquisitions to date have been accounted for as purchases. The excess of
cost over net assets of businesses acquired, which is classified as
"Investments and other assets" in the consolidated balance sheets, is being
amortized over twenty years or less, and at December 31, 1994 was not
material.
Sale and Dissolution of Businesses
In December, 1993 the Company sold the business and substantially all of the
assets and liabilities used in the business of the Walker Division to Walker
Systems, Inc., a Delaware corporation and The Wiremold Company, a Connecticut
corporation, for the selling price of $34.6 million in cash and the
assumption of certain liabilities. The net proceeds after taxes were used to
reduce long-term debt by $25 million. The Company recorded a net gain after
taxes of $10.7 million from the sale. Net sales and pretax earnings for the
Walker Division for the years 1993 and 1992 were $39.9 million and $4.9
million, and $40 million and $4.5 million, respectively.
In March, 1992 the Company recorded a $3.6 million pretax loss resulting from
Canadian Building Systems, Ltd. discontinuing its business due to insolvency.
The Company also recognized a $2.6 million tax benefit relating to the write
-off of this Canadian investment.
Real Estate Subsidiaries
Butler Real Estate, Inc. (BRE) is a wholly-owned subsidiary providing real
estate development services in cooperation with Butler dealers. In 1994,
1993, and 1992 BRE generated net earnings of $.3 million, $.4 million, and
$.8 million, respectively, from project related activities.
In a separate activity, BMC Real Estate, Inc. (BMCRE) participates in four
land development ventures. Of these, three are joint ventures in which BMCRE
owns 35% to 50% interests, and accounts for these using the equity method.
The combined borrowings of the joint ventures at December 31, 1994 were $.8
million, of which $.4 million is guaranteed by the Company. The fourth land
development venture is wholly-owned by BMCRE. The development is included in
"Assets held for sale" in the consolidated balance sheets with a net carrying
value of $10.3 million at December 31, 1994 and 1993. Management believes the
recovery of its investment in this property may take years and that the
ultimate realizable value approximates the carrying value.
International Joint Venture Operations
The Company has interests in two international joint ventures. The ventures,
Saudi Building Systems, Ltd. (30%-owned), and Butler Japan, Inc. (45%-owned),
are involved in the design, manufacture, and/or marketing of pre-engineered
metal buildings for nonresidential use in their respective markets.
The financial results of the joint ventures are reported using the equity
method of accounting. Total net sales of the joint ventures in 1994, 1993,
and 1992 were $32.6 million, $32.2 million, and $34.4 million, respectively.
The joint ventures' operating earnings in 1994, 1993, and 1992 were $2.9
million, $5.4 million, and $6.9 million, respectively. In 1994 and 1993 total
assets were $21.1 million and $21.2 million, respectively. Total liabilities
for 1994 and 1993 were $6.9 million in both years.
Page 19
The Company received distributions from the international joint ventures in
1994 and 1993 of $1 million and $1.4 million, respectively. No distributions
were received in 1992.
Business Segments
The Company groups its operations into three business segments, Building
Systems, Construction Services, and Other Building Products.
The Building Systems Segment includes the U.S. and foreign building systems
businesses, the Company's international joint venture operations, and real
estate subsidiaries. These business units supply steel and wood frame pre-
engineered building systems for a wide variety of commercial, community,
industrial, and agricultural applications.
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 Other Building Products Segment includes the operations of the Vistawall
and Grain Systems divisions. These businesses design, manufacture, and market
architecturally oriented component systems for nonresidential construction,
including aluminum curtain wall, storefront systems and doors, skylights, and
roof accessories, in addition to the design, manufacture, and sale of
commercial and on-farm grain storage to independent Agri-Contractor and Agri-
Builder dealer organizations. The results of the former Walker Division are
included in the Other Building Products Segment table amounts up until its
sale in December, 1993.
