UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

(Mark one)

Commission File Number 001-12335

BUTLER MANUFACTURING COMPANY

1540 Genessee Street, (P.O. Box 419917, zip code 64141), Kansas City, Missouri 64102
(Address of principal executive offices)

(816) 968-3000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  X  No     .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 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 or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 or the Act.) Yes X  No     .

The aggregate market value of Registrant’s Common Stock held by non-affiliates based on the closing price of $16.53 on June 30, 2003, the end of the second fiscal quarter, was $103,197,311.

The Registrant had 6,335,425 shares of no par value Common Stock issued and outstanding as of February 23, 2004.

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BUTLER MANUFACTURING COMPANY

FORM 10-K

For the Fiscal Year Ended December 31, 2003

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CONTENTS

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FORWARD LOOKING INFORMATION

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which may include statements concerning projection of revenues, income or loss, capital expenditures, capital structure, or other financial items, statements regarding the plans and objectives of management for future operations, statements of future economic performance, statements of future operations, statements of the assumptions underlying or relating to any of the forgoing statements, and other statements which are other than statements of historical fact. These statements appear in a number of places in this report and include statements regarding the intent, belief, or current expectations of the company and its management. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “plan,” “foresee,” “believe” or “continue” or the negatives of these terms or variations of them or similar terminology. Although management believes the expectations reflected in these forward-looking statements are reasonable, there can give no assurance that these expectations will prove to have been correct. Important factors that could cause actual results to differ materially from management’s expectations include (i) general economic, industry, business and social conditions; (ii) an inability to consummate a transaction as described more fully herein that provides for repayment in full of the company’s outstanding senior notes by April 30, 2004 coupled with the inability to negotiate amendments to loan covenants, or actions the company’s lenders to accelerate the company’s debt due to its ongoing defaults, and the potential that any such circumstance would force the company to file for protection under Chapter 11 of the U.S. Bankruptcy Code; (iii) changes in the willingness of vendors or trade creditors to deal with the company or in the credit or other commercial terms on which they are willing to do so; (iv) changes in customer confidence in the company and its products or loss of customer relationships; (v) the timing of, and legal, regulatory and other conditions associated with, the completion of the Merger; (vi) competitive pressures in the markets in which the company competes; (vii) weak demand for the company’s products; (viii) other consolidations, restructurings, or other ownership changes in the construction or steel industries; (ix) the loss of key employees; (x) the supply and price of materials used by the company; (xi) the demand and price for the company’s products and services; and (xii) other trends affecting the company’s financial condition or results of operations including changes in manufacturing capacity utilization and corporate cash flow in both domestic and international markets. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially as a result of these various factors

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PART I

Item 1. Business

(a) General Description of Business

General

Butler Manufacturing Company (the “company”) was founded as a partnership in 1901, incorporated in Missouri in 1902, and later reincorporated in Delaware in 1969. Its corporate headquarters are located in Kansas City, Missouri, and the company operates manufacturing facilities, engineering offices, and service centers throughout the continental United States and 15 foreign countries. Principal international operations are conducted through Chinese wholly owned subsidiaries, Butler (Shanghai) Inc., and Butler (Tianjin) Inc., and through Saudi Building Systems Ltd. and Vistawall International (UAE) Ltd., minority owned joint ventures in Saudi Arabia and the United Arab Emirates. In 2002 the company completed the sale of the assets of its European metal buildings business to the Lindab AB Group.

The company is primarily engaged in the marketing, design, and production of building systems and components for nonresidential structures. Products and services fall into five principal business segments: (1) North American Building Systems, consisting primarily of custom designed and pre-engineered steel and wood frame building systems for commercial, community, industrial, governmental, and agricultural uses; (2) International Building Systems, consisting primarily of custom designed and pre-engineered steel buildings for commercial, community, industrial, and governmental use primarily in China; (3) Architectural Products, consisting primarily of curtain wall and storefront framing systems, standard and custom window systems, skylights, and roof vents for low-rise, medium-rise, and high-rise nonresidential buildings; (4) Construction Services, providing construction management services for purchasers of large, complex, or multiple site building projects; and (5) Real Estate, providing build-to-suit-to-lease development services for corporations that prefer to lease rather than own their facilities.

The company’s products are sold, installed, and serviced through independent dealers or contractors that serve the commercial, community, industrial, governmental, and agricultural markets.

Recent Development

On February 15, 2004, the company entered into a merger agreement (“Merger Agreement”) pursuant to which BSL Acquisition Corporation, a wholly owned subsidiary of BlueScope Steel Limited (“BlueScope”), of Melbourne, Australia, will merge with and into the company (the “Merger”), and the company will become a wholly owned subsidiary of BlueScope. Pursuant to the Merger Agreement, each outstanding share of company common stock will be exchanged for the right to receive $22.50 in cash. The acquisition will be subject to a number of conditions, including the company achieving defined levels of financial performance for the first quarter of 2004, no acceleration of any amounts owed by the company to its senior lenders, and no environmental liability remediation costs in excess of $5 million, as well as shareholder approval and approval by regulatory authorities in the United States. Butler shareholders are expected to vote on the proposed acquisition in April 2004.

