EX-19 3 c71152exv19.txt LETTER TO SHAREHOLDERS EXHIBIT 19 BUTLER MANUFACTURING COMPANY Second Quarter Report 2002 Six Months Ended June 30, 2002 To Our Shareholders: Second quarter sales for Butler Manufacturing Company were $213 million, comparable to a year ago. Net earnings for the quarter were $0.3 million, or $.05 per share, compared with $3.4 million, or $.54 per share, earned in the second quarter of 2001. The significant decline in net earnings for the quarter is primarily due to lower selling prices depressing gross profit margins. For the first six months sales decreased 3% to $396 million compared with $409 million a year ago. Through June, the net loss was $5.1 million, or $.81 per share, compared with net earnings of $0.6 million, or $.10 per share last year. For the first six months, sales in the North American Building Systems segment were $176 million, approximately 13% lower than a year ago. Year to date operating results for the segment reflected a loss of $7.2 million. The significant decline in the nonresidential construction markets has heightened price competition depressing gross margins. Expenses have been well managed and are flat with a year ago, despite substantially higher health care and pension related costs. The Company's manufacturing capacity that was temporarily idled late last year remains off-line and at this point in the market cycle will likely not be needed until signs of a market rebound are well underway. In the International Building Systems segment, six months' sales were up 52%, all driven by our China building systems business. Operating income in this segment was approximately $3.0 million compared with $0.3 million a year ago, all related to our China operations. The China diversification strategy is building critical mass in an important and dynamic growth market. This businesses' earnings contribution helped to dampen the current cyclical decline in the North American market. Its future growth should provide greater positive earnings momentum. The addition of our second plant in China, announced earlier this year, is on schedule for an early 2003 opening. We reported the sale of our European pre-engineered metal buildings business to the Lindab AB Group in the first quarter. We did not close this transaction in the second quarter as anticipated due to delays in receiving government approvals. The approvals were received in early July and we anticipate closing the sale of this business within the next few weeks. The business operated at breakeven year to date. Through June, the Vistawall Architectural Products segment sales were $108 million, 7% lower than a year ago. Operating earnings were $4.1 million compared with $7.5 million last year. The significant decline in office and retail construction markets reduced the market opportunity and heightened price competition, lowering the gross profit margins in this business. Expenses have been reduced in this segment helping to offset a portion of the decline in gross profit. Office construction, an important market for this business, has seen a steep correction over the past year and while the rate of decline has eased, there is no indication of a sustained upturn anytime soon. Butler Construction's sales were $65 million compared with $51 million in the first half of 2001. Operating earnings were $1.1 million compared with $0.7 million for the same period a year ago. The strong start in this business and the excellent backlog led to the positive improvement through the first six months. The Real Estate segment sales were $6 million compared with $16 million for the first half last year. The decline reflects the overall downturn in the nonresidential construction market and the lower backlog of projects at the beginning of this year. Pretax earnings, which included rent and fee income for this business, were $1.5 million compared with $2.6 million a year ago. The Company's balance sheet remains solid with approximately $44 million in cash at the end of the quarter. There is always room for improvement in managing our assets and generating cash flow and that is our focus. The accounting scandals of the past few months have shaken investor confidence. I want to assure you that Butler Manufacturing Company has always followed conservative accounting practices recording expenses and revenues appropriately. The alignment of shareholders' interests with the employees and management of Butler is clear with over 18% of Butler common stock in our hands. That fact and our uncompromising values will continue to serve us well in the future, regardless of the changing regulatory environment. As expected, the first six months of the year have been difficult. F. W. Dodge reports that nonresidential construction orders through May, the latest data available, declined 11% compared with a year ago. The nonresidential construction economy continues to trend downward nearing the lows set in the early 1990's. Against this backdrop, we are balancing the near-term operating environment with careful management of expenses and selective investment in our growth strategy to emerge from this current downturn even stronger than today. The Company's backlog totals $332 million, 3% lower than a year ago. Our higher margin product backlog is equal to a year ago and the construction backlog is down 15%. At this point in the cycle, it is difficult to predict market conditions for the balance of the year. We anticipate some seasonal pick-up in the third quarter, typically the strongest quarter of the year. However, we anticipate pricing conditions to remain very competitive and that, coupled with higher steel costs related to the tariffs announced earlier this year, will keep the pressure on gross margins and operating profitability.