Net sales
(Thousands of dollars) 1994 1993 1992
-------- -------- --------
Building Systems $481,833 $367,028 $318,656
Construction Services 122,493 93,350 66,912
Other Building Products 123,050 140,807 137,879
Intersegment eliminations (35,186) (25,338) (23,270)
-------- -------- --------
$692,190 $575,847 $500,177
======== ======== ========
Net sales represent revenues from sales to affiliated and unaffiliated
customers before elimination of intersegment sales which are separately
disclosed. Intersegment eliminations are primarily sales from the Building
Systems and Other Building Products segments to Construction Services.
The Building Systems Segment and Construction Services Segment had sales to
one customer which accounted for approximately 10% of the Company's net sales
in 1994, 9% in 1993, and 5% in 1992.
Export sales by domestic operations
(Thousands of dollars) 1994 1993 1992
-------- -------- --------
North & South America $ 65,328 $ 34,467 $ 28,269
Far East 28,564 14,441 5,993
Other 11,799 21,553 19,938
-------- -------- --------
$105,691 $ 70,461 $ 54,200
======== ======== ========
Pretax earnings (loss)
(Thousands of dollars) 1994 1993 1992
-------- -------- --------
Building Systems $ 28,652 $ 9,519 $ 4,840
Construction Services 3,244 3,304 1,610
Other Building Products 9,489 10,014 7,425
Corporate (8,829) (6,456) (5,462)
Interest expense (3,895) (4,622) (5,966)
-------- -------- --------
$ 28,661 $ 11,759 $ 2,447
======== ======== ========
Pretax earnings in 1993 excludes the $18 million gain on the sale of the
Walker Division. Pretax earnings in 1992 includes $3.6 million in Building
Systems to write-off the Company's Canadian investment.
Assets
(Thousands of dollars) 1994 1993 1992
-------- -------- --------
Building Systems $154,724 $107,873 $ 97,349
Construction Services 21,339 12,105 9,377
Other Building Products 39,737 35,076 46,617
Corporate 55,336 50,433 42,467
-------- -------- --------
$271,136 $205,487 $195,810
======== ======== ========
Assets represent both tangible and intangible assets used by the segments.
Corporate 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.
Capital expenditures
(Thousands of dollars) 1994 1993 1992
-------- -------- --------
Building Systems $ 11,901 $ 4,931 $ 3,712
Construction Services 485 290 103
Other Building Products 1,182 1,160 1,141
Corporate 95 79 70
-------- -------- --------
$ 13,663 $ 6,460 $ 5,026
======== ======== ========
Page 20
Capital expenditures exclude property, plant, and equipment acquired through
acquisition of new businesses.
Depreciation
(Thousands of dollars) 1994 1993 1992
-------- -------- --------
Building Systems $ 4,811 $ 4,610 $ 4,747
Construction Services 278 224 235
Other Building Products 1,520 2,761 3,299
Corporate 72 80 73
-------- -------- --------
$ 6,681 $ 7,675 $ 8,354
======== ======== ========
Taxes on Income
Effective January 1, 1993 the Company adopted SFAS No. 109, "Accounting for
Income Taxes." Under this standard, deferred income tax expense or benefit
arises from differences between financial reporting and tax reporting of
assets and liabilities, which most often result from the differences in
timing of income and expense recognition. Differences between financial
reporting and tax bases also arise due to business acquisition activity as
tax laws can result in significant differences in values assigned to assets
and liabilities. Previously recorded deferred tax assets and liabilities are
adjusted for any changes in enacted tax rates. Under the previous method,
deferred income tax expense or benefit generally arose only from timing
differences, and previously recorded deferred tax assets and liabilities were
not adjusted to reflect changes in enacted tax rates.
The components of the provision for income taxes are shown in Table A. The
provisions for income taxes were $13.3 million, $11.7 million, and $1.4
million for 1994, 1993, and 1992, respectively. Cash payments for income
taxes were $17.6 million, $4.1 million, and $1.1 million in 1994, 1993, and
1992, respectively. The foreign components of pretax earnings were losses of
$(2.7) million, $(.6) million, and $(2.7) million in 1994, 1993, and 1992,
respectively. A reconciliation of the statutory federal income tax and the
income tax expense is shown in Table B.
