<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the period ended DECEMBER 31, 1996
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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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
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
---------------------------------------
(Title of class)
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. [ ]
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The aggregate market value of the voting stock held by non-affiliates of the
registrant is approximately $68,500,661. Such aggregate market value has been
computed by reference to the $11.63 per share closing sale price of such stock
as of March 19, 1997.
As of March 19, 1997, 6,156,168 shares of the registrant's single class of
common stock, par value $.001 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended December 31,
1996 are incorporated by reference in Part II hereof.
A definitive proxy statement pursuant to Regulation 14A will be filed with the
Commission not later than April 30, 1997. Portions of the proxy statement for
the 1997 Annual Meeting of Stockholders are incorporated by reference in Part
III hereof.
PART I
ITEM 1. BUSINESS
--------
Butler International, Inc. ("the Company"), through its subsidiaries, is a
leading provider of technical services and solutions to companies throughout the
world. The Company provides services on a contract basis to clients in a wide
variety of industries, including telecommunications, aerospace, electronics,
defense, energy and machinery & equipment. Contract services are utilized by
the Company's clients for staff augmentation, project management, and strategic
outsourcing of particular programs and functions. As of March 19, 1997, the
Company had more than 6,700 employees, of which 6,200 billable employees provide
these services, generally at client facilities, from a network of over 50
offices in the United States and abroad. Through its international operations,
the Company currently provides similar services from offices in the United
Kingdom. In 1996, the Company had net sales of $409.4 million from its domestic
and foreign operations.
The Company was incorporated in Maryland on November 27, 1985. The principal
executive offices of the Company are located at 110 Summit Avenue, Montvale, New
Jersey 07645, and its telephone number is (201) 573-8000.
DESCRIPTION OF THE BUSINESS
Contract services are utilized by the Company's clients for: (i) staff
augmentation, (ii) project management and (iii) outsourcing services, as
follows:
Staff augmentation services are provided to supplement a client's existing work
force with technical professionals whose skills are tailored to the particular
needs of that business. Staff augmentation is currently the largest part of the
Company's revenues. Staff can be added or removed as needed, avoiding extra
costs of specially-skilled people during slack times. Contract technical
personnel reduce a client's personnel costs and administrative burdens.
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Project management services are provided through the Company assuming
responsibility for specifically defined projects. Depending upon the nature of
the assignment, the type of equipment required for the task and the particular
needs of the client, project management services may be provided either on-site
at the client's facilities or at a facility designed by the Company for this
purpose. The Company frequently obtains the necessary equipment for the project
(if not available from the client) on a lease basis for the expected term of the
project.
Outsourcing services are provided through the Company managing an entire on-
going operation for or on behalf of a client, thereby reducing the cost and
relieving the client of the burden of maintaining that operation. Outsourcing
frequently involves performance of tasks which are ancillary to, and not a major
part of, the client's normal business. Outsourcing services are provided by the
company at facilities established by the Company for that purpose. In some
cases, however, where client facilities already exist for the performance of
that operation, the Company will staff and manage that operation.
Charges for the Company's services are billed to clients on the basis of an
hourly rate per contract employee, or on the basis of an hourly rate plus
equipment charges (and overhead charges, if applicable), or on a fixed price or
fixed unit price basis. Fixed price arrangements are usually subject to bid.
Staff augmentation is usually billed on an hourly rate per contract employee
supplied, and upon termination of the assignment there is no further cost to the
Company or to the client for the services of the contract employee. Outsourcing
and project management services may be billed on an hourly, per unit, or fixed
price basis, or a combination of these billing arrangements.
BUSINESS AND INDUSTRIES SERVICED
The Company's staff augmentation, project management and outsourcing services
are provided through six principal operations: (i) Butler Contract Technical
Services, (ii) Butler Telecom (iii) Butler Technology Solutions, (iv) Butler
Project Engineering Services, (v) Butler Fleet Services and (vi) Butler Service
Group, UK Ltd.
Butler Contract Technical Services provides contract staffing functions
including skilled technical personnel, managed services and payroll services to
companies worldwide and to industries ranging from aerospace to pharmaceuticals
to energy and electronics.
Butler Telecom provides a full range of human resource staffing and specialty
project services to the voice, data, and video communications industry through a
national network of branch offices. Butler Telecom contract personnel provide
applied engineering services, install, test and maintain central office and
customer premise equipment for voice and data applications, with both standard
coaxial cable and fiber optic capabilities. Such services also provided for
both campus and multi-story telecommunications management. In addition the
central service personnel and project services personnel design, install and
maintain cable television and provide related support services such as
management, clerical, drafting, training, data processing and other specialized
contract personnel services.
Butler Technology Solutions provides staffing-based technical solutions to the
information technology industry including project management, management
consulting, staff augmentation, strategic outsourcing and quality facilitation.
This group serves all sectors of the software and data processing industries,
from development through testing and final software quality assurance. Butler
employees provide a broad range of software, hardware and data processing
specialists with expertise in a wide variety of applications, operating systems
and platforms.
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Butler Project Engineering Services provides engineering support services
including strategic consulting, project management, drafting and design, and
total outsourcing, while specializing in establishing, managing, and staffing
dedicated engineering support centers carrying out both long-term and short-term
projects. Engineering support services include product and facilities design,
drafting, computer programming, technical writing and illustration.
Butler Fleet Services provides customized fleet operations services to major
ground fleet-holders nationwide, ranging from vehicle maintenance and repair to
total fleet management solutions. Services include: preventative maintenance,
mobile maintenance repair and service, scheduling servicing and inspections,
computerized fleet tracking systems (including inventory control), training,
fluid level checks and total fleet management. Most of these services are
provided by A.S.E. (Automotive Service Excellence) certified mechanics.
Butler Service Group, UK Ltd. provides technical staffing principally in the UK
and throughout Europe.
INTERNATIONAL OPERATIONS
The Company's international operations ("International Operations") are directed
from offices in the United Kingdom. In late 1995, the Company discontinued its
marginal operations in Canada, and exited its Latin American operations due to
economic uncertainties in Mexico and Venezuela. During 1996, the Company exited
its United Kingdom Telecommunications, Utility, Pacific and South African
operations. Currently, approximately 2% of the Company's personnel are employed
in its International Operations. International Operations accounted for
approximately 5.2% of the Company's net sales in 1996, principally from the
United Kingdom. The Company will continue to support its international
clientele in its staffing business in the United Kingdom.
CURRENT MARKETS AND MARKETING PLANS
Management believes that in today's environment of ever increasing competition,
companies are searching for ways to differentiate themselves and go beyond mass
production. This has led to the evolution of customized product and service
offerings. An integral part of customization is having the capability to
respond to individual opportunities and speed products to market. To achieve
this agile business strategy, organizations need to concentrate on defining core
competencies. Companies are analyzing activities in their value chain in terms
of their ability to accomplish it cost effectively and efficiently. They have
realized the benefits to their bottom line of outsourcing functions which can be
better handled by a dedicated provider, such as Butler.
This search for strategic business partners has created a transition in the
technical temporary services industry - from providing narrowly defined
temporary help to supplying services and solutions. Butler has recognized this
transformation and has proactively sought to exploit the emerging markets for
project management and human resource based solutions.
From product development to process improvements, Butler is committed to
creating the solution that is best for its client. By utilizing Butler's
expertise, customers are able to gain a strategic advantage in terms of
knowledge, quality, cost, timing and flexibility.
Management expects to participate in a meaningful manner as these changes
continue to occur in its markets. As a result, management believes that the
Company's recent marketing successes in penetrating the Technology Solutions,
Fleet Services and Telecom Services are the result of: (i) its attention to
client needs and devotion to achieving client satisfaction, (ii) its commitment
to quality, (iii) its ability to quickly locate and assemble the right
person/team through its computerized hiring system (described below, see
"Employees"), and
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(iv) its ability to successfully bid on projects. In addition, management works
very diligently with clients to define the job/project and to determine: the
client's needs and expectations, skill sets required, education and background
suited for the tasks or projects, proper work environment, location and duration
of the project, special training needs, equipment and tool requirements, and
proper scheduling of personnel and deployment of equipment and materials. This
personalized approach to client needs enables the Company to respond to clients'
expectations, as well as to the particular job requirements.
