<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 June 30, 1997
-------------------------
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
------------------------------ -------------------
(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 July 23, 1997, 6,271,176 shares of the registrant's common stock, par
value $.001 per share, were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
(A) Consolidated Balance Sheets - June 30, 1997 (Unaudited) and December
31, 1996
(B) Consolidated Statements of Operations (Unaudited) - quarter ended June
30, 1997 and quarter ended June 30, 1996
(C) Consolidated Statements of Operations (Unaudited) - six months ended
June 30, 1997 and six months ended June 30, 1996
(D) Consolidated Statements of Cash Flows (Unaudited) - six months ended
June 30, 1997 and six months ended June 30, 1996
(E) 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>
June 30, December 31,
1997 1996
------------- ------------
(Unaudited)
ASSETS
- ------
Current assets:
<S> <C> <C>
Cash $ 1,163 $ 229
Accounts receivable, net 60,682 56,271
Inventories 2,367 2,292
Other current assets 2,996 2,160
-------- --------
Total current assets 67,208 60,952
Property and equipment, net 13,059 13,347
Other assets and deferred charges 1,317 1,138
Excess cost over net assets of
businesses acquired, net 23,524 23,743
-------- --------
Total assets $105,108 $ 99,180
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 30,730 $ 21,145
Current portion of long-term debt 7,536 7,766
-------- --------
Total current liabilities 38,266 28,911
-------- --------
Long-term debt 28,157 31,342
-------- --------
Other long-term liabilities 448 3,348
-------- --------
Stockholders' equity:
Preferred stock, par value $.001 per share,
authorized 5,000,000: Series B 7%
Cumulative Convertible, authorized 3,500,000;
issued 2,718,214 at June 30,
1997 and 2,627,025 at December 31, 1996
(Aggregate liquidation preference
$2,718,214 at June 30, 1997 and
$2,627,025 at December 31, 1996) 3 3
Common stock, par value $.001 per share,
authorized 83,333,333; issued and
outstanding 6,156,168 at June 30, 1997
and 6,144,168 at December 31, 1996 6 6
Additional paid-in capital 93,848 93,673
Accumulated deficit (55,559) (58,112)
Cumulative foreign currency translation
adjustment (61) 9
--------- ---------
Total stockholders' equity 38,237 35,579
--------- ---------
Total liabilities and stockholders' equity $ 105,108 $ 99,180
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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BUTLER INTERNATIONAL, INC.
--------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended June 30,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Net sales $ 108,419 $ 105,379
Cost of sales 91,862 90,025
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Gross margin 16,557 15,354
Depreciation and amortization 668 816
Selling, general and administrative expenses 12,859 11,806
--------- ---------
Operating income 3,030 2,732
Other income (expense):
Interest and other income 103 158
Interest expense (1,118) (1,397)
--------- ---------
Income before income taxes 2,015 1,493
Income taxes 212 177
--------- ---------
Net income $ 1,803 $ 1,316
========= =========
Net income per share:
Primary $ .26 $ .20
Assuming full-dilution $ .24 $ .18
Average number of common shares and dilutive
common share equivalents outstanding:
Primary 6,688 6,403
Assuming full-dilution 7,531 7,138
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
BUTLER INTERNATIONAL, INC.
-------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------
1997 1996
----- -----
<S> <C> <C>
Net sales $ 213,116 $ 206,050
Cost of sales 180,975 176,808
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Gross margin 32,141 29,242
Depreciation and amortization 1,339 1,632
Selling, general and administrative expenses 25,574 23,025
--------- ---------
Operating income 5,228 4,585
Other income (expense):
Interest and other income 51 350
Interest expense (2,319) (2,835)
--------- ---------
Income before income taxes 2,960 2,100
Income taxes 316 272
--------- ---------
Net income $ 2,644 $ 1,828
========= =========
Net income per share:
Primary $ .38 $ .28
Assuming full-dilution $ .35 $ .26
Average number of common shares and dilutive
common share equivalents outstanding:
Primary 6,693 6,271
Assuming full-dilution 7,530 7,094
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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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>
Six Months Ended June 30,
-------------------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,644 $ 1,828
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and excess purchase
price amortization 1,339 1,632
Amortization of deferred financing 98 378
Foreign currency translation (70) 6
(Increase) decrease in assets,
increase (decrease) in liabilities:
Accounts receivable (4,411) (319)
Inventories (75) 47
Other current assets (836) 217
Other assets (277) (743)
Current liabilities 9,652 (405)
Other long-term liabilities (2,900) 46
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Net cash provided by operating activities 5,164 2,687
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - net (491) (648)
Cost of businesses acquired (341) (264)
Expenses paid in conjunction with
discontinued operations (67) (27)
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Net cash used in investing activities (899) (939)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under financing
agreements (3,415) (2,287)
Net proceeds from the issuance of
common stock 84 742
Payments on headquarters building debt -- (22)
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Net cash used in financing activities (3,331) (1,567)
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Net increase in cash 934 181
Cash at beginning of period 229 1,097
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Cash at end of period $ 1,163 $ 1,278
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<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 June 30, 1997 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, 1996.