Table A: Components of Income Taxes
(Thousands of dollars) 1994 1993 1992
-------- -------- --------
Current:
Federal $ 11,295 $ 11,821 $ 543
State and local 2,251 2,146 85
-------- -------- --------
13,546 13,967 628
-------- -------- --------
Deferred:
Federal (220) (2,124) 659
State and local (20) (182) 81
-------- -------- --------
(240) (2,306) 740
-------- -------- --------
Total income tax expense $ 13,306 $ 11,661 $ 1,368
======== ======== ========
Table B: Reconciliation of Income Tax Expense
(Thousands of dollars) 1994 1993 1992
-------- -------- --------
Expected income tax expense $ 10,031 $ 10,416 $ 832
State and local income tax,
net of federal benefits 1,463 1,395 56
Nondeductible operating losses
of foreign subsidiaries 951 204 919
Effect of discontinuing
Canadian Building Systems, Ltd. - - (998)
Difference in basis of assets - _ 346
Other 861 (354) 213
-------- -------- --------
Actual income tax expense $ 13,306 $ 11,661 $ 1,368
======== ======== ========
Detail of deferred tax assets and liabilities as of December 31, 1994, 1993,
and 1992 is shown in Table C.
Page 21
Table C: Deferred Tax Assets and Liabilities
(Thousands of dollars) 1994 1993 1992
-------- -------- --------
Current deferred tax assets:
Operating expenses $ 4,626 $ 4,037 $ 3,355
Inventory 619 575 649
Restructuring reserves 1,786 2,326 1,407
Other 507 278 1,037
-------- -------- --------
Net current deferred
tax assets $ 7,538 $ 7,216 $ 6,448
======== ======== ========
Noncurrent deferred tax
assets (liabilities):
Depreciation $ (6,595) $ (6,415) $ (7,132)
Operating expenses 3,368 3,399 3,282
Minority investments (968) (1,151) (1,334)
Foreign net operating
loss carryforward 2,552 1,600 1,396
Other (490) (434) (310)
-------- -------- --------
Noncurrent deferred
tax liabilities (2,133) (3,001) (4,098)
Valuation allowance (2,552) (1,600) (1,396)
-------- -------- --------
Net noncurrent deferred
tax liabilities $ (4,685) $ (4,601) $ (5,494)
======== ======== ========
The valuation allowance offsets the deferred tax asset relating to the
foreign net operating loss carryforwards. Depending on future profitability,
the carryforwards may be realized in later years. The valuation allowance
increased $1 million relating to 1994 foreign operating losses. The Company
has sufficient taxable income in the three year carryback period to support
the recognition of its other deferred tax assets.
The Company and its domestic subsidiaries file a consolidated federal income
tax return. The Company's consolidated federal income tax returns have been
examined by the Internal Revenue Service and settled through 1990.
Employee Benefit Plans
Retirement Plans
The Company provides retirement benefits for substantially all employees,
either through a defined benefit plan, the defined contribution Employee
Stock Ownership Plan (ESOP), or a combination of both types of plans. The
Company bases pension contributions on funding standards established by the
Employee Retirement Income Security Act of 1974.
The majority of the Company's salaried and nonunion hourly employees are
covered by both defined benefit plans and the ESOP. These plans are linked
as to retirement benefits, and benefits are based on the employees' highest
five consecutive years' compensation. The Company's bargaining unit employees
are covered by defined benefit retirement plans. Benefits are based upon the
number of years of service.
The funded status and accrued pension cost at December 31, 1994 and 1993 for
the defined benefit plans are presented in Table D. While the market value of
the ESOP assets is not included in the amounts in Table D, the effect of the
ESOP offset has been recognized in the accumulated and projected benefit
obligations. At December 31, 1994 and 1993 an intangible asset of $2.6
million and $3.1 million, respectively, was recorded as "Investments and
other assets" in the consolidated balance sheets, as an offset to the
adjustment required to recognize the minimum liability. Assets held by the
defined benefit plans are generally debt instruments of the U.S. Government
and debt and equity securities issued by domestic corporations. The net
periodic pension cost of these plans in 1994, 1993, and 1992 is presented in
Table E.