Pending the satisfaction of the conditions mentioned above and others included in the Merger Agreement, Butler and BlueScope expect the acquisition of Butler to be complete by April 30, although there are no assurances the Merger will close at that time or at any other time. In connection with the Merger Agreement, BlueScope, the company, and its senior note holders have reached mutually satisfactory agreements that provide the note holders assurance from BlueScope that the senior notes will be immediately paid in full if BlueScope closes the Merger. See the section on Management’s Discussion and Analysis of Financial Condition and Results of Operation — Liquidity in Part II, Item 7 of this report.

(b) and (d) Financial Information About Industry and Geographic Segments

For information about operating segments, see the section on Business Segments in the Notes to Consolidated Financial Statements under Part II, Item 8 of this report.

(c) Narrative Description of Business

North American Building Systems

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The company’s largest Segment, North American Building Systems, includes principally the United States, Canadian, and Latin American pre-engineered metal building systems businesses. Along with the company’s industry-leading Butler-brand building system, the Segment includes the entry-level priced metal buildings product offering of Liberty Building Systems, Inc., as well as the Lester Building System wood frame buildings business.

The company’s North American Building Systems Segment activities consist primarily of the design, engineering, fabrication, and distribution of one to five-story steel and one to two-story wood frame buildings for industrial, commercial, community, governmental, and agricultural uses, such as manufacturing facilities, warehouses, office buildings, schools, churches, shopping centers, restaurants, convenience stores, livestock, 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 assembly by independent dealers. Building components are manufactured for North American and export sales in plants located at Galesburg and Charleston, Illinois; Laurinburg, North Carolina; Visalia, California; Annville, Pennsylvania; San Marcos, Texas; Lester Prairie, Minnesota; Selmer, Tennessee; Clear Brook and Staunton, Virginia; and Monterrey, Mexico. In December 2003, the company announced the permanent closure of the Birmingham, Alabama metal buildings plant, which prior to the announcement was temporarily idled.

The primary business of the company’s North American Building Systems Segment is the design, manufacture, and sale of the Butler brand of nonresidential pre-engineered metal buildings. The company founded the pre-engineered metal buildings industry in the middle of the twentieth century and has held the leading position from inception. Butler Buildings are sold throughout the United States through a network of over 1,300 independent Butler Builders. These dealers provide construction services, and in many cases, design and engineering capabilities.

Nonresidential pre-engineered buildings compete with conventional forms of building construction in the low-rise commercial, community, industrial, agricultural, and governmental 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 in the United States, Canada, and South America. The company is a leading manufacturer of steel frame pre-engineered building systems within the United States with its largest competitors being: American Buildings Company, a subsidiary of MAGNATRAX Corporation, NCI Building Systems, Inc., Robertson — Ceco Corporation, a subsidiary of Heico Companies LLC, and V. P. Buildings Inc., a wholly owned subsidiary of Grupo IMSA, S.A. de C.V. of Mexico. Competition among manufacturers of pre-engineered buildings is based primarily upon price, service, product design and performance, and marketing capabilities.

The company’s principal export markets are Central America, the Caribbean, select other Latin American markets, and Canada. Shipments are sourced primarily from Butler’s U.S. plants, local manufacturing alliances, and commencing in December 2003, the company’s Monterrey, Mexico metal buildings plant. Principal sales and engineering offices for these regions are located in Mexico City, Mexico and Burlington, Ontario.

Liberty Building Systems produces lower-cost metal buildings for commercial, community, and industrial end uses in smaller communities, and primarily competes with regional metal building manufacturers in the Southern and Western regions of the United States. Liberty Buildings Systems’ products are distributed directly to end-users as well as through open distribution channels.

In 2003, the company established a new manufacturing plant in Monterrey, Mexico to produce frames and its long-bay structural system known as Landmark 2000. The new leased facility enables the company to be more competitive in both costs and service in Latin American markets. The 120,000 square foot plant became operational in December of 2003 and primarily serves building markets throughout Mexico and Latin America, but also markets in the U.S. as well. The company’s investment in equipment for the facility was approximately $3 million and the operation employs approximately 50 associates.

Also in 2003, the company leased space to manufacture the new R-Steel product line, a one-piece insulated curtain wall panel system for commercial and community applications. Production began during the third quarter of 2003 in Staunton, Virginia. The product is distributed through the Butler Builder dealer network.

