<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 1996
----------------------
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 0-14951
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BUTLER INTERNATIONAL, INC.
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(Exact name of registrant as specified in itscharter)
MARYLAND 06-1154321
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Summit Avenue, Montvale, New Jersey 07645
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 573-8000
--------------
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 .
----- -----
As of May 2, 1996, 6,046,640 shares of the registrant's common stock, par value
$.001 per share, were outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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(A) Consolidated Balance Sheets - March 31, 1996 (Unaudited) and December 31,
1995
(B) Consolidated Statements of Operations (Unaudited) - quarter ended March 31,
1996 and quarter ended March 31, 1995
(C) Consolidated Statements of Cash Flows (Unaudited) - quarter ended March 31,
1996 and quarter ended March 31, 1995
(D) Notes to Consolidated Financial Statements (Unaudited)
2
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BUTLER INTERNATIONAL, INC.
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CONSOLIDATED BALANCE SHEETS
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(in thousands except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
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(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 1,437 $ 1,097
Accounts receivable, net 68,940 66,020
Other current assets 3,544 3,345
-------- --------
Total current assets 73,921 70,462
Property and equipment, net 14,798 15,168
Other assets and deferred charges 705 654
Excess cost over net assets of
business acquired, net 24,153 24,288
-------- --------
Total assets $113,577 $110,572
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 30,257 $ 27,012
Current portion of long-term debt 10,267 9,347
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Total current liabilities 40,524 36,359
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Long-term debt 38,622 40,480
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Other long-term liabilities 3,715 3,677
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Stockholders' equity:
Preferred stock, par value $.001 per share,
authorized 5,000,000: Series B Cumulative Convertible,
authorized 3,500,000; issued 2,451,898 at March 31, 1996
and at December 31, 1995 (Aggregate liquidation
preference $2,451,898 at March 31, 1996 and at
December 31, 1995) 2 2
Common stock, par value $.001 per share, authorized
83,333,333; issued and outstanding 6,041,640 at
March 31, 1996 and 5,993,783 at December 31, 1995 6 6
Additional paid-in capital 93,097 92,882
Accumulated deficit (62,258) (62,727)
Cumulative foreign currency translation adjustment (131) (107)
-------- --------
Total stockholders' equity 30,716 30,056
-------- --------
Total liabilities and stockholders' equity $113,577 $110,572
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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BUTLER INTERNATIONAL, INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(in thousands except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
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1996 1995
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<S> <C> <C>
Net sales $ 100,671 $ 116,294
Cost of sales 86,783 101,458
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Gross margin 13,888 14,836
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Depreciation and amortization 816 638
Selling, general and administrative expenses 11,219 12,207
Non recurring charges - 125
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Income before other income (expense)
and income taxes 1,853 1,866
Other income (expense):
Interest and other 192 148
Interest expense (1,438) (1,421)
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Income before income taxes 607 593
Income taxes 95 142
---------- ----------
Net income $ 512 $ 451
========== ==========
Net income per share:
Primary $.08 $.07
Assuming full-dilution $.07 $.07
Average number of common shares and dilutive
common share equivalents outstanding:
Primary 6,191,941 6,252,958
Assuming full-dilution 6,943,597 6,838,962
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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BUTLER INTERNATIONAL, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 512 $ 451
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation and excess
purchase price amortization 816 638
Amortization of deferred
financing and employee
stock purchase plan loans 175 142
Foreign currency translation (24) (158)
(Increase) decrease in assets,
increase (decrease) in
liabilities:
Accounts receivable (2,920) (12,895)
Other current assets (199) (583)
Other assets (227) 23
Current liabilities 3,212 9,030
Other long-term liabilities 38 (48)
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Net cash provided by (used in)
operating activities 1,383 (3,400)
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CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures - net (191) (1,015)
Cost of business acquired (119) (133)
Expenses paid in conjunction
with discontinued operations (10) (73)
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Net cash used in investing
activities (320) (1,221)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings under
financing agreements (916) 3,727
Net proceeds from the issuance
of common stock 215 14
Net payments in conjunction with
headquarters building purchase (22) (55)
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Net cash (used in) provided by
financing activities (723) 3,686
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Net increase (decrease) in cash
and cash equivalents 340 (935)
Cash and cash equivalents,
beginning of period 1,097 2,285
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Cash and cash equivalents,
end of period $ 1,437 $ 1,350
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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BUTLER INTERNATIONAL, INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
NOTE 1 - PRESENTATION:
The consolidated financial statements include the accounts of Butler
International, Inc. ("the Company") and its wholly-owned subsidiaries.
Significant intercompany balances and transactions have been eliminated.
Certain amounts from prior period consolidated financial statements have been
reclassified in the accompanying consolidated financial statements to conform
with current period presentation.