As leading corporations around the world move toward doing business with a
reduced number of "preferred suppliers", they tend to form longer-term supplier
partnerships with quality providers who are able to respond to a wide range of
needs in the most efficient manner. The Company received its first ISO 9000
certification in 1993 and to date has received a total of nine (9) ISO 9000
certifications covering a number of different locations in the United States and
the United Kingdom. The Company has received at least one ISO 9000
certification in each of its major businesses, and continues to seek additional
ISO 9000 certifications for several other of its facilities. Management
believes that its commitment to quality will enhance Butler's standing as a
provider of quality technical services throughout the world.
BUSINESS EXPANSION AND ACQUISITIONS
In recent years the Company has completed several acquisitions in its Technology
Solutions business. The Company believes that acquisitions in the information
technology services market will increase its overall margins and add to the
Company's future growth in terms of sales and profits.
CLIENTS
The Company provides its services to over 1,600 clients. None of the Company's
clients individually represented 10% or more of the Company's net sales in 1996.
A substantial amount of the Company's 1996 net sales were derived from U.S.
companies included in the "Fortune 500" companies list.
EMPLOYEES
The Company currently has over 6,700 employees in the United States and abroad,
and believes that its relationship with its employees is good. Less than 2% of
the Company's employees are covered by collective bargaining agreements.
Historically, the Company has been able to attract and retain high caliber
employees and utilize them effectively to service client needs quickly,
efficiently and at competitive costs.
The Company's services are provided by employees who are hired by the Company
and assigned to work on a full time basis on a specific project of a client.
The period of assignment depends upon the duration of the need for the skills
possessed by an individual employee, and averages approximately five to eight
months. At the end of an assignment, the employee's employment is terminated
unless the Company is able to reassign the employee to a different client. A
number of employees have worked for Butler intermittently over a period of
years.
Management believes that technical personnel are attracted to this type of
employment by the opportunity to work frequently on "state-of-the-art" projects
and by the geographic and industry diversity of the projects. The Company's
employees are on the Company's payroll and are subject to its administrative
control only during the period that the employee provides services to the
client. The client typically retains technical and supervisory control over the
performance of the employees.
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Management expects that changing technologies will continue to create demands
for new skills faster than the permanent workforce can respond, resulting in a
shortage of specialized technical skills. At the same time, early retirees and
increased labor force mobility provide a sizable labor pool available to
technical service companies like the Company. As a result, the Company expects
that an adequate supply of qualified people will continue to be available to
recruit and satisfy client needs.
Company recruiters are trained to be skilled at providing a proper match between
the candidate and the client's requirements. Candidates are screened on the
basis of their overall career experience and technical competency. In 1996, the
Company's recruiting system was replaced with a state-of-the-art fulfillment
system that allows for full text searches, on-line reporting, systematic
management of requirements, and shared databases across all divisions.
Identification of personnel to add to the Company's employee candidate base
comes from multiple sources including national and international advertising,
the internet, employee referrals and industry contacts, including early
retirees. The Company's strategic direction for the sales and recruiting
organization is (i) to significantly lower overhead costs by centralizing field
operations and upgrading technology; achieving process standardization and cost
management; and creating a platform for integration with future systems
(payroll/billing, finance, etc.); and (ii) to have a customer driven strategy by
creating mobile sales and recruiting organizations that can move in and out of
markets. The new system is expected to produce both hard dollar savings and
productivity gains in the entire sales and recruiting process.
COMPETITION
The technical services industry in the United States is highly fragmented and
characterized by specialized regional and local firms serving specific
geographic territories and industries. The Company is one of only a few
international companies with the breadth of personnel and resources to respond
quickly to the large scale and rapidly changing personnel requirements of major
corporate clients worldwide. Based on this characteristic, management believes
the Company is a preferred provider of contract technical services and solutions
to major corporations because of its ability to service the broad range of
client needs.
Some national and international companies are larger than the Company or are
associated with companies that have greater financial or other resources than
the Company. Management believes, however, that the Company's ability to handle
efficiently the broad spectrum of specialized client needs, its commitment to
quality, the extensive network of the Company's offices, the wide array of
technical skills available, and its unique computerized system of identifying
qualified personnel for specialized tasks enable it to compete favorably with
other providers in the industry.
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ITEM 2. PROPERTIES
----------
The Company owns its corporate office facility located at 110 Summit Avenue,
Montvale, New Jersey, 07645.
At March 19, 1997, Butler maintained office space at the following locations for
predominantly sales, recruiting and administrative functions:
UNITED STATES
Albuquerque, NM Gaylord, MI Saginaw, MI
Anaheim, CA Indianapolis, IN St. Louis, MO
Arlington Heights, IL Irving, TX San Jose, CA
Aurora, CO King of Prussia, PA Shelton, CT
Aurora, IL Kokomo, IN Springfield, MA
Austin, TX Lake St. Louis, MO Syracuse, NY
Baltimore, MD Lombard, IL Tempe, AZ
Beaverton, OR McLean, VA Twinsburg, OH
Bronx, NY Montvale, NJ West Bridgewater, MA
Burlington, MA Norcross, GA Woodside, NY
Center Line, MI Ontario, CA
Chillicothe, IL Park Ridge, IL
Cincinnati, OH Plainsboro, NJ
Citrus Heights, CA Pleasanton, CA
Dublin, CA Portsmouth, NH
Encino, CA Raleigh, NC
Euclid, OH Redmond, WA
Fairport, NY Riverside, CA
Fort Wayne, IN Rochester, NY
INTERNATIONAL
York, England
London, England
Redhill, Surrey, England
Except for its corporate headquarters facility in Montvale, New Jersey, the
Company does not own any real estate and generally leases office space. The
Company makes modest investments in leasehold improvements, equipment and other
tangible property, principally computer equipment, as required.
ITEM 3. LEGAL PROCEEDINGS
------------------
The Company and its subsidiaries are parties to various legal proceedings and
claims incidental to normal business operations for which any 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 in the 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 March 14,
1997, CIGNA notified the Company that it intended to draw down on
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three letters of credit, posted by the Company, in the aggregate amount of
approximately $2.9 million. This amount is fully reserved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
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MATTERS
- -------
Information regarding the market for the Company's common stock and related
stockholder matters is on page 32 of the Company's 1996 Annual Report, which
information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
Selected financial data is included on page 32 of the Company's 1996 Annual
Report, which is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
-----------------------------------------------------------------
FINANCIAL CONDITION
-------------------
Management's discussion and analysis of results of operations and financial
condition is included on pages 14-16 of the Company's 1996 Annual Report, which
discussion and analysis are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The following financial statements and supplementary data are herein
incorporated by reference to the Company's 1996 Annual Report:
<TABLE>
<S> <C>
Consolidated Balance Sheets at December 31, 1996 and December 31, 1995 PAGE 17
Consolidated Statements of Operations for the years ended December 31, 1996,
December 31, 1995, and December 31, 1994 PAGE 18
Consolidated Statements of Cash Flows for the years ended December 31, 1996,
December 31, 1995, and December 31, 1994 PAGE 19
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, December 31, 1995, and December 31, 1994 PAGE 20
Notes to Consolidated Financial Statements PAGES 21-30
Independent Auditors' Report PAGE 31
</TABLE>
Other supporting schedules are submitted in a separate section of this report
following Item 14.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not Applicable.
PART III
A definitive proxy statement pursuant to Regulation 14A will be filed with the
Commission not later than April 30, 1997, which is 120 days after the close of
the Registrant's fiscal year. The proxy statement will be incorporated in Part
III (Items 10 through 13) of Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
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(a)(1) The following consolidated financial statement schedules of Butler
International, Inc. and subsidiaries are included following Item 14:
Schedule I - Condensed financial information of Registrant
Schedule II - Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(a)(3) Exhibits: The exhibit listing and exhibits follow the schedules.
(b) No reports on Form 8-K were filed by the Company during the fiscal
quarter ended December 31, 1996.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 27, 1997 BUTLER INTERNATIONAL, INC.