Lester Building Systems, the company’s wood frame buildings business, sells its products through independent dealers and a direct-sales operation. Lester operates three plants in the United States serving the mid-west and middle Atlantic markets. Lester competes with other regional wood building manufacturers, such as Morton Buildings, Inc. and Cleary Buildings, Inc., as well as several single plant manufacturers and lumberyards.

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On May 15, 2003, the company entered into a letter of intent to sell substantially all of the assets of the Lester Building Systems business to a management team headed by the current Lester Building Systems’ president. The company recorded a $7 million pretax charge related to the proposed sale to write down the assets to fair value. An additional $.8 million was recorded for selling and legal costs related to negotiating the sale. The closing of the transaction was scheduled to occur by November 21, 2003, however the company did not receive the consent from its senior lenders to proceed with the sale and the sale agreement terminated. Accordingly, at December 31, 2003, the Lester assets were reclassified from assets held for sale to assets held and used. Also, a credit to the asset impairment charge in the amount of $2.2 million was taken in the fourth quarter to adjust the Lester assets to fair market value.

In December 2003, the company announced the permanent closure of the Birmingham, Alabama metal buildings plant, which prior to the announcement was temporarily idled. The closing of this facility will result in cost savings associated with the permanent removal of overhead costs due to excess capacity. In conjunction with the closing, the company recorded $.7 in termination and severance benefits. As of December 31, 2003, the fair market value of the facility as determined by independent appraisal exceeded the net book value of the facility, thereby eliminating the need for any asset impairment charge.

Effective January 1, 2004, the company combined the Construction Segment with the North American Building Systems Segment, forming the Buildings Group. The combination is expected to provide cost savings and better alignment of capabilities, enabling more thorough integration of the construction supply chain and enhanced service to customers. In conjunction with the combination, the company recorded $.2 million in termination and severance benefits in 2003 as well as an asset impairment charge of $2.4 million. Costs related to the move as well as the effect of any contract termination costs on the existing lease will be charged to operations when incurred in 2004.

International Building Systems

The International Building Systems Segment includes Butler Shanghai Inc., and Butler Tianjin Inc., wholly owned Chinese metal building systems subsidiaries, and Saudi Building Systems Ltd., a minority owned Saudi Arabian metal buildings joint venture. Prior to its sale in July 2002, the Segment also included the company’s European metal buildings business.

The majority of the activity and assets with this Segment are those of the Chinese subsidiaries. These subsidiaries market, engineer, and manufacture metal buildings systems for the Chinese market as well as for export to other Asian countries. Products are typically distributed through direct selling to end customers and through an established builder network. In January 2003, the company opened its second manufacturing facility for this region in Tianjin, China. The manufacturing plant, with a total capital cost of $11 million, produces secondary structural frames and wall panel systems. Also in 2003 the company introduced its Vistawall architectural product line to mainland China establishing a sales, engineering, and fabrication presence. The Chinese market is highly competitive and the company competes with both local and multi-national metal building companies. As in other markets, the company’s products compete based on price, service, product design, and performance.

The company’s operations in China represent an increasing portion of the company’s business in terms of revenues, earnings, and assets. Accordingly, changes in political or regulatory conditions, trade protection measures, or currency exchange policies could adversely affect operating results in any reporting period.

The company is exposed to foreign currency exchange rate risks with respect to its sales, profits, and assets and liabilities denominated in currencies other than the U.S. dollar. Factors reducing such exposure in China include the historical pegging of the Chinese currency to the U.S. currency. The company’s manufacturing facilities in China serve predominantly Chinese markets and its activities are largely denominated in the Chinese currency. However, there can be no assurance that the company will be fully protected against foreign currency fluctuations.

In July 2002, the company completed the sale of certain assets of its European metal building systems subsidiaries, closed its European sales and engineering offices, and disposed of the remaining assets of the European operation. The relatively small scale of the European operation, the continued loss position of the business, and a business recession in Europe contributed to this decision. The company continues to be represented in Europe through licensee arrangements.

Saudi Building Systems, Ltd. manufactures pre-engineered steel frame buildings for Middle Eastern markets at manufacturing facilities located in Jeddah, Saudi Arabia. The company owns a 30% interest in this joint venture and accounts for its activities using the equity method.