Page 22
Table D: Funded Status and Accrued Pension Cost
1994 1993
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
(Thousands of dollars) Benefits Assets Benefits Assets
-------- -------- -------- --------
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 18,986 $ 12,757 $ 20,481 $ 11,927
======== ======== ======== ========
Accumulated benefit
obligation $ 19,060 $ 12,885 $ 20,532 $ 12,043
======== ======== ======== ========
Projected benefit obligation $ 19,064 $ 21,601 $ 20,541 $ 19,991
Plan assets at fair value 20,507 12,607 23,371 11,324
-------- -------- -------- --------
Projected benefit obligation
(greater than)/less than
plan assets 1,443 (8,994) 2,830 (8,667)
Unrecognized net (gain)/loss 807 8,889 (682) 8,117
Unrecognized net transition
(asset)/liability (1,168) 2,429 (1,354) 2,813
Adjustment required to
recognize minimum liability - (2,602) - (3,057)
-------- -------- -------- --------
Prepaid (accrued) pension
cost $ 1,082 $ (278) $ 794 $ (794)
======== ======== ======== ========
Table E: Components of Net Periodic Pension Cost
(Thousands of dollars) 1994 1993 1992
-------- -------- --------
Service cost-- benefits
earned during the period $ 1,983 $ 1,299 $ 911
Interest cost on the pro-
jected benefit obligation 3,141 3,140 3,061
Actual return on assets--
(gain)/loss 2,231 (3,488) (3,391)
Net amortization and
deferral (4,090) 1,377 1,547
-------- -------- --------
Net periodic pension cost $ 3,265 $ 2,328 $ 2,128
======== ======== ========
Assumptions used in deter-
mining net periodic pension
cost and all benefit obli-
gations were:
Expected long-term rate
of return on assets 8.5% 8.5% 8.5%
Discount rate 8.5% 7.5% 8.5%
Long-term rate of increase
in compensation levels 5.5% 5.5% 5.5%
At the end of 1994 the Company increased the defined benefit plans' discount
rate to 8.5%. The increase is expected to decrease 1995 pension expense by
approximately $.6 million. Nevertheless, the Company expects an overall
increase in pension expense in 1995.
The ESOP assets include the Company's common stock, and fixed income
securities which are primarily debt instruments of the U.S. Government. At
December 31, 1994 and 1993, the ESOP had net assets of $45.7 million and
$46.9 million, respectively, and held 736,215 shares and 815,384 shares,
respectively, of Company stock. The Company expensed $.4 million for ESOP
contributions in 1994, 1993, and 1992, respectively.
Other Benefit Plans
The Company sponsors the Butler Employees Savings Trust, a savings plan under
section 401(k) of the Internal Revenue Code. All salaried and nonunion hourly
employees are eligible to participate in this Plan. Under its terms the
Company will match 25% of the first 6% of employees' contributions to the
Plan, given that certain Company profitability levels are attained. In 1994,
1993, and 1992 the Company reached the defined profitability goals and
accordingly expensed $.7 million, $.6 million, and $.6 million, respectively,
as a matching contribution to the Plan.
The Company has a supplemental employee retirement plan. The Company has
purchased life insurance arrangements which name the Company as beneficiary
to meet the liabilities of the plan. The Company expensed $.2 million related
to this plan in 1994.
Page 23
Postretirement Benefits
The Company currently provides certain health care and life insurance
benefits for retired employees and their dependents. Substantially all of the
Company's employees become eligible for these benefits if they reach
retirement age while still working for the Company and have at least ten
years of service. The Company's contribution towards these benefits has been
set to fixed amounts per participant based on 1993 costs. Election of health
care and life insurance benefit coverage for retirees and dependents is
optional, and requires contributions by the retiree towards the cost of these
coverages. The Company has reserved the right to change or terminate all
employee benefits, including postretirement benefits.