(Registrant)
By: /s/ Edward M. Kopko
------------------
Edward M. Kopko, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
/s/Edward M. Kopko Chairman of the Board of March 27, 1997
- ------------------ Directors and CEO
Edward M. Kopko (Principal Executive Officer)
/s/John F. Hegarty Director March 27, 1997
- ------------------
John F. Hegarty
/s/Frederick H. Kopko, Jr. Director March 27, 1997
- --------------------------
Frederick H. Kopko, Jr.
/s/Hugh G. McBreen Director March 27, 1997
- ------------------
Hugh G. McBreen
/s/Nikhil S. Nagaswami Director March 27, 1997
- ----------------------
Nikhil S. Nagaswami
/s/Michael C. Hellriegel Senior Vice President March 27, 1997
- ------------------------ and Chief Financial Officer
Michael C. Hellriegel
/s/Warren F. Brecht Senior Vice President March 27, 1997
- ------------------- and Secretary
Warren F. Brecht
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 27, 1997 BUTLER INTERNATIONAL, INC.
(Registrant)
By:_____________________________
Edward M. Kopko, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
___________________________ Chairman of the Board of March 27, 1997
Edward M. Kopko Directors and CEO
(Principal Executive Officer)
__________________________ Director March 27, 1997
John F. Hegarty
__________________________ Director March 27, 1997
Frederick H. Kopko, Jr.
__________________________ Director March 27, 1997
Hugh G. McBreen
__________________________ Director March 27, 1997
Nikhil S. Nagaswami
__________________________ Senior Vice President March 27, 1997
Michael C. Hellriegel and Chief Financial Officer
__________________________ Senior Vice President March 27, 1997
Warren F. Brecht and Secretary
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Butler International, Inc.:
We have audited the consolidated financial statements of Butler International,
Inc. as of December 31, 1996 and December 31, 1995, and for each of the three
years in the period ended December 31, 1996, and have issued our report thereon
dated March 19, 1997; such financial statements and report are included in your
1996 Annual Report to Stockholders and are incorporated herein by reference.
Our audits also included the financial statement schedules of Butler
International, Inc. listed in Item 14. These financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/Deloitte & Touche LLP
- ------------------------
Parsippany, New Jersey
March 19, 1997
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Schedule I
- ----------
BUTLER INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(in thousands)
December 31,
--------------------
1996 1995
-------- --------
ASSETS
- ------------------------------------------------
Current Assets
Cash $ $ 2
-
Other current assets 78 117
-------- --------
Total current assets 78 119
Investment in and receivable from subsidiaries 36,324 30,781
Other assets 67 77
-------- --------
Total assets $ 36,469 $ 30,977
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable and accrued liabilities $ 639 $ 532
Current portion of long-term debt 127 149
-------- --------
Total current liabilities 766 681
-------- --------
Long-term liabilities 133 133
-------- --------
Stockholders' equity:
Preferred stock 3 2
Common stock 6 6
Additional paid-in capital 93,673 92,882
Accumulated deficit (58,112) (62,727)
-------- --------
Total stockholders' equity 35,570 30,163
-------- --------
Total liabilities and
stockholders' equity $ 36,469 $ 30,977
======== ========
The accompanying notes are an integral part of these financial statements.
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Schedule I (continued)
- -----------------------
BUTLER INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
(in thousands)
Year ended December 31,
----------------------------------
1996 1995 1994
---------- ---------- ---------
Revenues
Interest income (includes intercompany
interest of $1,181, $2,349 and $1,609) $ 1,200 $ 2,363 $ 1,624
--------- --------- --------
Expenses
Compensation and benefits 7 16 (21)
Administrative and operating expenses 623 671 911
Interest expense 12 24 45
------ ------ ------
642 711 935
------ ------ ------
Equity in income (loss) of subsidiaries 4,826 (9,677) 1,279
------ ------ ------
Income from operations before income taxes 5,384 (8,025) 1,968
Income taxes (benefit) 593 (111) 309
------ ------ ------
Net income (loss) $4,791 (7,914) $1,659
====== ====== ======
The accompanying notes are an integral part of these financial statements.
14
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Schedule I (continued)
- ----------------------
BUTLER INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
<S> <C> <C> <C>
1996 1995 1994
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,791 $(7,914) $ 1,659
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 9 23 (12)
(Gains) losses of subsidiaries (4,363) 9,534 (1,007)
(Increase) decrease in assets, increase
(decrease) in liabilities:
Other current assets 41 223 128
Other assets - - 4
Accounts payable and accrued liabilities 107 316 (459)
Long-term liabilities - - (75)
------- ------- -------
Net cash provided by operating activities 585 2,182 238
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in note receivable from Butler
Service Group, Inc. (1,181) (2,349) (1,442)
Capital expenditures - net - - (27)
Other - 53 (4)
------- ------- -------
Net cash used in investing activities (1,181) (2,296) (1,473)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the exercise of common
stock options and warrants 547 84 1,566
Net payments of note payable 47 (72) (289)
Payment of dividends - - (99)
------- ------- -------
Net cash provided by financing activities 594 12 1,178
------- ------- -------
Net decrease in cash (2) (102) (57)
Cash at beginning of year 2 104 161
------- ------- -------
Cash at end of year $ - $ 2 $ 104
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
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Schedule I (continued)
- ----------------------
BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT AT DECEMBER 31, 1996
NOTE 1 - ACCOUNTING POLICIES:
The investments in the Company's subsidiaries are carried at the Company's
equity of the subsidiary which represents amounts invested less the Company's
equity in the losses to date. Significant intercompany balances and activities
have not been eliminated in this unconsolidated financial information.
No cash dividends were received from subsidiaries during the past three years.
Certain information and footnote disclosures normally included in financial
statements prepared in conformity with generally accepted accounting principles
have been condensed or omitted. Accordingly, these financial statements should
be read in conjunction with the Company's consolidated financial statements in
its 1996 Annual Report to Stockholders.
NOTE 2 - CONTINGENT LIABILITIES:
The Company has guaranteed the Butler Service Group, Inc. ("BSG") revolving
credit loan. Under the terms of the agreement, transfer of funds to the Company
by BSG is restricted (see Note 5 of the Company's consolidated financial
statements in its 1996 Annual Report).
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Schedule II
- -----------
BUTLER INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
----------------------
Balance at Charged to Charged to Balance
beginning costs and other end of at
Description of period expenses accounts Deductions period
- ------------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1994
- -------------
Allowance for
uncollectible
accounts receivable $ 651,000 $ 447,000 - $ 225,000 $ 873,000
Reserve for
discontinued
operations $1,014,400 - - $ 642,400 $ 372,000
1995
- --------------
Allowance for
uncollectible
accounts receivable $ 873,000 $ 783,000 - $ 82,000 $1,574,000
Reserve for
discontinued
operations $ 372,000 - - $ 118,000 $ 254,000
1996
- ---------------
Allowance for
uncollectible
accounts receivable $1,574,000 $ 453,000 - $ 572,000 $1,455,000
Reserve for
discontinued
operations $ 254,000 - - $ 118,000 $ 136,000
</TABLE>
17
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
3.1 Articles of Incorporation of the Registrant, as amended, filed as
Exhibit No. 3(a) to the Registrant's Registration Statement on
Form S-4, Registration No. 33-10881 (the "S-4"), and hereby
incorporated by reference.
3.2 By-laws of the Registrant, as amended, filed herewith as Exhibit
3.2.
4.1 Specimen Stock Certificate for the Registrant's common stock, par
value $.001 per share, filed as Exhibit No. 4.1 to the
Registrant's Registration Statement on Form S-1, Registration No.
33-2479 (the "S-1"), and hereby incorporated by reference.
4.2 Articles Supplementary to the Articles of Incorporation of the
Registrant's 7 1/2% Senior Cumulative Convertible Preferred
Stock, filed as Exhibit No. 4.1 to Form 10-Q for the period ended
September 27, 1992, and hereby incorporated by reference.
4.3 Specimen Stock Certificate representing the Registrant's Series B
7% Cumulative Convertible Preferred Stock, par value $.001 per
share, filed as Exhibit No. 4.5 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992 (the "1992 10-
K"), and hereby incorporated by reference.