NOTE 2 - CREDIT FACILITY:
Effective July 17, 1997, the Company extended its Credit Facility with General
Electric Capital Corporation ("GECC") to July 1, 2001. The Credit Facility, as
amended and restated, provides the Company with up to $50.0 million in loans,
including $9.0 million for letters of credit. The interest rate chargeable to
the Company in the second quarter 1997 was 240 basis points above the 30 day
commercial paper rate. The interest rate has since been reduced to 230 basis
points above the commercial paper rate. Additional interest reductions are
available based upon the Company achieving certain financial results. The
interest rate in effect on June 30, 1997 was 8.0%, and the average rate since
January 1, 1997 was 8.0%. 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. The amended and restated agreement also
includes an additional acquisition facility for up to $15 million, bearing
interest at 300 basis points above the 30 day commercial paper rate.
NOTE 3 - COMMON STOCK:
During the first quarter of 1997, the Company issued 12,000 shares of common
stock upon the exercise of common stock options.
NOTE 4 - EARNINGS PER SHARE:
Primary earnings per share are determined by dividing net income (after
deducting preferred stock dividends of $45,589 and $91,189 for the quarter and
six months ended June 30, 1997 and $42,790 and $85,582 for the quarter and six
months ended June 30, 1996) 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.
The Company will adopt the Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128") in the fourth quarter of 1997, as required.
The Company will continue to apply APB Opinion No. 15 until the adoption of SFAS
128. The pro forma earnings per share ("EPS") computed under the provisions of
SFAS 128 for the quarter and six months ended June 30, 1997 are as follows:
Basic EPS of $.29
7
<PAGE>
and $.41, respectively, and diluted EPS of $.24 and $.35, respectively. Pro
forma basic and diluted EPS for the quarter and six months ended June 30, 1996
were as follows: Basic EPS of $.21 and $.29, respectively and diluted EPS of
$.18 and $.26, respectively.
NOTE 5 - CONTINGENCIES:
The Company and its subsidiaries are parties to various legal proceedings and
claims incidental to its normal business operations for which material
liability, 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 $7.6 million. On April 18, 1997, CIGNA drew down on three letters
of credit, posted by the Company, in the aggregate amount of $2.9 million. There
was no impact on current operating results. These letters of credit had been
posted as collateral for estimated retrospective premiums. On July 29, 1997, the
Company entered into an agreement with CIGNA which, in the absence of a
settlement, will result in the respective parties undertaking binding
arbitration in late 1998. The parties further agreed to grant the Company an
option to settle this matter in lieu of arbitration.
NOTE 6 - 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 terms of the agreement include an interest rate of 10%, down from
10 7/8%, and an amortization schedule of 15 years. On July 7, 1997, the Company
received a commitment from Fleet Bank to refinance the existing mortgage. The
commitment which is based upon normal terms and conditions will provide
financing at 75% of the appraised value of the real estate to a maximum of $6.75
million. The agreement includes several choices of interest rates including
Fleet's Prime Rate or LIBOR plus 225 basis points or Fleet's Cost of Funds plus
225 basis points.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
-----------------------------------------------------------------
Financial Condition
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RESULTS OF OPERATIONS
- ---------------------
The second quarter of 1997 net income increased by 37% to $1.8 million, or $.26
per share, up from the $1.3 million, or $.20 per share, reported in the second
quarter of 1996. On a year-to-date basis, net income was $2.6 million, or $.38
per share, compared to $1.8 million, or $.28 per share reported for the
comparable period last year.
The increased profitability was driven by higher gross margin percentages which
in the current quarter were 15.3%, up from 14.6% reported in the second quarter
of 1996. This improvement was lead by the Telecommunications Services and
Technology Solutions operations. Also, contributing to the increased earnings
was reduced interest expenses which was principally due to decreased borrowings.
Revenues for the quarter were $108.4 million, up 3% from the $105.4 million
recorded in 1996. Impacting the year-on-year comparison was the previously
announced exiting of certain of the Company's United Kingdom operations, as well
as the continuing de-emphasis of the Contract Technical Services business.
Revenues excluding these groups increased by 14%. Year-to-date revenues were
$213.1 million for the first six months of 1997, or 3% higher than that reported
for the comparable period in 1996.
Information contained in this Management's Discussion and Analysis of Results of
Operations and Financial Condition, other than historical information, may be
considered forward-looking in nature, as such it is based upon certain
assumptions and is subject to various risks and uncertainties, which may not be
controllable by the Company. To the extent that these assumptions prove to be
incorrect, or should any of these risks or uncertainties materialize, the actual
results may vary materially from those which were anticipated.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's primary sources of funds are generated from operations and
borrowings under its Credit Facility. As of June 30, 1997, $28.2 million was
outstanding under the Credit Facility, and an additional $8.4 million was used
to collateralize letters of credit. Proceeds from the Credit Facility are used
by the Company to finance its internal business growth, working capital and
capital expenditures.