The accompanying financial statements are unaudited, but, in the opinion of
management, reflect all adjustments, which include normal recurring accruals,
necessary to present fairly the financial position, results of operations and
cash flows at March 31, 1996 and for all periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in conformity with generally accepted accounting principles
have been condensed or omitted. Accordingly, this report should be read in
conjunction with the Company's annual report on Form 10-K for the year ended
December 31, 1995. The results of operations for the quarter ended March 31,
1996 are not necessarily indicative of operating results for the full year.
NOTE 2 - CREDIT FACILITY:
In May, 1994, certain of the Company's U.S and Canadian operating subsidiaries
entered into a three-year Credit Facility with General Electric Capital
Corporation ("GECC"). This Credit Facility provides the Company with up to
$50.0 million in loans including $6.0 million for letters of credit. The sum of
the aggregate amount of loans outstanding under the Credit Facility plus the
aggregate amount available for letters of credit may not exceed the lessor of
(i) $50.0 million or (ii) an amount equal to 85% of eligible receivables plus
75% of eligible pending receivables (which percentages are subject to adjustment
from time to time by the Company's principal lender - GECC). The interest rate
chargeable to the Company is fixed at the beginning of each month based upon the
30 day commercial paper rate in effect at the close of the last business day of
each month, plus three hundred basis points. The interest rate in effect on
March 31, 1996 was 8.3%, and the average rate since January 1, 1996 was 8.5%.
The Company has guaranteed all obligations incurred or created under the Credit
Facility. The termination date of the Credit Facility is the earlier of (i) May
31, 1997, or (ii) thirty days prior to the maturity date of the mortgage note on
the Company's corporate office complex (or any extension, renewal or refinancing
of such indebtedness). The Company is also required to comply with certain
affirmative and financial covenants. The Company is in compliance with the
aforementioned covenants, as amended. In the case of one or more events of
default, GECC may take either or both of the following actions: (a) terminate
the Credit Facility, and (b) declare the Credit Facility then outstanding and
the term note to be due and payable. Although there are lenders which
management feels could provide such a loan on comparable terms, a change in
lenders could adversely affect the Company's operating results.
NOTE 3 - COMMON STOCK:
In the quarter ended March 31, 1996, the Company issued 47,857 shares of common
stock upon the exercise of common stock purchase warrants.
NOTE 5 - EARNINGS PER SHARE:
Primary earnings per share are determined by dividing net earnings (after
deducting preferred stock dividends) by the weighted average number of common
shares outstanding and dilutive common stock equivalents. On a fully-diluted
basis, both earnings and shares outstanding are adjusted to assume the
conversion of convertible preferred stock.
6
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NOTE 6 - CONTINGENCIES:
The Company and its subsidiaries are parties to various legal proceedings and
claims incidental to its normal business operations for which material losses,
beyond that which is recorded, is remote except for the following matter. In
June, 1995, the Company filed a complaint against CIGNA Property and Casualty
Insurance Company in the Court of Common Pleas of Philadelphia County,
Pennsylvania alleging negligence, breach of contract, breach of fiduciary duty,
and negligent misrepresentation arising out of CIGNA's and other defendants'
acts and omissions in the processing, handling and investigation of claims
against the Company under general liability and workmen's compensation insurance
contracts. On August 31, 1995, the defendants filed an answer, new matter and
counterclaim denying the Company's allegations, asserting certain affirmative
defenses, and alleging that the Company has failed to pay retrospective premiums
amounting to approximately $7.0 million. In the opinion of management, based on
the advice of counsel, all of the proceedings and claims in which the Company
and its subsidiaries are involved with can ultimately be defended. The Company
is defending itself vigorously against all such claims.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
-----------------------------------------------------------------
Financial Condition
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RESULTS OF OPERATIONS
- ---------------------
The first quarter of 1996 net income increased 14% to $512,000, or $.08 per
share, from the $451,000, or $.07 per share, reported in the first quarter of
1995. The increased profitability was primarily attributed to higher margins,
principally due to improved business mix, and lower overhead expenses, the
result of previously announced restructurings and cost reduction initiatives.
This improvement occurred despite the 1996 quarter containing 13 weeks, compared
with 14 weeks in the prior year.
The increased profitability extended to all operating divisions, with the
exception of the United Kingdom operations and Project Engineering Services.
Notable improvements were registered by the Technology Solutions and
Telecommunications business units. The UK operation reported a moderate loss,
as had been anticipated. Project Engineering, while still quite profitable,
returned less than the prior year due to the completion of a major contract at
the beginning of the new year.
Net sales for the quarter were $100.7 million, down from $116.3 million in the
comparable period last year. The sales decrease was attributable to the
Contract Technical Services ("CTS") and UK operations. The lower CTS volume was
planned, and is consistent with that division's strategy of shedding low margin
business in favor of achieving higher margins. The UK variance was due to the
curtailment of business in the utility and telecommunications areas. Also
impacting sales on a comparative basis was the decrease in weeks from 14 to 13
in the 1996 first quarter.
Gross margins improved to 13.8% in 1996, from 12.8% in the first quarter of
1995, further reflecting the Company's strategy of improving its business mix,
achieving better pricing and lowering cost of sales.