In 1993 the Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." This standard requires
companies to accrue for estimated future postretirement benefit costs during
the year that employees perform services and earn the benefits. The Company
had previously recognized retiree health and benefits expense when paid. As
such, the transition obligation in adopting the standard equaled the
accumulated postretirement benefit obligation. As of January 1, 1993 the
accumulated postretirement benefit obligation was $11.5 million, which the
Company elected to amortize over a 20 year period beginning in 1993. The
Company sold its Walker Division in 1993 which had the effect of reducing
the transition obligation by $1.3 million in that year. The transition
obligation was $9.1 million and $9.6 million at December 31, 1994 and 1993,
respectively.
Table F: Accumulated Postretirement Benefit Obligation
(Thousands of dollars) 1994 1993
------- -------
Retirees $ 6,448 $ 7,037
Active participants fully
eligible to retire 2,425 2,925
Other active participants 1,944 2,063
------- -------
10,817 12,025
Unrecognized net loss for changes
in assumptions (477) (1,961)
Remaining accumulated
postretirement benefit obligation (9,071) (9,576)
------- -------
Accrued postretirement benefit
liability $ 1,269 488
======= =======
In 1992 the Company made several plan changes which are incorporated in the
actuarial computation of its accumulated postretirement benefit obligation
and net periodic cost. Net periodic costs were $1.7 million in 1994 and $1.6
million in 1993. The Company paid and expensed benefits of $1.7 million in
1992.
Table G: Net Periodic Postretirement Benefit Costs
(Thousands of dollars) 1994 1993
------- -------
Service cost, benefits attributed to
employee service during the year $ 229 $ 160
Interest cost on accumulated post-
retirement benefit obligation 863 911
Amortization of accumulated post-
retirement benefit obligation 504 574
Deferred (gain) loss 48 (83)
------- -------
$ 1,664 $ 1,562
======= =======
The Company revised its discount rate assumption in 1994 to 8.5% from 7.5%
in 1993. The health care cost trend rate used in the actuarial computation
ranged from 10% in 1994 increasing 1% per year through 1997 to a maximum of
15%, and declining 1% per year thereafter through the year 2001. The
Company's costs are limited to a fixed dollar amount per capita in future
years not to exceed 175% of 1993 costs. The effect of a 1% increase in the
health care cost trend rate on the accumulated postretirement benefit
obligation and net periodic costs would not be material.
Debt, Leases, and Commitments
Long-Term Debt Net of Current Maturities
(Thousands of dollars) 1994 1993
------- -------
Private Placement Notes (A) $35,000 $ -
Bank Loan (B) - 22,650
Industrial Revenue Bonds (C) 4,000 4,540
Other debt 1,263 3,155
------- -------
$40,263 $30,345
(A) In June, 1994 the Company entered into a Private Placement Note Agreement
("Private Placement Notes") with a group of insurance companies. The proceeds
from the financing of $35 million were used to retire the remaining $32.7
million of short and long-term Bank Loan debt and for other corporate
purposes.
The Private Placement Notes carry a fixed interest rate of 8.02%. Annual
principal payments of $5 million are required beginning in December, 1997
and continuing through 2003. The Notes contain certain limitations on
additional borrowings, the payment of cash dividends, and the purchase of
Company stock, as well as covenants related to the maintenance of certain
financial ratios. As of December 31, 1994 the Company was in compliance with
all covenants, and at that date approximately $23.4 million of retained
earnings was available for cash dividends and share repurchases.
Page 24
(B) Prior to refinancing, the Bank Loan carried a variable interest rate
based on prime or LIBOR rates. As of December 31, 1993 the effective interest
rate was 4.9%.
