<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 SEPTEMBER 30, 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.
--------------------------
Exact name of registrant as specified in its charter)
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 November 12, 1996, 6,174,997 shares of the registrant's common stock, par
value $.001 per share, were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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(A) Consolidated Balance Sheets - September 30, 1996 (Unaudited) and December
31, 1995
(B) Consolidated Statements of Operations (Unaudited) - quarter ended September
30, 1996 and quarter ended September 30, 1995
(C) Consolidated Statements of Operations (Unaudited) - nine months ended
September 30, 1996 and nine months ended September 30, 1995
(D) Consolidated Statements of Cash Flows (Unaudited) - nine months ended
September 30, 1996 and nine months ended September 30, 1995
(D) Notes to Consolidated Financial Statements (Unaudited)
<PAGE>
BUTLER INTERNATIONAL, INC.
--------------------------
CONSOLIDATED BALANCE SHEETS
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(in thousands except share data)
--------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
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(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 1,277 $ 1,097
Accounts receivable, net 59,643 66,020
Other current assets 2,813 3,345
-------- --------
Total current assets 63,733 70,462
Property and equipment, net 13,491 15,168
Other assets and deferred charges 965 654
Excess cost over net assets of
business acquired, net 23,878 24,288
-------- --------
Total assets $102,067 $110,572
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 24,061 $ 27,012
Current portion of long-term debt 7,228 9,347
-------- --------
Total current liabilities 31,289 36,359
-------- --------
Long-term debt 32,976 40,480
-------- --------
Other long-term liabilities 3,724 3,677
-------- --------
Stockholders' equity:
Preferred stock, par value $.001 per share,
authorized 5,000,000: Series B Cumulative
Convertible, authorized 3,500,000; issued
2,537,480 at September 30, 1996 and
2,451,898 at December 31, 1995 (Aggregate
liquidation preference $2,537,480 at
September 30, 1996 and $2,451,898
at December 31, 1995) 3 2
Common stock, par value $.001 per share,
authorized 83,333,333; issued and
outstanding 6,174,997 at September 30, 1996
and 5,993,783 at December 31, 1995 6 6
Additional paid-in capital 93,709 92,882
Accumulated deficit (59,551) (62,727)
Cumulative foreign currency translation
adjustment (89) (107)
-------- --------
Total stockholders' equity 34,078 30,056
-------- --------
Total liabilities and stockholders' equity $102,067 $110,572
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BUTLER INTERNATIONAL, INC.
--------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(in thousands except share and per share daata)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended September 30,
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1996 1995
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<S> <C> <C>
Net sales $ 103,054 $ 108,222
Cost of sales 87,733 92,776
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Gross margin 15,321 15,446
Depreciation and amortization 693 682
Selling, general and administrative expenses 11,991 12,868
Non recurring charges - 163
---------- ----------
Income before other income (expense)
and income taxes 2,637 1,733
Other income (expense):
Interest and other 283 168
Interest expense (1,333) (1,835)
---------- ----------
Income before income taxes 1,587 66
Income taxes 108 (17)
---------- ----------
Net income $ 1,479 $ 83
========== ==========
Net income per share:
Primary $.22 $.01
Assuming full-dilution $.20 $.01
Average number of common shares and dilutive
common share equivalents outstanding:
Primary 6,545,191 6,354,258
Assuming full-dilution 7,337,501 7,004,219
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BUTLER INTERNATIONAL, INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(in thousands except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1996 1995
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<S> <C> <C>
Net sales $ 309,104 $ 335,030
Cost of sales 264,541 288,458
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Gross margin 44,563 46,572
Depreciation and amortization 2,325 2,004
Selling, general and administrative expenses 35,016 37,563
Non recurring charges - 493
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Income before other income (expense)
and income taxes 7,222 6,512
Other income (expense):
Interest and other 633 442
Interest expense (4,168) (4,832)
---------- ----------
Income before income taxes 3,687 2,122
Income taxes 380 421
---------- ----------
Net income $ 3,307 $ 1,701
========== ==========
Net income per share:
Primary $.50 $.25
Assuming full-dilution $.46 $.24
Average number of common shares and dilutive
common share equivalents outstanding:
Primary 6,364,624 6,281,293
Assuming full-dilution 7,256,528 6,982,273
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BUTLER INTERNATIONAL, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,307 $ 1,701
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and excess purchase
price amortization 2,325 2,004
Amortization of deferred financing and
employee stock purchase plan loans 605 453
Foreign currency translation 18 (173)
(Increase) decrease in assets,
increase (decrease) in liabilities:
Accounts receivable 6,377 (18,043)
Other current assets 532 (1,367)
Other assets (917) 186
Current liabilities (2,916) 9,796
Other long-term liabilities 47 (401)
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Net cash provided by (used in)
operating activities 9,378 (5,844)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - net 145 (3,196)
Cost of business acquired (382) (419)
Expenses paid in conjunction with
discontinued operations (80) (108)
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Net cash used in investing activities (317) (3,723)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings under financing
agreements (9,601) 11,755
Net proceeds from the issuance of
common stock 742 106
Net payments in conjunction with
headquarters building purchase (22) (73)
Repurchase common stock - (126)
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Net cash (used in) provided by
financing activities (8,881) 11,662
-------- -------
Net increase in cash and
cash equivalents 180 2,095
Cash and cash equivalents,
beginning of period 1,097 2,285
-------- -------
Cash and cash equivalents,
end of period $ 1,277 $ 4,380
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BUTLER INTERNATIONAL, INC.