Selling, general and administrative expenses declined significantly from that of
the prior year, the direct result of the cost reduction programs implemented in
the fourth quarter of 1995. Those measures included a 16% reduction in staff
workforce, a consolidation of senior management, the closure of marginal offices
and the discontinuance of marginal business units.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's primary sources of funds are generated from operations and
borrowings under its Credit Facility. As of March 31, 1996, $38.6 million was
outstanding under the Credit Facility, and an additional $6.0 million was used
to collateralize letters of credit. Proceeds from the Credit Facility were used
by the Company to finance working capital, capital expenditures and other
business related expenses.
Improved controls over the Company's investment in its accounts receivable
continue to yield results as reflected in the decrease in the borrowings under
its Credit Facility to $38.6 million at March 31, 1996 from $40.5 million at
December 31, 1995.
In May, 1994, certain of the Company's U.S and Canadian operating subsidiaries
entered into a three-year Credit Facility with General Electric Capital
Corporation ("GECC"). This Credit Facility provides the Company with up to
$50.0 million in loans including $6.0 million for letters of credit. The sum of
the aggregate amount of loans outstanding under the Credit Facility plus the
aggregate amount available for letters of credit may not exceed the lessor of
(i) $50.0 million or (ii) an amount equal to 85% of eligible receivables plus
75% of eligible pending receivables (which percentages are subject to adjustment
from time to time by the Company's principal lender - GECC). The interest rate
chargeable to the Company is fixed at the beginning of each month based upon the
30 day commercial paper rate in effect at the close of the last business day of
each month, plus three hundred basis points. The interest rate in effect on
March 31, 1996 was 8.3%, and the average rate since January 1, 1996 was 8.5%.
The Company has guaranteed all obligations incurred or created under the Credit
Facility. The Company is also required to comply with certain affirmative and
financial covenants. The Company is in compliance with the aforementioned
covenants, as amended. The termination date of the Credit Facility is the
earlier of (i) May 31, 1997, or (ii) thirty days prior to the maturity date of
the mortgage note, mentioned below, (or any extension,
8
<PAGE>
renewal or refinancing of such indebtedness). In the case of one or more events
of default, GECC may take either or both of the following actions: (a) terminate
the Credit Facility, and (b) declare the Credit Facility then outstanding and
the term note to be due and payable. Although there are lenders which management
feels could provide such a loan on comparable terms, a change in lenders could
adversely affect the Company's operating results.
In 1993, Butler of New Jersey Realty Corp., a subsidiary of the Company,
acquired the Company's corporate office complex in Montvale, NJ for
approximately $9.4 million. This transaction was financed principally through
the assumption of an existing mortgage of $6.7 million, bearing interest at 10
7/8%, the issuance of a non-interest bearing note in the amount of $1.2 million
(which was fully paid in 1994), and the issuance of a second note in the amount
of $510,000 (the balance of which was $127,000 at March 31, 1996). The existing
mortgage note becomes due on October 31, 1996. The Company is currently in the
process of refinancing the mortgage long-term and expects to complete the
refinancing by September 1996. The mortgage balance is reflected in the current
portion of long-term debt.
9
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PART II - OTHER INFORMATION
Item
1. Legal Proceedings - None
2. Changes in Securities - None
3. Defaults Upon Senior Securities - None
4. Submission of Matters to a Vote of Security Holders - None
5. Other Information - None
6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
10
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUTLER INTERNATIONAL, INC.
--------------------------
(Registrant)
May 9, 1996 By: /s/ Edward M. Kopko
-------------------------
Edward M. Kopko,
Chairman and Chief Executive
Officer
May 9, 1996 By: /s/ Michael C. Hellriegel
---------------------------
Michael C. Hellriegel
Senior Vice President - Finance
and Treasurer
May 9, 1996 By: /s/ Warren F. Brecht
----------------------------
Warren F. Brecht
Senior Vice President and
Secretary
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BUTLER
INTERNATIONAL INC. FORM 10-Q FOR PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,437
<SECURITIES> 0
<RECEIVABLES> 70,291
<ALLOWANCES> 1,351
<INVENTORY> 172
<CURRENT-ASSETS> 73,921
<PP&E> 28,172
<DEPRECIATION> 13,374
<TOTAL-ASSETS> 113,577
<CURRENT-LIABILITIES> 40,524
<BONDS> 0
0
2
<COMMON> 6
<OTHER-SE> 30,708
<TOTAL-LIABILITY-AND-EQUITY> 113,577
<SALES> 100,671
<TOTAL-REVENUES> 100,671
<CGS> 86,783
<TOTAL-COSTS> 86,783
<OTHER-EXPENSES> 11,710
<LOSS-PROVISION> 133
<INTEREST-EXPENSE> 1,438
<INCOME-PRETAX> 607
<INCOME-TAX> 95
<INCOME-CONTINUING> 512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 512
<EPS-PRIMARY> .08
<EPS-DILUTED> .07
</TABLE>