10.1* Incentive Stock Option Plan of the Registrant, as amended, filed
as Exhibit No. 10.1 to the 1990 10-K, and hereby incorporated by
reference.
10.2* Stock Option Plan of the Registrant, as amended, filed as Exhibit
No. 10.2 to the 1990 10-K, and hereby incorporated by reference.
10.3 Agreement dated May 26, 1993, by and among Butler International,
Inc. ("Butler"), Butler of New Jersey Realty Corp., a New Jersey
corporation ("BNJRC"), Frederick H. Kopko, Jr. and Hugh G.
McBreen, filed as Exhibit No. 10.6 to the S-2, and hereby
incorporated by reference.
10.4 Purchase and Sale Agreement, dated May 26, 1993, by and between
110 Summit Limited Partnership, a New Jersey limited partnership
("110 Summit") and BNJRC, filed as Exhibit 10.7 to the
Registrant's Registration Statement on Form S-2, Registration No.
33-72550 (the "S-2), and hereby incorporated by reference.
10.5(a) Promissory Note, dated May 26, 1993, in the principal amount of
$1,200,000 by BNJRC to 110 Summit, as lender, filed as Exhibit
No. 10.8(a) to the S-2, and hereby incorporated by reference.
10.5(b) Amended and Restated Promissory Note, dated May 26, 1993, in the
amount of $6,750,000 by BNJRC to Firemen's Insurance Company of
Newark, New Jersey, as lender ("Firemen's"), filed as Exhibit No.
10.8(b) to the S-2, and hereby incorporated by reference.
* Denotes compensatory plan, compensation arrangement or management contract.
E-1
<PAGE>
Exhibit
No. Description
- -------- -----------
10.6 Amended and Restated Mortgage and Assignment of Leases and Rents
and Security Agreement, dated May 26, 1993, from BNJRC, as
mortgagor, to Firemen's as mortgagee, filed as Exhibit No. 10.9
to the S-2, and hereby incorporated by reference.
10.7 Guaranty Agreement, dated May 26, 1993, by Butler in favor of 110
Summit, filed as Exhibit 10.10 to the S-2, and hereby
incorporated by reference.
10.8* 1989 Directors Stock Option Plan of the Registrant, dated
November 1, 1988, as amended, filed as Exhibit 10.18 to the 1990
10-K, and hereby incorporated by reference.
10.9* Stock Purchase Agreement, dated September 19, 1990, between North
American Ventures, Inc. and Edward M. Kopko, filed as Exhibit
10.31 to the 1990 10-K, and hereby incorporated by reference.
10.10* Plan Pledge Agreement, dated September 19, 1990, between North
American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No.
10.32 to the 1990 10-K, and hereby incorporated by reference.
10.11* Plan Promissory Note, dated January 16, 1991, executed by Edward
M. Kopko, and made payable to the order of North American
Ventures, Inc. in the amount of $445,000, filed as Exhibit No.
10.33 to the 1990 10-K, and hereby incorporated by reference.
10.12* Pledge Agreement, dated January 16, 1991, between North American
Ventures, Inc. and Edward M. Kopko, filed as Exhibit No. 10.34 to
the 1990 10-K, and hereby incorporated by reference.
10.13* Promissory Note, dated January 16, 1991, executed by Edward M.
Kopko and made payable to the order of North American Ventures,
Inc. in the amount of $154,999.40, filed as Exhibit No. 10.35 to
the 1990 10-K, and hereby incorporated by reference.
10.14* Form of Plan Pledge Agreement, dated September 19, 1990, between
North American Ventures, Inc. and each of John F. Hegarty, Hugh
G. McBreen, and Frederick H. Kopko, Jr. ("outside directors"),
filed as Exhibit No. 10.36 to the 1990 10-K, and hereby
incorporated by reference.
10.15* Form of Plan Promissory Note, dated September 19, 1990, each
represented by an outside director and each made payable to the
order of North American Ventures, Inc. in the amount of $185,000,
filed as exhibit no. 10.37 to the 1990 10-K, and hereby
incorporated by reference.
10.16* Form of Stock Purchase Agreement, dated November 4, 1988, between
North American Ventures, Inc. and each of the outside directors,
filed as Exhibit No. 10.38 to the 1990 10-K, and hereby
incorporated by reference.
10.17* Form of Pledge Agreement, dated January 16, 1991, between North
American Ventures, Inc. and each of the outside directors, filed
as Exhibit No. 10.39 to the 1990 10-K, and hereby incorporated by
reference.
* Denotes compensatory plan, compensation arrangement or management contract.
E-2
<PAGE>
Exhibit
No. Description
- -------- -----------
10.18* Form of Promissory Note, dated January 16, 1991, executed by each
of the outside directors and each payable to the order of North
American Ventures, Inc., in the amount of $63,000, filed as
Exhibit No. 10.40 to the 1990 10-K, and hereby incorporated by
reference.
10.19* Form of Pledge Agreement, dated January 16, 1991, between North
American Ventures, Inc. and each of the outside directors, filed
as Exhibit No. 10.41 to the 1990 10-K, and hereby incorporated by
reference.
10.20* Form of Promissory Note, dated January 16, 1991, executed by each
of the outside directors and each made payable to the order of
North American Ventures, Inc. in the amount of $54,000, filed as
Exhibit No. 10.42 to the 1990 10-K, and hereby incorporated by
reference.
10.21* Form of Promissory Note, dated January 16, 1991, executed by each
of the outside directors and each payable to the order of North
American Ventures, Inc., in the amount of $225,450, filed as
Exhibit No. 10.43 to the 1990 10-K, and hereby incorporated by
reference.
10.22* Form of Pledge Agreement, dated January 16, 1991, between North
American Ventures, Inc. and each of the outside directors, filed
as Exhibit No. 10.44 to the 1990 10-K, and hereby incorporated by
reference.
10.23* Form of Security Agreement, dated January 16, 1991, between North
American Ventures, Inc. and each of the outside directors, filed
as Exhibit No. 10.45 to the 1990 10-K, and hereby incorporated by
reference.
10.24* 1990 Employee Stock Purchase Plan of the Registrant, as amended,
filed as Exhibit No. 10.46 to the 1990 10-K, and hereby
incorporated by reference.
10.25* Employment Agreement, dated December 17, 1991, among North
American Ventures, Inc., Butler Service Group, Inc., and Edward
M. Kopko, filed as Exhibit 10.33 to the Registrant's Annual
Report on Form 10-K for the year ended December 29, 1991 (the
"1991 10-K"), and hereby incorporated by reference.
10.26* Stock Purchase Agreement, dated December 17, 1991, between North
American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No.
10.34 to the 1991 10-K, and hereby incorporated by reference.
10.27* Plan Pledge Agreement, dated December 17, 1991, between North
American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No.
10.35 to the 1991 10-K and hereby incorporated by reference.
10.28* Plan Promissory Note, dated December 17, 1991, executed by Edward
M. Kopko, and made payable to the order of North American
Ventures, Inc. in the amount of $84,000, filed as Exhibit No.
10.36 to the 1991 10-K, and hereby incorporated by reference.
10.29* Form of Stock Purchase Agreement, dated December 17, 1991,
between North American Ventures, Inc. and each of the outside
directors, filed as Exhibit 10.37 to the 1991 10-K, and hereby
incorporated by reference.
* Denotes compensatory plan, compensation arrangement or management contract.
E-3
<PAGE>
Exhibit
No. Description
- -------- -----------
10.30* Form of Plan Pledge Agreement, dated December 17, 1991, between
North American Ventures, Inc. and each of the outside directors,
filed as Exhibit 10.38 to the 1991 10-K, and hereby incorporated
by reference.
10.31* Form of Plan Promissory Note, dated December 17, 1991, each
executed by an outside director, and each made payable to the
order of North American Ventures, Inc., in the amount of $42,000,
filed as Exhibit No. 10.39 to the 1991 10-K, and hereby
incorporated by reference.
10.32* 1992 Stock Option plan, filed as Exhibit 10.40 to the 1992 10-K,
and hereby incorporated by reference.
10.33* 1992 Incentive Stock Option Plan, filed as Exhibit 10.41 to the
1992 10-K, and hereby incorporated by reference.