--------------------------
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 September 30, 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 three and nine months ended
September 30, 1996 are not necessarily indicative of operating results for the
full year.
NOTE 2 - CREDIT FACILITY:
Effective September 30, 1996, the Company extended its Credit Facility with
General Electric Capital Corporation ("GECC") to July 1, 1998. The Credit
Facility provides the Company with up to $50.0 million in loans, including $9.0
million for letters of credit. During the fourth quarter of 1996, the interest
rate will be reduced by fifty basis points from the current rate of 300 basis
points above the 30 day commercial paper rate. Beginning January 1, 1997,
additional interest reductions are available based upon the Company achieving
certain financial results. The Company has guaranteed all obligations incurred
or created under the Credit Facility. The Company is required to comply with
certain affirmative and financial covenants. The Company is in compliance with
the aforementioned covenants as amended.
NOTE 3 - COMMON STOCK:
In the nine months ended September 30, 1996, the Company issued 181,214 shares
of common stock upon the exercise of common stock options and warrants.
NOTE 4 - PREFERRED STOCK:
On June 30, 1996, $85,582 of dividends in kind were paid to holders of Series B
Preferred Stock.
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.
<PAGE>
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
1995, the Company filed a complaint against CIGNA Property and Casualty
Insurance Company 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. 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.
NOTE 7 - UNITED KINGDOM DISPOSALS:
As previously announced during the third quarter of 1996, the Company completed
the sale and disposal of the Telecommunications, Pacific and South African
operations of its United Kingdom ("UK") unit. There was no significant impact
on reported earnings.
NOTE 8 - MORTGAGE NOTE:
Effective November 7, 1996, the Company entered into an agreement to extend the
$6.75 million mortgage note on its corporate headquarters facility through April
30, 1998. The new terms include an interest rate of 10%, down from 10 7/8%, and
an amortization schedule of 15 years. The Company will pursue long-term
refinancing of the mortgage in 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
-----------------------------------------------------------------
Financial Condition
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RESULTS OF OPERATIONS
- ---------------------
The third quarter of 1996 net income increased to $1.5 million, or $.22 per
share, from the $83,000, or $.01 per share, reported in the third quarter of
1995. On a year-to-date basis, net income improved 94% to $3.3 million, or $.50
per share, from $1.7 million, or $.25 per share reported last year.
The results for the quarter continue to reflect the strength of the Company's
Telecommunications Services, Technology Solutions and Fleet Services operations,
as they continue to drive the Company's improved performance. Additionally, the
margins in the Contract Technical Services ("CTS") division were again higher
than that of the prior quarter and the same quarter last year.
Gross margins increased to 14.9% in the third quarter from 14.6% reported in the
second quarter and 13.8% reported in the first quarter, reflecting the success
of the Company's strategy of pursuing an improved business mix. This increase
occurred despite lower than average margins in the United Kingdom ("UK")
business. The year-to-date gross margin for 1996 was 14.4%, compared with 13.9%
for the same period in 1995. Selling, general and administrative expenses were
sharply lower than that of the prior year, the direct result of the strategic
management actions announced in late 1995.