(C) In September, 1994 the Company retired an Industrial Revenue Bond due to
mature in 1996. The Company's remaining Industrial Revenue Bond obligation
bears interest at a stated rate of 13% and matures in 2001. The bond issue
is guaranteed by the Company. The weighted average interest rate on the
combined bond issues was 12.4% for 1994 and 12% for 1993.
Total principal payments due on all debt in each of the five years subsequent
to December 31, 1994 are $2.5 million in 1995, $.5 million in 1996, $5.4
million in 1997, $5.4 million in 1998, $5.4 million in 1999, and $23.6
million thereafter. Cash payments for interest on long-term debt were $3.4
million, $4.1 million, and $4.9 million in 1994, 1993, and 1992, respectively.
Short-Term Borrowings
During 1994 and 1993 the Company borrowed to meet working capital needs and
other requirements. At December 31, 1994 the Company and its subsidiaries had
short-term credit facilities at several banks totaling $52.3 million with
approximately $2.3 million limited to Butler Building Systems, Ltd. (BBSL).
The credit line for BBSL is secured by the assets of that business.
Borrowings outstanding at December 31, 1994 were $.1 million.
Leases
Rental expense under operating leases was $6.1 million, $5.6 million, and
$5.5 million in 1994, 1993, and 1992, respectively. Minimum rental
commitments under noncancelable operating leases are $2.9 million in 1995,
$2.5 million in 1996, $2.2 million in 1997, $2.1 million in 1998, and $2.1
million in 1999.
Commitments
As a service to its independent dealers, the Company assists in obtaining
performance bonds on certain construction contracts in the ordinary course
of business. An irrevocable letter of credit is generally required for a
portion of the contract amount to reduce the possible liability of the
Company. At December 31, 1994 such performance bonds exceeded the related
letters of credit by $3.1 million. The contracts are in various stages of
completion and management believes that there will be no liability to the
Company. In addition, indebtedness of others guaranteed by the Company was
$.4 million at December 31, 1994.
Stock Incentive Plans
Stock options are presently outstanding under the Stock Incentive Plans of
1979 and 1987. The 1987 Plan covering 979,210 shares was approved on April
21, 1987 and it terminated the 1979 Plan except for outstanding qualified and
nonstatutory stock options and stock appreciation rights.
Options are granted at a price equal to the fair market value of Butler stock
at the date of grant for terms of up to ten years. At December 31, 1994,
1993, and 1992, 483,927, 577,755, and 650,707 shares, respectively, under
option were exercisable and 11,382, 21,882, and 38,549 shares, respectively,
were available for grant. Table H presents a summary of stock option activity
for the three years ended December 31, 1994.
Table H: Summary of Stock Option Activity
Number Option
Options of Shares Price Range
------- ------- ------------
Unexercised at 12-31-91 831,760 $11.75-21.41
Granted 10,000 12.00
Exercised (9,955) 11.75-12.91
Terminated (22,876) 13.75-17.27
-------
Unexercised at 12-31-92 808,929 11.75-21.41
Granted 19,000 15.50
Exercised (162,950) 11.75-21.41
Terminated (3,998) 13.75-16.75
-------
Unexercised at 12-31-93 660,981 $11.75-18.65
Granted 10,500 26.25
Exercised (163,501) 11.75-18.65
Terminated (664) 13.05
-------
Unexercised at 12-31-94 507,316 $11.75-26.25
=======
Treasury Stock Activity
(Thousands of dollars) 1994 1993 1992
------- ------- -------
Common stock held
in treasury:
Balance January 1 $37,429 $41,845 $42,119
Purchases 443 152 6
Sales or issues (4,578) (4,568) (280)
------- ------- -------
Balance December 31 $33,294 $37,429 $41,845
======= ======= =======
Purchases of treasury stock were made in 1994, 1993, and 1992 of 15,902,
5,783, and 420 common shares, respectively. Sales or issues of treasury stock
were 163,501, 162,950, and 9,955 common shares in 1994, 1993, and 1992,
respectively. The Company recognized a tax benefit of $.8 million and $.7
million in 1994 and 1993, respectively, which was credited directly to
retained earnings in the treasury stock transaction.