10.34* 1992 Stock Bonus Plan, filed as Exhibit No. 10.42 to the 1992 10-
K, and hereby incorporated by reference.
10.35* 1992 Stock Option plan for non-employee directors, filed as
Exhibit 10.43 to the 1992 10-K, and hereby incorporated by
reference.
10.36* Butler Service Group, Inc. employee stock ownership plan and
trust agreement, filed as Exhibit No. 19.2 to the registrant's
annual report on form 10-K for the year ended December 31, 1987
(the "1987 10-K"), and hereby incorporated by reference.
10.37 Credit Agreement dated as of May 31, 1994 between Butler Service
Group, Inc. and General Electric Credit Corporation, filed as
Exhibit 10.41 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994 (the "1994 10-K"), and hereby
incorporated by reference.
10.38(a) First Amendment Agreement, dated December 14, 1994 among Butler
Service Group, Inc., the Company, Butler Service Group Canada,
Ltd., and General Electric Capital Corporation, filed as Exhibit
10.42(a) to the 1994 10-K, and hereby incorporated by reference.
10.38(b) Second Amendment Agreement, dated March 21, 1995 and effective as
of December 14, 1994, among Butler Service Group, Inc., the
Company, Butler Service Group Canada, Ltd., and General Electric
Capital Corporation, filed as Exhibit 10.42(b) to the 1994 10-K,
and hereby incorporated by reference.
10.38(c) Third Amendment Agreement, dated May 15, 1995 and effective as of
March 31, 1995, among Butler Service Group, Inc., the Company,
Butler Service Group Canada, Ltd., and General Electric Capital
Corporation, filed as Exhibit 10.42(c) to Form 10-Q for the
period ended September 30, 1995, and hereby incorporated by
reference.
10.38(d) Fourth Amendment Agreement, dated August 3, 1995 and effective as
of June 1, 1995, among Butler Service Group, Inc., the Company,
Butler Service Group Canada, Ltd., and General Electric Capital
Corporation, filed as Exhibit 10.42(d) to Form 10-Q for the
period ended September 30, 1995, and hereby incorporated by
reference.
* Denotes compensatory plan, compensation arrangement or management contract.
E-4
<PAGE>
Exhibit
No. Description
- -------- -----------
10.38(e) Fifth Amendment Agreement, dated October 4, 1995 and effective as
of September 30, 1995, among Butler Service Group, Inc., the
Company, Butler Service Group Canada, Ltd., and General Electric
Capital Corporation, filed as Exhibit 10.42(e) to Form 10-Q for
the period ended September 30, 1995, and hereby incorporated by
reference.
10.38(f) Sixth Amendment Agreement, dated November 3, 1995 and effective
as of September 30, 1995, among Butler Service Group, Inc., the
Company, Butler Service Group Canada, Ltd., and General Electric
Capital Corporation, filed as Exhibit 10.39(f) to the 1995 10-K,
and hereby incorporated by reference.
10.38(g) Seventh Amendment Agreement, dated December 6, 1995 and effective
as of November 30, 1995, among Butler Service Group, Inc., the
Company, Butler Service Group Canada, Ltd., and General Electric
Capital Corporation, filed as Exhibit 10.39(g) to the 1995 10-K,
and hereby incorporated by reference.
10.38(h) Eighth Amendment Agreement, dated March 26, 1996 and effective as
of December 31, 1995, among Butler Service Group, Inc., the
Company, Butler Service Group Canada, Ltd., and General Electric
Capital Corporation, filed as Exhibit 10.39(h) to the 1995 10-K,
and hereby incorporated by reference.
10.38(i) Ninth Amendment Agreement, dated May 1, 1996, among Butler
Service Group, Inc., the Company, Butler Service Group Canada,
Ltd., and General Electric Capital Corporation, filed herewith as
Exhibit 10.38(i).
10.38(j) Tenth Amendment Agreement, dated June 1, 1996, among Butler
Service Group, Inc., the Company, Butler Service Group Canada,
Ltd., and General Electric Capital Corporation, filed herewith as
Exhibit 10.38(j).
10.38(k) Eleventh Amendment Agreement, dated October 31, 1996 and
effective as of September 30, 1996, among Butler Service Group,
Inc., the Company, Butler Service Group Canada, Ltd., and General
Electric Capital Corporation, filed herewith as Exhibit 10.38(k).
10.39* Employment Agreement dated May 15, 1994 between Butler Fleet
Services, a division of Butler Services, Inc., and James
Vonbampus, filed as Exhibit 10.44 to the 1994 10-K, and hereby
incorporated by reference.
10.40* Employment Agreement dated April 18, 1995 between Butler
International, Inc., and Harley R. Ferguson, filed as Exhibit
10.42 to the 1995 10-K, and hereby incorporated by reference.
10.41* Form of Promissory Note dated May 3, 1995 in the original
principal amount of $142,500 executed by Frederick H. Kopko, Jr.
and Hugh G. McBreen, and made payable to the order of Butler
International, Inc., filed as Exhibit 10.43 to the 1995 10-K, and
hereby incorporated by reference.
10.42* Form Pledge Agreement dated May 3, 1995 between Butler
International, Inc. and each of Frederick H. Kopko, Jr. and Hugh
G. McBreen, filed as Exhibit 10.44 to the 1995 10-K, and hereby
incorporated by reference.
13.1 1996 Annual Report to Stockholders, Financial Section (Pages 14-
32), filed herewith as Exhibit 13.1.
* Denotes compensatory plan, compensation arrangement or management contract.
E-5
<PAGE>
Exhibit
No. Description
- -------- -----------
22.1 List of Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule.
E-6
<PAGE>
EXHIBIT 3.2
As Amended
BY LAWS
OF
NORTH AMERICAN VENTURES, INC.
(A Maryland Corporation)
Article I
---------
Stockholders
------------
SECTION 1. Annual Meeting. Annual meetings of stockholders, commencing
---------- --------------
with the year 1987, shall be held once each year during the fourth month
following the close of the fiscal year of the Corporation, and at such time as
shall be set or provided for by the Board of Directors or, if not so set or
provided for, then as stated in the notice of meeting. At such meeting the
stockholders shall elect a Board of Directors and transact other business as may
properly be brought before the meeting.
SECTION 2. Special Meetings. Special meetings of stockholders may be held
--------- ----------------
on such date and at such time as shall be set or provided for by the Board of
Directors or, if not so set or provided for, then as stated in the notice of
meeting. The notice of meeting shall state the purpose or purposes for which
the special meeting is called.
SECTION 3. Place of Meetings. All meetings of stockholders shall be held
--------- -----------------
at such place in the United States as is set or provided for by the Board of
Directors or, if not so set or provided for, then as stated in the notice of
meeting.
SECTION 4. Quorum. At any meeting of stockholders a majority of the
--------- ------
outstanding shares of stock entitled to vote at such meeting, present in person
or represented by proxy, shall constitute a quorum. If such majority shall not
be present or represented at any meeting of the stockholders, a majority of the
shares of stock present in person or represented thereat shall have the power to
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
SECTION 5. Organization. At any meeting of the stockholders, in the
--------- ------------
absence of the Chairman of the Board of Directors, if any, and of the President
or a Vice President acting in his stead, the stockholders shall choose a
chairman to preside over the meeting. In the absence of the Secretary or an
Assistant Secretary, acting in his stead, the chairman of the meeting shall
appoint a secretary to keep the record of all the votes and minutes of the
proceedings.
<PAGE>
SECTION 6. Proxies. At any meeting of the stockholders, every stockholder
--------- -------
having the right to vote shall be entitled to vote in person or by proxy
appointed by an instrument executed in writing by such stockholder or his duly
authorized attorney in fact and bearing a date not more than eleven (11) months
prior to said meeting, unless otherwise provided in the proxy.
SECTION 7. Voting. At any meeting of the stockholders, every stockholder
--------- ------
shall be entitled to one vote or a fractional vote on each matter submitted to a
vote for each share or fractional share of stock standing in his name on the
books of the Corporation as of the close of business on the record date for such
meeting. Unless the voting is conducted by inspectors, all questions relating
to the qualification of voters, validity of proxies and acceptance or rejection
of votes shall be decided by the chairman of the meeting.