CONSOLIDATED STATEMENTS OF OPERATIONS --------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2002 2001 2002 2001 --------------------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Net sales $ 213,421 $ 213,672 $ 396,273 $ 408,531 Cost of sales 184,210 180,014 344,943 350,108 ----------- ----------- ----------- ----------- Gross profit 29,211 33,658 51,330 58,423 Selling, general and administrative expenses 27,909 27,131 55,746 55,318 ----------- ----------- ----------- ----------- Restructuring charge (credit) -- -- -- -- ----------- ----------- ----------- ----------- Operating income (loss) 1,302 6,527 (4,416) 3,105 Other income, net 686 220 616 706 ----------- ----------- ----------- ----------- Earnings (loss) before interest and taxes 1,988 6,747 (3,800) 3,811 Interest expense 1,975 1,594 3,933 3,073 ----------- ----------- ----------- ----------- Pretax earnings (loss) 13 5,153 (7,733) 738 Income tax expense (benefit) (281) 1,728 (2,659) 116 ----------- ----------- ----------- ----------- Net earnings (loss) $ 294 $ 3,425 $ (5,074) $ 622 =========== =========== =========== =========== Basic earnings (loss) per common share $ 0.05 $ 0.55 $ (0.81) 0.10 =========== =========== =========== =========== Diluted earnings (loss) per common share $ 0.05 $ 0.54 $ (0.81) $ 0.10 =========== =========== =========== =========== Basic weighted average number of shares 6,315,046 6,282,620 6,302,643 6,278,123 Diluted weighted average number of shares 6,324,684 6,290,487 6,302,643 6,282,057
CONSOLIDATED BALANCE SHEETS ------------------------------------------------------------------------------------------------------------------------------- AT JUNE 30, 2002 2001 2002 2001 ------------------------------------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) LIABILITIES & ASSETS: SHAREHOLDERS' EQUITY: Cash and equivalents $ 44,431 $ 18,270 Notes payable $ 2,413 $ 2,037 Receivables, net 116,583 138,275 Current maturities of Inventories 58,986 57,218 long-term debt 5,567 5,586 Real estate developments Accounts payable 76,179 69,737 in progress 18,459 42,491 Accrued liabilities 91,386 69,908 Prepaid income taxes 16,635 10,587 Taxes on income 3,960 8,793 Other current assets 8,468 6,475 Dividends payable 1,136 1,069 ---------- ---------- --------- --------- Total current assets 263,562 273,316 Total current liabilities 180,641 157,130 Investments and other assets 52,777 42,004 Deferred income taxes 3,683 1,409 Assets held for sale 3,684 3,832 Other non-current liabilities 18,041 19,017 Plant and equipment, net 138,335 125,946 Long-term debt 97,916 103,274 Shareholders' equity 158,077 164,268 ---------- ---------- --------- --------- $ 458,358 $ 445,098 $ 458,358 $ 445,098 ========== ========== ========= =========
CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2002 2001 2002 2001 ------------------------------------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) CASH FROM CASH FROM OPERATING ACTIVITIES: FINANCING ACTIVITIES: Net earnings (loss) $ (5,074) $ 622 Dividends (2,264) (2,131) Depreciation and amortization 9,000 8,282 Net change in long-term debt (328) 49,976 Change in assets and liabilities (2,700) (2,737) Net change in short-term debt 263 (33,095) Other, net 55 (19) Purchase and sale of ---------- ---------- treasury stock, net 673 620 Total 1,281 6,148 Other, net 75 (299) ---------- ---------- --------- --------- Total (1,581) 15,071 --------- --------- CASH FROM INVESTING ACTIVITIES: Capital expenditures (3,068) (18,656) Other, net (4,770) (1,148) INCREASE/(DECREASE) IN ---------- ---------- Total (7,838) (19,804) CASH AND EQUIVALENTS $ (8,138) $ 1,415 ---------- ---------- ========= =========