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Architectural Products

The Architectural Products Segment includes the operations of the Vistawall group which designs, manufactures, and sells aluminum extruded curtain wall systems for mid and high-rise office markets, and sells entry doors, standard and custom architectural window systems, translucent roof and wall systems, custom and standard skylights, and other standard storefront products primarily for low-rise retail and commercial markets. The Vistawall Group’s products are primarily distributed on a material supply basis to either curtain wall erection subcontractors or general contractors, and through its distribution warehouses to glazing contractors for storefront and entry door applications. Manufacturing facilities are located in Midway, Tennessee and Terrell, Texas. Fabrication facilities are located in Warwick, Rhode Island; Newnan, Georgia; Modesto, California; and Wausau, Wisconsin. Distribution warehouses are located in Tucker, Georgia; Hayward, Rancho Cucamonga, and Sacramento, California; Denver, Colorado; Brooklyn Park, Minnesota; Cincinnati and Cleveland, Ohio; Houston and Dallas, Texas; Tampa, Florida; Chicago, Illinois; Jessup, Maryland; St. Louis, Missouri; and Seattle, Washington. In 2001 Vistawall added to its production capacity the extruding and finishing facility located in Midway, Tennessee. During 2003, Vistawall added the distribution warehouses in Sacramento, California and Brooklyn Park, Minnesota.

The Vistawall Group 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 price, engineering capabilities, delivery, appearance, and other specific customer requirements.

The company has a 40% interest in Vistawall International Ltd, a joint venture located within the United Arab Emirates which designs, manufactures, and sells architectural aluminum products in Middle Eastern markets. In 2003, the business activity of and investments of the joint venture were immaterial to the operations of the company.

Construction Services

The company’s Construction Services Segment consists of Butler Construction, a wholly owned construction subsidiary also known as BUCON, Inc. BUCON provides comprehensive design, planning, execution, and construction management services to major purchasers of construction. Butler Heavy Structures is an operating unit of Butler Construction serving markets requiring large, complex building designs using fabricated mill steel in combination with Butler’s pre-engineered secondary structural and metal cladding systems. Revenues from the Construction Services Segment are derived primarily from turnkey construction, material-erect, and material only subcontracts. Butler Construction’s projects typically incorporate products from several company businesses, predominantly the company’s U.S. metal buildings businesses. The Construction Services Segment is headquartered in Kansas City, Missouri.

BUCON competes with numerous international, national, regional, and local general contracting firms, and whenever possible, performs projects in conjunction with independent Butler dealers. Competition is primarily based upon price, design, speed of project execution, and product performance.

As discussed previously in General Description of Business section under Part I Item 1 (a), effective January 1, 2004, the company combined the Construction Services Segment with the North American Buildings Systems Segment, forming the Buildings Group.

Real Estate

The Real Estate Segment consists of Butler Real Estate, Inc., a wholly owned subsidiary of the company, which provides value-added real estate development and leasing services to major corporations in cooperation with Butler dealers. Butler Real Estate, Inc. generally functions as a development and financing source during the lead procurement and construction process, and as a seller of the completed project. On the basis of commitments to lease obtained from credit worthy tenants, Butler Real Estate, Inc. acquires building sites, arranges with Butler dealers for construction of build-to-suit projects, and sells the completed projects to permanent investors when the facilities are occupied by lessees.

Manufacturing and Materials

The company’s manufacturing facilities include most conventional metal fabricating operations, such as punching, shearing, welding, extruding, and forming of sheet and structural steel and aluminum. Other metal manufacturing processes include painting and anodizing. Wood frame manufacturing operations include sawing and truss fabrication. The principal materials used in the manufacture of products include steel, aluminum, wood, and purchased parts.

During 2003 steel prices moved erratically but were generally higher than those of 2002. In 2002, the United States invoked tariffs on certain steel product imports causing significant price increases in the latter half of that year. Competitive pricing pressures have prevented the company from recapturing all of the steel price differential in its selling prices. Early in 2004, the

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company experienced unprecedented increases in steel pricing as a result of lower availability of raw materials, escalating energy costs and unusually high demand in China. Consequently pricing contracts with the company’s vendors were being modified on a weekly basis, either through actual material costs changes or surcharges. To minimize the erosion of margins, price increases on incoming sales were being passed to customers to the extent possible through the company’s product sales pricing. Further increases are expected into the second quarter of 2004, which may impact the level of both sales and profitability.

Aluminum costs were stable through October of 2003, but then experienced a 6% increase through the end of the year. Further increases of up to 8% are expected during the first quarter of 2004. Improved economic conditions throughout the world and increased consumption in China were the most recognized causes of the change in prices, while improvement in the U.S. economy along with continued curtailments of U.S. aluminum production has tightened local supply. For all of 2004, the company anticipates aluminum costs will remain strong for the balance of 2004 with some escalation possible. Vistawall continues to manage exposure to rising aluminum prices through hedging contracts and forward purchase contracts, while implementing price adjustments on its products.

Business Cycles and Seasonal Demand

Historically, the company’s sales and net earnings have been affected by cycles in the general economy, which influence nonresidential construction markets (see Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview in Part II, Item 7 of this report). In 2003, the domestic construction markets recorded the fourth consecutive annual decline, as F.W. Dodge reported a 3% decline in nonresidential construction orders, with the commercial segment off 6% and the manufacturing segment up 8%, a positive development albeit increasing from a very low base. Because the economy appears to be showing signs of improvement, coupled with the aggressive cost reductions and new products and capabilities developed during 2003, management believes that the company is on a path toward profitability.