SECTION 8. Record Date; Closing of Transfer Books. The Board of Directors
--------- ----------- -------------------------
may fix, in advance, a date as the record date for the purpose of determining
stockholders entitled to notice of, or to vote at, any meeting of stockholders,
or stockholders entitled to receive payment of any dividend or the allotment of
any rights, or in order to make a determination of stockholders for any other
proper purpose. Such date, in any case, shall be not more than sixty days, and
in case of a meeting of stockholders not less than ten days, prior to the date
of which the particular action requiring such determination of stockholders is
to be taken. In lieu of fixing a record date, the Board of Directors may
provide that the stock transfer books shall be closed for a stated period but
not to exceed, in any case, twenty days. If the stock transfer books are closed
for the purpose of determining stockholder entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least ten days
immediately preceding such meeting.
SECTION 9. Registered Stockholders. The Corporation shall be entitled to
--------- -----------------------
recognize the exclusive right of a person registered on its books as the owner
of shares and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof.
SECTION 10. Transfer of Shares. No transfer of shares shall be valid or
---------- ------------------
shall be registered on the stock transfer books without the order of the Board
of Directors, of any shares upon which any assessments have been levied and are
unpaid, or the holders of which are indebted to the Corporation, directly or
indirectly, or any account whatever.
ARTICLE II
Board of Directors
SECTION 1. Number, Qualification, Tenure and Vacancies. The number of
--------- -------------------------------------------
directors shall be four, which number may be increased or decreased as provided
herein. The number of directors may be increased or decreased by the amendment
of this section, which amendment shall be accomplished by an affirmative vote of
at least 75% of the Directors. However, no decrease in the number of directors
shall have the effect of shortening the term of any incumbent director. The
Board of Directors shall never be
<PAGE>
less than three (3) nor more than twelve (12). If the number of Directors is
increased, the additional Directors thus created may be elected by majority vote
of the entire Board of Directors. If additional Directors are not so elected by
a majority vote of the entire Board of Directors, they shall be elected by the
stockholders at their next annual meeting. Any vacancy occurring for any cause
other than an increase in the number of directors may be filled by a majority of
the remaining members of the Board of Directors, although such majority is less
than a quorum. A director elected by the Board of Directors to fill a vacancy,
for any cause, shall be elected to hold office until the next annual meeting of
stockholders, or until his successor is elected and qualifies, or until such
director's earlier death, resignation, retirement, or removal.
The Board of Directors at its first meeting after the adoption of these
Amended By-Laws shall classify the Directors with respect to the period of time
for which they shall serve into three classes, each consisting as nearly as
possible of one third of the total number of Directors. The Director(s) in the
first class shall serve until the first annual meeting next ensuing after the
organization of the corporation; and the Director(s) in the second and third
classes shall serve until the second, and third, annual meetings respectively;
and at each annual election held after the organization of the Corporation, the
successors to the class of Directors whose terms shall expire in that year shall
be elected to hold office for a full term of three years, so that the term of
office of one class of Directors shall expire in each year.
In the event that the number of Directors increases, the Board shall
reclassify the Directors into as many classes as there are Directors up to five
classes, and shall extend the tenure of each classification to correspond with
the number of classes, so that the term of one shall expire each year. Whenever
under the provisions hereof, the number of Directors is increased and vacancies
caused by such increase are filled by the Board of Directors, the Board of
Directors in filling such vacancies shall classify such Directors so elected in
accordance with the provisions hereof so that each of the classes shall contain
as nearly equal numbers as possible. Whenever, under the provisions hereof, the
number of Directors is decreased by a vote of 75% of the entire Board to take
effect while the number of Directors whose terms of office have not expired
exceeds the number of Directors to which the Board is decreased, the Board shall
determine when the term of office of the Directors in excess of such decreased
number shall expire and shall, if necessary, reclassify the remaining Directors
so that each of the classes shall contain as nearly equal number as possible,
provided that the term of office of no Director shall be extended to a period
which shall be more than five years from the date of his last election and
qualification, and provided further than the tenure of office of any existing
Director is not decreased. In the event that the number of directors is three,
four, or five, the number of classes of Directors shall equal the number of
Directors.
Directors need not be residents of Maryland or stockholders of the
Corporation.
This section may be altered, amended, or repealed only by an affirmative
vote of at least 75% of the Directors then in office.
<PAGE>
SECTION 2. Regular Meetings. Regular meetings of the Board of Directors
--------- ----------------
may be held at such time and place as shall be determined from time to time by
agreement or fixed by resolution of the Board of Directors.
SECTION 3. Special Meetings. Special meetings of the Board of Directors
--------- ----------------
may be called at any time by the Chairman of the Board or President and shall be
called by the Secretary upon the written request of any two (2) directors.
SECTION 4. Notice of Meetings. Except as otherwise provided in these
--------- ------------------
Bylaws, notice need not be given of regular meetings of the Board of Directors
held at times fixed by agreement or resolution of the Board of Directors.
Notice of special meetings of the Board of Directors, stating the place, date
and time thereof, shall be given not less than two (2) days before such meeting
to each director. Notice to a director may be given personally, by telegram,
cable or wireless, by telephone, by mail, or by leaving such notice at this
place of residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to the director at his address as it appears on the records of the
Corporation. Meetings may be held at any time without notice if all the
directors are present, or if those not present waive notice of the meeting in
writing. If the President shall determine in advance that a quorum would not be
present on the date set for any regular or special meeting, such meeting may be
held at such later date, time and place as he shall determine, upon at least
twenty four (24) hours' notice.
SECTION 5. Quorum. A majority of the directors then in office, at a
--------- ------
meeting duly assembled, but not less than one third of the entire Board of
Directors nor in any event less than two directors, shall constitute a quorum
for the transaction of business. The vote of a majority of directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
Articles of Incorporation or by these Bylaws. If at any meeting of the Board of
Directors, there shall be less than a quorum present, a majority of those
present may adjourn the meeting, without further notice, from time to time until
a quorum shall have been obtained.
SECTION 6. Removal. Before expiration of his term, a Director may only be
--------- -------
removed for cause and for no other reason. A director may be removed for cause
at any meeting of stockholders, duly called at which a quorum is present, by the
affirmative vote of the holders of 80% of the votes entitled to be cast thereon.
At such meeting, after the removal of a Director, the stockholders may elect a
successor or successors to fill any resulting vacancies for the unexpired terms
of the removed directors. This section may be altered, amended, or repealed
only by an affirmative vote of at least 75% of the Directors then in office.
SECTION 7. Committees. The Board of Directors may, by resolution adopted
--------- ----------
by a majority of the entire Board of Directors, from time to time appoint from
among its members one or more committees as it may determine. Each committee
appointed by the Board of Directors shall be
<PAGE>
composed of two (2) or more directors and may, to the extent provided in such
resolution, have an exercise all the powers of the Board of Directors, except
the power to declare dividends, to issue stock or to recommend to stockholders
any action requiring stockholder approval. Each such committee shall serve at
the pleasure of the Board of Directors. Each such committee shall keep a record
of its proceedings and shall adopt its own rules of procedure. It shall make
such reports as may be required by the Board of Directors.