Page 25
Quarterly Financial Information (Unaudited)
(Thousands of dollars except per share amounts)
1994 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 Total
-------- -------- -------- -------- --------
Net sales $117,067 $175,422 $189,645 $210,056 $692,190
Gross profit 17,864 31,486 34,987 35,626 119,963
Net earnings (loss) (1,401) 5,081 6,635 5,040 15,355
Net earnings (loss)
per common share (.29) 1.04 1.33 1.00 3.13
Dividends per share - - .10 .10 .20
1993 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 Total
-------- -------- -------- -------- --------
Net sales $110,708 $144,784 $163,910 $156,445 $575,847
Gross profit 17,253 25,303 29,258 24,721 96,535
Net earnings (loss) (1,212) 2,400 4,141 12,769 18,098
Net earnings (loss)
per common share (.27) .51 .87 2.63 3.84
Dividends per share - - - - -
Annual earnings per share amounts do not equal the sum of the quarterly
earnings per share amounts because of the timing of net earnings and the
issuance of common shares during the years.
During 1993 the Company sold its Walker Division and used the net cash
proceeds to pay down long-term debt. Had the Walker operations been excluded
from consolidated net earnings, and the interest expense savings from the
debt pay down been included, the quarterly effect on net earnings for 1993
would be a decrease of $.3 million, $.6 million, $.9 million, and $.4 million
for the first, second, third, and fourth quarters, respectively, totaling
$2.2 million for the year. Earnings per share would decrease $.06 per share,
$.13 per share, $.19 per share, and $.09 per share for the first, second,
third, and fourth quarters, respectively, totaling $.47 per share for the
year.
Price Range of Common Stock (Unaudited)
The Company's common stock is traded in the Over-the-Counter Market. The
table below summarizes the high and low closing prices as reported on the
NASDAQ National Market System.
1994 1993
---- ----
Quarter High Low High Low
------- ------- ------- ------- ------
First $29 1/4 $24 $20 $13 1/2
Second 25 3/4 21 1/2 19 3/4 18 1/2
Third 32 1/2 24 1/8 30 1/4 19
Fourth 35 1/4 30 1/4 30 3/4 24 1/4
Page 26
Independent Auditors' Report
To the Board of Directors
Butler Manufacturing Company:
We have audited the consolidated balance sheets of Butler Manufacturing
Company and subsidiaries as of December 31, 1994 and 1993 and the related
consolidated statements of earnings and retained earnings and cash flows for
each of the years in the three-year period ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Butler
Manufacturing Company and subsidiaries at December 31, 1994 and 1993, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1994 in conformity with generally
accepted accounting principles.
As discussed in the Notes to Consolidated Financial Statements, in 1993 the
Company adopted the provisions of Statements of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" and No. 109, "Accounting for Income Taxes."
/s/ KPMG Peat Marwick
Kansas City, Missouri
February 3, 1995
Page 27
Historical Review 1994-1990
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
Income Statement Data
Net sales $692,190 $575,847 $500,177 $460,828 $564,459
Net earnings (loss) 15,355 18,098 1,079 (11,954) 8,177
As a percent of sales 2.2% 3.1% 0.2% (2.6%) 1.4%
As a percent of
average shareholders'
equity 21.8% 35.4% 2.8% (27.6%) 18.2%
Per share of common stock:
Net earnings (loss) 3.13 3.84 0.25 (2.62) 1.81
Cash dividends
declared, per
common share .20 - - - -
Cash dividends paid,
per common share .10 - - - -
Financial Position at Year-End
Assets
Current assets 188,652 128,266 115,425 110,785 128,264
Property, plant, and
equipment, net 48,526 41,528 47,863 54,407 62,669
Total assets 271,136 205,487 195,810 198,389 221,691
Working capital
Net working capital 52,572 30,072 44,286 27,053 40,474
Ratio of current
assets to current
liabilities 1.4 1.3 1.6 1.3 1.5
Financial structure
Long-term debt, less
current maturities 40,263 30,345 67,315 67,856 70,909
Total debt 42,737 41,713 68,797 69,612 76,166
Shareholders' equity 79,102 61,709 40,551 37,624 48,875
Per common share,
year-end 16.24 13.07 8.88 8.26 10.77
Total debt as a
percent of total
capital 35.1% 40.3% 62.9% 64.9% 60.9%
General Statistics
Depreciation 6,681 7,675 8,354 9,909 10,574
Capital expenditures 13,663 6,460 5,026 5,737 8,017
Common shares out-
standing, average 4,903 4,716 4,569 4,569 4,536
Common shares out-
standing, year-end 4,870 4,722 4,565 4,556 4,539
Common shareholders,
year-end 2,473 2,562 2,725 2,754 2,876
Number of employees,
year-end 3,564 3,064 3,169 3,040 3,444
1. Thousands of dollars, except per share amounts for common stock.
2. The 1993 net earnings include an after-tax gain on the sale of the
Walker Division of $10.7 million or $2.27 per share.
3. The 1991 net earnings include an after-tax restructuring charge of $4
million.
Page 28
EX-24
6
POWER OF ATTORNEY
1
EXHIBIT 24.0
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned hereby
constitutes and appoints Richard O. Ballentine and John Huey, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and revocation in each, for him/her and in his/her name, place and
stead, to sign any or all reports (including reports on Form 10-K, Form 3, Form
4, Form 5, Schedule 13-D, Schedule 13-G, and Form 144), and any amendments
thereto, required or permitted to be filed by him under the Securities and
Exchange Act of 1934, or the Securities Act of 1933, with respect to beneficial
ownership of, and transactions in, equity securities of BUTLER MANUFACTURING
COMPANY, a Delaware corporation (the "Company"), and with respect to other
matters relating to the Company, and to file the same, with all documents
required or permitted to be filed in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
DATED: JANUARY 16, 1995 /S/ HAROLD G. BERNTHAL
----------------------------------------------------
HAROLD G. BERNTHAL
DATED: JANUARY 11, 1995 /S/ ROBERT E. COOK
----------------------------------------------------
ROBERT E. COOK
DATED: JANUARY 14, 1995 /S/ ALAN M. HALLENE
----------------------------------------------------
ALAN M. HALLENE
DATED: JANUARY 11, 1995 /S/ C.L. WILLIAM HAW
----------------------------------------------------
C.L. WILLIAM HAW
DATED: JANUARY 16, 1995 S/ GEORGE E. POWELL, JR.
----------------------------------------------------
GEORGE E. POWELL, JR.
DATED: JANUARY 11, 1995 /S/ DONALD H. PRATT.
----------------------------------------------------
DONALD H. PRATT
DATED: JANUARY 11, 1995 /S/ ROBERT J. REINTJES, SR.
----------------------------------------------------
ROBERT J. REINTJES, SR.
DATED: JANUARY 13, 1995 S/ JUDITH A.ROGALA
----------------------------------------------------
JUDITH A. ROGALA
DATED: JANUARY 10, 1995 /S/ ROBERT H. WEST
----------------------------------------------------
ROBERT H. WEST
-65-
EX-27
7
FINANCIAL DATA SCHEDULE
5
0000015840
BUTLER MANUFACTURING COMPANY
1,000
YEAR
DEC-31-1994
JAN-01-1994
DEC-31-1994
5,284
0
95,277
0
58,906
188,652
184,576
136,050
271,136
136,080
40,263
12,623
0
0
99,579
271,136
692,190
691,289
572,227
572,227
86,506
0
3,895
28,661
13,306
15,355
0
0
0
15,355
3.13
3.13
Reflects long-term debt, less current maturities
Reflects other stockholders' equity before deduction of $33.3 million cost of
treasury stock
Reflects net sales plus net international joint venture income less net other
expense
Consists of selling, general, and administrative expense