The company also experiences seasonal demand, which increases and decreases based upon how conducive the weather is for construction. Sales for the first, second, third, and fourth quarters of 2003 were $170 million, $174 million, $221 million, and $231 million, respectively. For 2002, sales for the first, second, third, and fourth quarters of 2002 were $183 million, $213 million, $239 million, and $193 million, respectively. The seasonal demand is negatively influenced by severe weather including significant precipitation and extremes in temperatures.

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 expended $.6 million of research and development costs each year during 2003, 2002, and 2001.

Backlog

The company’s backlog of orders believed to be firm was $318 million at December 31, 2003, 20% higher than a year ago. The higher margin product backlog was about 17% higher than the levels of the previous year, while the construction backlog was 33% higher.

Backlog by segment is presented below.

Employees

At December 31, 2003 the company employed 4,298 persons, 3,986 of whom

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were non-union employees, and 312 of whom were hourly paid employees that were members of two unions.

Available Information

The company’s Internet website address is http://www.butlermfg.com. The company makes the following reports filed or furnished by it available, free of charge, on its website under the heading “Investor Relations:”

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Annual Report on Form 10-K;

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Quarterly Reports on Form 10-Q;

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Current reports on Form 8-K; and

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Amendments to the foregoing reports.

The foregoing reports are made available on the company’s website as soon as practicable after they are filed or furnished with the Securities and Exchange Commission (“SEC”) at http://www.sec.gov.

Item 2. Properties

The principal plants and physical properties of the company consist of the manufacturing facilities described under Part I, Item 1 and its world headquarters office in Kansas City, Missouri. Through a subsidiary, the company also owns a land development venture with property located on approximately 75 acres in San Marcos, Texas. The property is recorded as “Assets held for sale” and described in the Notes to Consolidated Financial Statements in Part II, Item 8 of this report. All other plants and offices described under Part I, Item 1 are utilized by the company and are generally suitable and adequate for the business activity conducted therein. The company’s manufacturing facilities, along with current outsourcing agreements with various domestic and foreign fabricators, provide production capabilities sufficient to meet current and foreseeable needs.

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 world headquarters offices in Kansas City, Missouri entered into in 2002 as a result of a sale and leaseback of the facility (154,000 sq. ft. lease expires at the end of 2022).
			The sale leaseback transaction was effected through (i) the assignment by the company to the purchaser of the company’s rights (including an option to purchase) under a lease for the headquarters facility (land and building) from the Planned Industrial Expansion Authority of Kansas City (PIEA), under which the company has received sales and property tax abatement (ii) the assignment by the company of its interest as owner of PIEA bonds issued by PIEA to finance the facility and (iii) the lease of the facility by the purchaser to the company. The lease is a triple net lease and has a term of 20 years, with five ten-year renewal options. During the initial term, annual rentals range from $1.4 to $3.6 million. If the purchaser wishes to sell the facility, the company has a right of first refusal; however, with limited exceptions in the case of major catastrophes, which are generally covered by insurance, the company has no option to purchase the property. The company has agreed to indemnify the purchaser/lessor from property taxes assessed on the property and certain other liabilities under the applicable provisions of the triple net lease and also remains liable to PIEA for certain contingent payments in lieu of property tax obligations if specified employee City earnings tax targets are not met, as well as for certain environmental and other matters.
	(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 2009 and 2006, respectively, both containing options to renew), and fabrication and distribution facilities in Dallas and Houston, Texas; Jessup, Maryland; St. Louis, Missouri; Brooklyn Park, Minnesota; Taylor, Michigan; Chicago, Illinois; Cincinnati and Cleveland, Ohio; Tucker, Georgia; Tampa, Florida; Auburn, Washington; Modesto, Hayward, Rancho Cucamonga, and Sacramento, California; Warwick, Rhode Island; and Denver, Colorado (an aggregate of 443,000 sq. ft. leased with various expiration dates).
	(3)		Leased space used for BUCON, Inc. in Kansas City, Missouri (74,000 sq. ft. lease expiring in the year 2007). Effective January 1, 2004, the company combined the Butler Construction business with the North American Buildings business, forming the Buildings Group. The effect of any contract termination costs on the existing lease will be charged to operations when incurred in 2004.
	(4)		Leased space used for Liberty Building Systems, Inc. in Selmer, Tennessee (91,000 sq. ft. lease expiring in the year 2013 with two five year renewal options).