SECTION 8. Nominations for Director. Nominations for election to the
--------- ------------------------
Board of Directors may be made by the Board of Directors or by any stockholder
entitled to vote in the election or directors where the stockholder complies
with the requirements of this Section. Nominations, other than those made by or
on behalf of the existing Board of Directors of the Company, shall be made by
notification in writing by personal delivery or certified mail to each of the
President and Secretary of the Company, not less than sixty (60) days or more
than ninety (90) days in advance of the meeting to elect persons to the Board of
Directors; provided that if the annual meeting of stockholders is held earlier
than the first Friday in the month of April, such notice must be given on or
before the later of (x) the date sixty (60) days prior to the earlier date of
the annual meeting and (y) the date ten (10) days after the first public
disclosure, which may include any public filing with the Securities and Exchange
Commission or a press release to Dow Jones & Company or any similar service, of
the earlier date of the annual meeting. Such written notification shall contain
the following information as to each proposed nominee and as to each person,
acting alone or in conjunction with one or more other persons, in making such
nomination or in organizing, directing or financing such nomination or
solicitation of proxies to vote for the nominee: (a) the name, age, residence
address, and business address of each proposed nominee and of each such person;
(b) the principal occupation or employment, the name, type of business and
address of the corporation or other organization in which such employment is
carried on of each proposed nominee and of each such person; (c) if the proposed
nominee is an attorney, a statement as to whether or not either he or any
attorney or firm with whom he has an office relationship as partner, associate,
employee, or otherwise, is an attorney for any competitor, affiliate or
subsidiary thereof; (d) a statement as to each proposed nominee and a statement
as to each such person stating whether the nominee or person concerned has been
a participant in any proxy contest within the past ten years, and, if so, the
statement shall indicate the principals involved, the subject matter of the
contest, the outcome thereof, and the relationship of the nominee or person to
the principals; (e) the amount of stock of the Company owned beneficially,
directly or indirectly, by each proposed nominee and each such person or by
members of their families residing with them and the names of the registered
owners thereof; (f) the amount of stock of the Company owned of record but not
beneficially by each proposed nominee and each such person or by members of
their families residing with them and the names of the beneficial owners
thereof; (g) if any shares specified in (e) or (f) above were acquired in the
last two years, a statement of the dates of acquisition and amounts acquired on
each date; (h) a statement showing the extent of any borrowings to
<PAGE>
purchase shares of the Company specified in (e) or (f) above acquired within the
preceding two years, and if funds were borrowed otherwise than pursuant to a
margin account or a bank loan in the regular course of business of a bank, the
material provisions of such borrowings and the names of the lenders; (i) the
details of any contract, arrangement or understanding relating to the securities
of the Company, to which each proposed nominee or to which each such person is a
party such as joint venture or option arrangements, puts or calls, guarantees
against loss, or guarantees of profit or arrangements as to the division of
losses or profits or with respect to the giving or withholding of proxies, and
the name or names of the persons with whom such contracts, arrangements or
understandings exist; (j) the details of any contract, arrangement, or
understanding to which each proposed nominee or to which such person is a party
with any other contract technical service corporation, affiliate or subsidiary
thereof or with any officer, director, employee, agent, nominee, attorney, or
other representative thereof; (k) a description of any arrangement or
understanding of each proposed nominee and of each such person with any person
regarding future employment or with respect to any future transaction to which
the Company will or may be a party; (l) a statement as to each proposed nominee
and a statement as to each such person as to whether or not the nominee or
person concerned with bear any part of the expense incurred in any proxy
solicitation, and, if so, the amount thereof; (m) a statement as to each
proposed nominee and a statement as to each such person describing any
conviction of a felony that occurred during the preceding ten years involving
the unlawful possession, conversion or appropriation of money or other property,
or the payment of taxes; (n) the amount of stock , if any, owned, directly or
indirectly, by each proposed nominee or by members of his family residing with
him, in any competitor, affiliate or subsidiary thereof; (o) a representation
that such person is a holder of record of stock of the Company entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (p) such other
information regarding each nominee proposed and each such person as would be
required to be disclosed in solicitation of proxies for election of directors,
or would be otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended, including any information that
would be required to be included in a proxy statement filed pursuant to
Regulation 14A had the nominee been nominated by the Board of Director; and (q)
the written consent of each nominee to be named in a proxy statement and to
serve as a director of the Company if so elected, and written acknowledgment by
the nominee that the nominee will not require directors' and officers' liability
insurance to serve as a director of the Company if so elected. No person shall
be eligible to serve as a director of the Company unless nominated in accordance
with the procedures set forth in this Section. If the Chairman of the
stockholders' meeting shall determine that a nomination was not made in
accordance with the procedures prescribed by this section or any other
applicable section of the bylaws, he shall so declare to the meeting and the
defective nomination shall be disregarded.
<PAGE>
This section may be altered, amended or repealed only by an affirmative
vote of at least 75% of the Directors then in office.
SECTION 9. Qualification. No person shall be a member of the Board of
--------- -------------
Directors who is not a citizen of the United States of America.
This section may be altered, amended or repealed only by an affirmative
vote of at least 75% of the Directors then in office.
ARTICLE III
Officers
SECTION 1. Officers. The elected officers of the Corporation shall be the
--------- --------
President, the Secretary and the Treasurer, and may also include one or more
Vice Presidents, a Controller, one or more Assistant Secretaries, one or more
Assistant Treasurers and such other officers as the Board of Directors may
determine. The Board of Directors may elect one of its members as Chairman of
the Board. The President shall be chosen from among the directors. Any two or
more offices may be held by the same person, except that no person may hold both
the office of President and the office of Vice President. A person who holds
more than one office in the Corporation shall not act in more than one capacity
to execute, acknowledge or verify an instrument required by law to be executed,
acknowledged or verified by more than one officer.
SECTION 2. Election, Term of Office and Vacancies. The elected officers
--------- --------------------------------------
of the Corporation shall be elected annually by the Board of Directors at the
first meeting of the Board of Directors after each annual meeting of the
stockholders. Additional officers may be elected at any regular or special
meeting of the Board of Directors to serve until the first regular meeting of
the Board held after the next annual meeting of the stockholders. Each officer
shall hold office until his successor shall have been duly elected and shall
have qualified or until his earlier death, resignation, retirement or removal.
If any office becomes vacant, the vacancy shall be filled by the Board of
Directors.
SECTION 3. Chairman of the Board. Except as otherwise provided in these
--------- ---------------------
Bylaws, in the event the Board of Directors elects a Chairman of the Board of
Directors, he shall preside at all meetings of the stockholders and the Board of
Directors and shall perform such other duties as from time to time may be
assigned to him by the Board of Directors.
SECTION 4. President. The President shall be the chief executive officer
--------- ----------
of the Corporation and shall perform such other duties as from time to time may
be assigned to him by the Board of Directors. He shall perform the duties of
the Chairman of the Board of Directors in the event there is no Chairman or in
the event the Chairman is absent.
SECTION 5. Vice Presidents. A Vice President shall perform such duties as
--------- ---------------
may be assigned by the President or the Board of Directors. In the absence of
the President and in accordance with such order of priority as may be
established by the Board of Directors, he may perform the duties of the
<PAGE>
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
SECTION 6. Secretary. The Secretary shall: (a) keep the minutes of the
--------- ---------
stockholders' and Board of Directors' meetings in one or more books provided for
that purpose, and shall perform like duties for the committees when requested;
(b) see that all notices are duly given in accordance with the provisions of
these Bylaws or as required by law; (c) be custodian of the corporate records
and of the seal of the Corporation and see that the seal of the Corporation is
affixed to all documents the execution of which on behalf of the Corporation
under its seal is duly authorized or required by law; (d) in general perform all
duties incident to the office of Secretary and such other duties as may be
assigned by the President or the Board of Directors.
SECTION 7. Assistant Secretaries. One or more Assistant Secretaries may
--------- ---------------------
be elected by the Board of Directors or appointed by the President. In the
absence of the Secretary and in accordance with such order as may be established
by the Board of Directors, an Assistant Secretary shall have the power to
perform his duties including the certification, execution and attestation of
corporate records and corporate instruments. Assistant Secretaries shall
perform such other duties as may be assigned to them by the President or the
Board of Directors.
SECTION 8. Treasurer. The Treasurer: (a) shall be the principal
--------- ---------
financial officer of the Corporation; (b) shall see that all funds and
securities of the Corporation are held by the custodian of the Corporation's
assets, and (c) in the absence of a Controller, shall also be the principal
accounting officer of the Corporation.
SECTION 9. Assistant Treasurers. One or more Assistant Treasurers may be
--------- --------------------
elected by the Board of Directors or appointed by the President. In the absence
of the Treasurer and in accordance with such order as may be established by the
Board of Directors, an Assistant Treasurer shall have the power to perform his
duties. Assistant Treasurers shall perform such other duties as may be assigned
to them by the President or the Board of Directors.
SECTION 10. Other Officers. The Board of Directors may appoint or may
---------- --------------
authorize the Chairman of the Board or the President to appoint such other
officers and agents as the appointer may deem necessary and proper, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the appointer.