The Company also benefited from reduced interest expense, resulting from the
significantly improved controls on, and management of, its receivable investment
which decreased by $22 million on a year-to-year basis, allowing the Company to
reduce its revolving line of credit to $33 million at September 30, 1996.
The results of the UK Telecommunications group did not meet expectations and the
Company entered into an agreement to sell this operation. The Company finalized
the transaction to dispose its UK Telecommunications, as well as its Pacific and
South African operations during the third quarter of 1996. Proceeds from the
sale of the Telecommunications and Pacific operations were sufficient to
extinguish related liabilities and cover the cost basis of assets sold. The
company will continue to support its international clientele in its staff
business, both in the UK and its other international markets.
Sales for the quarter were $103.1 million, reflecting a 5% decrease from the
$108.2 million recorded in the third quarter last year. For the nine months,
sales were $309.2 million, down 8% from $335.0 million in the comparable period
of the prior year. The reduction in sales related to businesses that the
Company has exited, totaled $8 million and $17 million in the three and nine
month periods, respectively. CTS sales, in accordance with the Company's
strategic plans, were managed lower by $9 million and $32 million respectively,
as the Company continues its strategy of shedding low margin business.
Noteworthy increases were registered by the Fleet Services, Technology Solutions
and Telecommunications Services divisions. Revenues in these units exceeded the
prior year by 59% and 51% in the three and nine month periods, respectively.
These operations, which generate higher than average returns, have been targeted
for expansion, at the expense of lower margin work in the CTS business and other
exited businesses.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's primary sources of funds are generated from operations and
borrowings under its Credit Facility. As of September 30, 1996, $33.0 million
was outstanding under the Credit Facility, and an additional $6.5 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.
<PAGE>
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 $33.0 million at September 30, 1996 from $40.5 million at
December 31, 1995.
Effective September 30, 1996, the Company extended its Credit Facility with
General Electric Capital Corporation ("GECC") to July 1, 1998. The Credit
Facility provides the Company with up to $50.0 million in loans, including $9.0
million for letters of credit. Effective during the fourth quarter of 1996, the
interest rate will be reduced by fifty basis points from the current rate of 300
basis points above the 30 day commercial paper rate. The interest rate for
November 1996 is 7.9%, which compares favorably to the prime rate of 8.25%. The
average rate on the Credit Facility since January 1, 1996, was 8.45%. 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.
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 $6.75 million, bearing interest at
10%, 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 September 30, 1996.) On
November 7, 1996, the lender approved an extension of the existing mortgage note
through April 30, 1998. The new terms include an interest rate of 10%, down
from 10 7/8%, and amortization schedule of 15 years and a 1% extension fee. The
Company will be pursuing long term refinancing of the mortgage in 1997. The
mortgage balance is reflected in the current portion of long-term debt.
<PAGE>
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
<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)
November 13, 1996 By: /s/ Edward M. Kopko
--------------------------------
Edward M. Kopko,
Chairman and Chief Executive
Officer
November 13, 1996 By: /s/ Michael C. Hellriegel
--------------------------------
Michael C. Hellriegel
Senior Vice President and Chief
Financial Officer
November 13, 1996 By: /s/ Warren F. Brecht
--------------------------------
Warren F. Brecht
Senior Vice President and
Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BUTLER INTERNATIONAL, INC. FROM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 1,277
<SECURITIES> 0
<RECEIVABLES> 60,850
<ALLOWANCES> 1,207
<INVENTORY> 307
<CURRENT-ASSETS> 63,733
<PP&E> 25,989
<DEPRECIATION> 12,498
<TOTAL-ASSETS> 102,067
<CURRENT-LIABILITIES> 31,289
<BONDS> 0
0
3
<COMMON> 6
<OTHER-SE> 34,069
<TOTAL-LIABILITY-AND-EQUITY> 102,067
<SALES> 309,104
<TOTAL-REVENUES> 309,104
<CGS> 264,541
<TOTAL-COSTS> 264,541
<OTHER-EXPENSES> 36,455
<LOSS-PROVISION> 253
<INTEREST-EXPENSE> 4,168
<INCOME-PRETAX> 3,687
<INCOME-TAX> 380
<INCOME-CONTINUING> 3,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,307
<EPS-PRIMARY> .50
<EPS-DILUTED> .46
</TABLE>