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	(5)		Leased space used for Butler de Mexico, S. De. R.L. De C.V. in Monterrey, Mexico (124,000 sq. ft. expiring in the year 2013 with two five year renewal options).
	(6)		Leased space used for R-Steel Building Systems in Staunton, Virginia (76,000 sq. ft. lease expiring in the year 2008 with one five year renewal option).
	(7)		Leased land usage rights for International Building Systems in Shanghai, China (794,000 sq. ft. and 122,000 sq. ft. expiring in the year 2045 and 2051, respectively) and in Tianjin, China (1,040,000 sq. ft. expiring in the year 2052).
	(8)		Various other smaller leased facilities for sales and engineering offices throughout the world.

Item 3. Legal Proceedings

The company is subject to various legal proceedings, claims, and environmental actions which arise in the ordinary course of business operations. Although the ultimate outcome of these matters is presently not determinable, management, after consultation with legal counsel, believes the resolution of these matters will not have a material adverse effect upon the company’s financial position or results of operations.

On October 15, 2002, a McLeod County, Minnesota District Court jury awarded the company $29.6 million for its Lester building business in its suit against Louisiana-Pacific Corporation. The suit pertained to Louisiana-Pacific’s Inner-Seal siding product. The award compensates the company for damages and other losses resulting from product purchased by the company and sold to its dealers. However, on December 13, 2002 the United States District Court for the District of Oregon enjoined the Minnesota trial court from entering judgment against Louisiana-Pacific for $11.2 million of the total verdict. The company has appealed the December 2002 Order by the federal court to the Ninth Circuit U.S. Court of Appeals.

On February 17, 2004, the State of Minnesota Court of Appeals affirmed the October 2002 verdict of the McLeod County, Minnesota, District Court jury. This decision of the Minnesota Court of Appeals relates solely to that portion of the original verdict unaffected by the federal court injunction, and is subject to appeal to the Supreme Court of the State of Minnesota, the acceptance of which appeal is discretionary with the Supreme Court.

The company is unable to estimate the impact the award may have on its financial position or results of operations at this time. However, if the entire award is paid, the company believes it will recognize approximately $14 million pretax income for damages and recovery of prior costs in the period in which the award is paid.

There are no other material legal or environmental proceedings pending as of March 12, 2004, nor does the company have any known material environmental contingencies as of this date. Proceedings, other than the Louisiana-Pacific case, consist of matters normally incident to the business conducted by the company and taken together are not believed 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 stockholders on April 15, 2003.

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PART II

Item 5. Market for Registrant’s Common Equity

The company’s common stock is traded on the New York Stock Exchange under the symbol BBR. The table below presents the high and low sales prices as reported by the exchange for each quarter in the last two years.

Price Range of Common Stock

Year end closing price:

On February 23, 2004, there were 1,981 stockholders of record of common stock.

Under the company’s note agreements, restricted payments, including dividends and treasury stock purchases, may not in the aggregate exceed the sum of $10 million, plus 75% of consolidated net income or less 100% of any deficit for each fiscal quarter subsequent to March 31, 2003, and may not be made if a default or event of default exists under the note agreements. Due to the losses and the uncertain course of the economy, the company discontinued the quarterly cash dividend in the third quarter of 2003. Because it was in default under the credit agreements and note agreements as of September 30, 2003, and December 31, 2003 and remains in default, the company is currently prohibited from paying dividends under the terms of those agreements. Further, the Merger Agreement between the company and BlueScope prohibits the payment of dividends prior to the effective time of the Merger or the termination of the Merger Agreement.

Dividends Declared

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Item 6. Selected Financial Data

		Including charges of $4.4 million after tax, or $.69 per share, for asset impairment charges and $24.7 million, or $3.89 per share, for the deferred tax asset valuation reserve in 2003.
		Including asset impairment and restructuring charges after tax of $3.6 million, or $.58 per share, in 2001.
		Including special items, which increased net earnings by $2.3 million, or $.33 per share in 1999.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

In 2003, the domestic nonresidential construction markets recorded their fourth consecutive annual decline, as F.W. Dodge reported a 3% decline in orders, with the commercial segment off 6% and the manufacturing segment up 8%, the latter a positive development albeit increasing from a very low base. The general U.S. economy continues to show signs of a recovery from recession; nevertheless, the turnaround may be more gradual than past recoveries given increasing costs early in 2004 for raw materials, energy, and employee benefit costs. Increasing costs for steel and aluminum have been a particular concern. See the Manufacturing and Materials section in Part I, Item I of this report.

While the United States’ construction markets continued in decline in 2003, China’s economy continued to enjoy relatively large increases in gross domestic product. The estimated economic growth in China approached 8% in 2003, and demand for the company’s products was strong. During the fourth quarter of 2003 and into early 2004, China experienced large commodity price increases similar to those incurred in the United States. Butler’s China operations were impacted primarily by increases in steel costs. The company implemented price increases on its products to blunt the impact of these rising raw materials costs.