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 $28.2 million at June 30, 1997, down from $37.6 million
at June 30, 1996.
During the first quarter of 1997, the Company received net proceeds of $84,000
from the exercise of 12,000 common stock options.
Effective July 17, 1997, the Company extended its Credit Facility with General
Electric Capital Corporation ("GECC") to July 1, 2001. The Credit Facility, as
amended and restated, provides the Company with up to $50.0 million in loans,
including $9.0 million for letters of credit. The interest rate chargeable to
the Company is 240, since reduced to 230, basis points above the 30 day
commercial paper rate. Interest reductions are available based upon the Company
achieving certain financial results. The interest rate in effect on June 30,
1997 was 8.0%, and the average rate since January 1, 1997 was 8.0%. 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. The amended and restated agreement also includes an additional
acquisition facility for up to $15 million, bearing interest at 300 basis points
above the 30 day commercial paper rate.
9
<PAGE>
Effective November 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 terms of the extension include an interest rate of 10%, down from
10 7/8%, an amortization schedule of 15 years and a 1% extension fee. On July 7,
1997, the Company received a commitment from Fleet Bank to refinance the
existing mortgage. The commitment which is based upon normal terms and
conditions will provide financing at 75% of the appraised value of the real
estate to a maximum of $6.75 million. The agreement includes several choices of
interest rates including Fleet's Prime Rate or LIBOR plus 225 basis points or
Fleet's Cost of Funds plus 225 basis points. The Company expects to close on the
new mortgage during the third quarter of 1997.
RECENT ACCOUNTING PRONOUNCEMENT
- -------------------------------
The Company will adopt the Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128") in the fourth quarter of 1997, as required.
The Company will continue to apply APB Opinion No. 15 until the adoption of SFAS
128. The pro forma earnings per share ("EPS") computed under the provisions of
SFAS 128 for the quarter and six months ended June 30, 1997 are as follows:
Basic EPS of $.29 and $.41, respectively, and diluted EPS of $.24 and $.35,
respectively. Pro forma basic and diluted EPS for the quarter and six months
ended June 30, 1996 were as follows: Basic EPS of $.21 and $.29, respectively
and diluted EPS of $.18 and $.26, respectively.
10
<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 - At the Annual
Meeting of Stockholders held on May 8, 1997, a quorum, consisting of
approximately 90% of the Company's common and preferred stock
outstanding and entitled to vote at the meeting, was present in
person or by proxy. At the meeting, the following proposals were
approved by the stockholders: Proposal #1 - Frederick H. Kopko, Jr.
was re-elected as a Third Class Director. Edward M. Kopko, John F.
Hegarty, Hugh G. McBreen and Nikhil S. Nagaswami continue to serve as
directors. Proposal #2 - To amend the 1992 Stock Option Plan, 1992
Incentive Stock Option Plan, and the 1992 Stock Bonus Plan, and
Proposal #3 - to amend the 1992 Stock Option Plan for Non-Employee
Directors.
FOR WITHHELD
--------- ---------
Proposal #1 7,669,976 235,330
FOR AGAINST ABSTAIN
--------- --------- --------
Proposal #2 7,493,039 360,424 21,997
Proposal #3 7,515,567 371,976 17,763
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
11
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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)
August 8, 1997 By: /s/ Edward M. Kopko
-------------------
Edward M. Kopko,
Chairman and Chief Executive
Officer
August 8, 1997 By: /s/ Michael C. Hellriegel
-------------------------
Michael C. Hellriegel
Senior Vice President and Chief
Financial Officer
August 8, 1997 By: /s/ Warren F. Brecht
--------------------
Warren F. Brecht
Senior Vice President and
Secretary
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM Butler
International, Inc. Form 10Q for period ended June 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,163
<SECURITIES> 0
<RECEIVABLES> 62,227
<ALLOWANCES> 1,545
<INVENTORY> 2,367
<CURRENT-ASSETS> 67,208
<PP&E> 26,263
<DEPRECIATION> 13,204
<TOTAL-ASSETS> 105,108
<CURRENT-LIABILITIES> 38,266
<BONDS> 0
0
3
<COMMON> 6
<OTHER-SE> 38,228
<TOTAL-LIABILITY-AND-EQUITY> 105,108
<SALES> 213,116
<TOTAL-REVENUES> 213,116
<CGS> 180,975
<TOTAL-COSTS> 180,975
<OTHER-EXPENSES> 26,556
<LOSS-PROVISION> 306
<INTEREST-EXPENSE> 2,319
<INCOME-PRETAX> 2,960
<INCOME-TAX> 316
<INCOME-CONTINUING> 2,644
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,644
<EPS-PRIMARY> .38
<EPS-DILUTED> .35
</TABLE>