During 2003, the company experienced a pretax loss of $22.2 million and a net loss after taxes of $32.1 million. This followed a pretax loss of $6.9 million and a net loss after taxes of $1.8 million in 2002. During the fourth quarter of 2003, the company established a deferred tax asset valuation reserve of $24.7 million, charging this amount to income tax expense. The need for the valuation reserve stemmed from uncertainty as to whether the company will be able to utilize these assets given continued losses and ongoing noncompliance with the senior lenders’ debt covenants. The valuation allowance is reflected in two places on the December 31, 2003 balance sheet, $14 million is netted against the net current deferred tax assets and $11 million is netted against net noncurrent deferred tax assets. The realization of net deferred tax assets is dependent on generating $75 million of domestic taxable income in the future.

As discussed below and in the Liquidity section, the most significant and immediate challenge facing the company is its ability to generate positive cash flow during the prolonged economic downturn. The severe cyclical decline in the nonresidential construction industry during the past three years has outstripped the savings realized from cost reductions and capacity closures that the company has implemented over this period. During 2003, notwithstanding various cost cutting measures, the company had negative cash flow from operating activities of $18 million. The net decrease in cash for the year was $21.4 million. This liquidity challenge is heightened by an agreement with the company’s senior note holders to consummate a transaction, which would generate enough funds to repay the note holders in full by April 30, 2004. The principal balance owed on the notes at December 31, 2003 was $90 million. This amount does not include any make-whole payment, a payment designed to compensate the note holders for changes in market interest rates since the original borrowing date, due to accelerated payment of the notes. Because of the company’s continuing default under the bank credit agreement the company has no committed line of credit to provide liquidity.

At September 30 and December 31, 2003 the company was not in compliance with its financial covenants within the bank credit agreement and the senior notes agreements. As a result, the company was required under accounting standards to reclassify the related long-term portion of this debt, $81.5 million, as a current liability on both the September 30, 2003 and December 31, 2003 consolidated balance sheets.

As reported in the second and third quarter, the company has been in discussions with the senior lenders to restructure its debt agreements. Also as reported in the third quarter, the company’s Board authorized management to explore various strategic options available to the company, including solicitation of private investment capital, asset sales, and the sale of the company. In the fourth quarter the company reached agreement with its senior note holders to defer the December 30, 2003 and March 20, 2004 principal payments in the aggregate amount of $8.5 million on the company’s long-term senior notes. In exchange, the company has agreed to satisfy certain milestones including consummation of a transaction that provides for repayment in full of its outstanding senior notes, including make-whole amounts, by April 30, 2004.

Notwithstanding the December agreement with its note holders, the senior lenders have the right at any time to require payment of $90 million of debt (as well as any make-whole amount due upon acceleration) as well as require funding of $23 million of stand-by letters of credit. If the senior lenders were to exercise this right, the company would not have the ability to fund these obligations immediately, and the senior lenders could pursue other remedies.

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On February 15, 2004, the company entered into a Merger Agreement pursuant to which the company will become a wholly owned subsidiary of BlueScope. In connection with the Merger Agreement, BlueScope, the company and the senior note holders have reached mutually acceptable agreements that provide the note holders assurance from BlueScope that the senior notes will be immediately paid in full if BlueScope closes the Merger. See the General Description of the Business – Recent Development section in Part I, Item I and the Liquidity section in Part II, Item 7 of this report. The Merger is subject to various conditions, including the company achieving certain defined levels of financial performance — see the Liquidity and Capital Resources section below and Business – General Description of Business – Recent Development in Part I, Item I, as well as shareholder and regulatory approvals.

If the Merger is not completed, the company must recapitalize, restructure debt, dispose of assets, procure additional equity, or effect a combination of the foregoing actions, which may be with or without filing for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, in order to reach a workable arrangement with its senior creditors and to continue operations with minimal disruption and preserve the value of its assets. Management believes it will be difficult to obtain a workable arrangement with the company’s senior creditors to continue operations as currently conducted if the Merger is not completed on or before April 30, 2004.

The accompanying financial statements have been prepared on a going concern basis which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business and do not reflect adjustments that might result if the company were not to continue as a going concern. The auditor’s report on the company’s financial statements as of December 31, 2003 contains an explanatory paragraph which refers to the company’s net losses in 2003 and 2002 and its difficulties in meeting its loan covenants and notes that these matters raise substantial doubt about the company’s ability to continue as a going concern.

Initiatives to Reduce Costs and Increase Revenues

Nonresidential construction markets are cyclical by nature. During the current prolonged downturn the company has taken many actions to reduce costs and increase revenues from underserved markets. Related to cost reductions, in the face of continued declining demand, the company’s domestic employment levels are approximately 8% lower since the beginning of 2003. This is in addition to employment reductions in 2001 and 2002. Along with expense reductions related to volume initiated in most downturns, the company has implemented more permanent cost cutting measures. The company implemented a change during the third quarter of 2003 in its primary pension plan benefit, which helped to offset most factors causing pension expense increases. The change is expected to have a $5.7 million favorable impact annually. The company's pension expense for 2003 was $13.0 million compared to $10.9 million in 2002. Also, the company discontinued the subsidy for its retiree health care plan and ended certain retiree group life insurance programs effective January 1, 2004. The company reversed approximately $5.1 million of accrued liabilities related to these retiree plans to pretax income during the fourth quarter of 2003. The net expense for retiree medical and life benefits for 2003 was a credit of $2.1 million compared to $3.0 million of expense in 2002. The company expects these actions to reduce retiree group insurance costs by approximately $2.8 million annually beginning in 2004.

The above mentioned cost reductions have been partially offset by: increased costs for steel caused primarily by tariffs imposed by the U.S. Government in April, 2002; higher business insurance costs driven in part by the September 11, 2001 terrorist attacks; and the costs under the company’s credit agreements.

The company continued its efforts to increase revenues and earnings in previously underserved markets. Within the North American Building Systems Segment, sales of the company’s Liberty Buildings product line, a first price point building solution, continued to grow. The plant to produce the new R-Steel panel product line, a one piece insulated curtain wall panel system for commercial and community applications, began production in the third quarter of 2003. Construction of the company’s frame fabrication plant in Mexico, which is to serve Mexican and Latin American markets as well as for the U.S., was completed in the fourth quarter of 2003 and commenced operations in December 2003. Within the Architectural Products Segment, two new distribution outlets and the introduction of new product offerings, including hurricane/blast resistant products, have provided incremental sales growth. Finally, the start-up of the company’s second plant in China for the International Building Systems Segment has provided needed capacity to support the demand growth in this region.

RESULTS OF OPERATIONS

Butler Manufacturing Company supplies products and services for nonresidential construction markets. These markets are cyclical in nature and are subject to changes in the general economy. In 2003, while most of the domestic economy

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experienced growth, nonresidential construction activity posted its fourth year of decline. The company’s financial results reflected that trend.

2003 Compared to 2002

Net sales were $796 million in 2003, down from $828 million or a 4% decrease from the prior year. Lower sales were caused by a continued decline in nonresidential construction project opportunities and lower sales prices for Butler’s metal building products due to a very competitive domestic construction market. The North American Building Systems, Architectural Products, Construction Services and Real Estate segments reported lower sales for 2003 than a year ago while International Building Systems reported higher sales for the period than a year ago. This trend in North American opportunities along with the $4.8 million restructuring charge and $.8 selling expense for the anticipated sale of Lester Building Systems business, a $2.4 million asset impairment charge taken related to the combination of the North American Building Systems Segment and the Construction Services Segment, $.9 million in severance and termination benefits related to the combination of segments and the closure of a facility in Birmingham, Alabama, $3.4 million of consulting and legal expense related to debt restructuring, and increased interest expense due to negotiated higher interest rates on the company’s long-term borrowings were the primary factors for greater operating and pretax losses compared with the prior year. Net sales and pretax earnings by segment are presented below. For further information on segments, see the section on Business Segments under the Notes to Consolidated Financial Statements in Part II, Item 8 of this report.

Sales in the North American Building Systems Segment were $375 million, a decline from $394 million or a 5% decrease from the prior year. The decline in sales occurred in the metal buildings business and reflected continued weak demand in the manufacturing end-use market, which typically represents a significant percentage of the company’s revenues.

The International Building Systems Segment sales were $138 million, up 28% from the prior year. All the sales reported in 2003 in this Segment were from China, while the prior year’s sales included $9.8 million from the European business, which was sold in 2002. The higher sales volume in China was related to the company’s continued penetration of the market in China for nonresidential construction, seasonal increases, and a post-SARS business rebound.

The Construction Services Segment sales were $81 million during 2003, compared to $111 million during 2002. The entire decline in sales occurred in the first half of 2003 primarily as the result of an uncertain domestic economy. At December 31, 2003, the Segment’s backlog was up 33% from December 31, 2002. As noted previously, effective

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January 1, 2004, the company combined the Construction business with the North American Buildings business, forming the Buildings Group. This combination is expected to improve the alignment, capabilities, and talents of the two operations in order to better serve customers.

Sales in the Architectural Products Segment were $217 million for the year compared with $220 million during the prior year. The 1% decline in sales was a better performance when compared to the overall 6% drop in commercial construction awards. Along with better than market performance, the Segment also supported the start-up of