SECTION 11. Bond. If required by the Board of Directors, the Treasurer,
---------- ----
the Controller, and such other directors, officers, employees and agents of the
Corporation as the Board of Directors may specify, shall give the Corporation a
bond in such amount, in such form and with such security, surety or sureties, as
may be satisfactory to the Board of Directors, conditioned on the faithful
performance of the duties of their office and for the restoration to the
Corporation, in case of their death, resignation, or removal from their office
of all books, papers, vouchers, monies, securities and property of whatever
<PAGE>
kind in their possession belonging to the Corporation. All premiums on such
bonds shall be paid by the Corporation.
SECTION 12. Removal. Any officer of the Corporation may be removed by the
---------- -------
Board of Directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contractual rights, if any, of the officer so removed.
SECTION 13. Indemnification. Each present or former director, officer,
---------- ---------------
agent and employee of the Corporation or any predecessor or constituent
corporation, and each person who, at the request of the Corporation, serves or
served another business enterprise in any such capacity, and the heirs and
personal representatives of each of the foregoing, shall be indemnified by the
Corporation to the fullest extent permitted by law against all expenses,
including without limitation amounts of judgments, fines, amounts paid in
settlement, attorneys' and accountants' fees, and costs of litigation, which
shall necessarily or reasonably be incurred by him in connection with any
action, suit or proceeding to which he was, is or shall be a party, or with
which he may be threatened, by reason of his being or having been a director,
officer, agent or employee of the Corporation or such predecessor or constituent
corporation or such business enterprise, whether or not he continues to be such
at the time of incurring such expenses. Such indemnification may include
without limitation the purchase of insurance and advancement of any expenses.
ARTICLE IV
----------
General Provisions
------------------
SECTION 1. Fiscal year. The fiscal year of the Corporation shall be
--------- -----------
established by the Board of Directors.
SECTION 2. Amendments. Unless otherwise provided in these By Laws or the
--------- ----------
Articles of Incorporation, these By Laws may be altered, amended or repealed and
new By Laws may be adopted by a majority of the entire Board of Directors at any
regular or special meeting of the Board of Directors.
<PAGE>
EXHIBIT 10.38(I)
NINTH AMENDMENT AGREEMENT
-------------------------
AGREEMENT, dated as of May 1, 1996, among BUTLER SERVICE GROUP, INC., a New
Jersey corporation, BUTLER INTERNATIONAL, INC., a Maryland corporation, BUTLER
SERVICE GROUP CANADA, LTD., a Canadian corporation, and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation.
BACKGROUND
----------
A. Capitalized terms not otherwise defined shall have the meanings
ascribed to them in the Credit Agreement dated as of May 31, 1994, between
Butler Service Group, Inc. and General Electric Capital Corporation (as amended,
modified or supplemented from time to time, the "Credit Agreement").
----------------
B. The Borrower has requested that the Lender increase, from $6,000,000
to $9,000,000, the maximum amount of outstanding Letters of Credit to be issued
pursuant to the Credit Agreement.
C. The Lender has agreed to the Borrower's request subject to the terms
and conditions of this Agreement.
AGREEMENT
---------
In consideration of the Background, which is incorporated by reference, the
parties, intending to be legally bound, agree as follows:
1. Modifications. All the terms and provisions of the Credit
-------------
Agreement and the other Loan Documents shall remain in full force and effect
except that the second sentence of Section 2.10 of the Credit Agreement is
deleted and the following is substituted therefor:
The maximum amount of outstanding Letters of Credit
shall not exceed $9,000,000 in the aggregate at any time.
2. Conditions Precedent, The Lender's obligations under this
---------------------
Agreement are contingent upon the Lender's receipt of the following, all in
form, scope and content acceptable to the Lender in its sole discretion:
(a) Amendment Agreement This Agreement duly executed by parties
-------------------
hereto.
<PAGE>
(b) Other. Such other agreements and instruments as the Lender
-----
shall require.
3. Reaffirmation by Borrower. The Borrower acknowledges and agrees,
-------------------------
and reaffirms, that it is legally, validly and enforceably indebted to the
Lender under the Revolving Note without defense, counterclaim or offset, and
that it is legally, validly and enforceably liable to the Lender for all costs
and expenses of collection and attorneys' fees related to or in any way arising
out of this Agreement, the Credit Agreement, the Revolving Note and the other
Loan Documents. The Borrower hereby restates and agrees to be bound by all
covenants contained in the Credit Agreement and the other Loan Documents and
hereby reaffirms that all of the representations and warranties contained in the
Credit Agreement remain true and correct in all material respects except as
disclosed in connection with the execution and delivery of the First Amendment
Agreement dated December 14, 1994 (the "First Amendment Agreement"). The
Borrower represents that except as set forth in the Credit Agreement and the
First Amendment Agreement, there are not pending or to the Borrower's knowledge
threatened, legal proceedings to which the Borrower or either of the Guarantors
is a party, or which materially or adversely affect the transactions
contemplated by this Agreement or the ability of the Borrower or either of the
Guarantors to conduct its business. The Borrower acknowledges and represents
that the resolutions of the Borrower dated May 25, 1994, remain in full force
and effect and have not been amended, modified, rescinded or otherwise
abrogated.
4. Reaffirmation by Guarantors. Each of the Guarantors acknowledges
---------------------------
that each is legally and validly indebted to the Lender under the Guaranty of
each without defense, counterclaim or offset. Each of the Guarantors affirms
that the Guaranty of each remains in full force and effect and acknowledges that
the Guaranty of each encompasses, without limitation, the amount of the Maximum
Revolving Loan, as modified herein.
5. Other Representations By Borrower and Guarantors. The Borrower
------------------------------------------------
and the Guarantors each represents and confirms that (a) no Default or Event of
Default has occurred and is continuing and the Lender has not given its consent
to or waived any Default or Event of Default and (b) the Credit Agreement and
the other Loan Documents are in full force and effect and enforceable against
the Borrower and Guarantors in accordance with the terms thereof. The Borrower
and the Guarantors each represent and confirm that as of the date hereof, each
has no claim or defense (and the Borrower and the Guarantors each hereby waive
every claim and defense) against the Lender arising out of or relating to the
Credit Agreement and the other Loan Documents or the making, administration or
enforcement of the Revolving Loan and the remedies provided for under the Loan
Documents.
6. No Waiver By Lender. The Borrower and the Guarantors each
-------------------
acknowledges that (a) by the execution by each of this Agreement, the Lender is
waiving any Default, whether now existing or hereafter occurring, disclosed
or
2
<PAGE>
undisclosed, by the Borrower under the Loan Documents and (b) the Lender
reserves all rights and remedies available to it under the Loan Documents and
otherwise.
3
<PAGE>
The parties have executed this Agreement as of April 30, 1996.
BUTLER SERVICE GROUP, INC.
By /s/ Michael C. Hellriegel
-------------------------
Michael C. Hellriegel
Title: Senior Vice President - Finance
BUTLER INTERNATIONAL, INC.
By /s/ Michael C. Hellriegel
-------------------------
Michael C. Hellriegel
Title: Senior Vice President - Finance
BUTLER SERVICE GROUP CANADA, LTD.
By /s/ Michael C. Hellriegel
-------------------------
Michael C. Hellriegel
Title: Senior Vice President - Finance
GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ Martin S. Greenberg
-----------------------
Martin S. Greenberg
Title: Duly Authorized Signatory
4
<PAGE>
EXHIBIT 10.38(j)
TENTH AMENDMENT AGREEMENT
-------------------------
AGREEMENT, dated as of June 1, 1996, among BUTLER SERVICE GROUP, INC., a
New Jersey corporation, BUTLER INTERNATIONAL, INC., a Maryland corporation,
BUTLER SERVICE GROUP CANADA, LTD., a Canadian corporation, and GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation.
BACKGROUND
----------
A. Capitalized terms not otherwise defined shall have the meanings
ascribed to them in the Credit Agreement dated as of May 31, 1994, between
Butler Service Group, Inc. and General Electric Capital Corporation (as amended,
modified or supplemented from time to time, the "Credit Agreement").
----------------
B. The Borrower has requested that the Lender extend the Commitment
Termination Date and that the Lender allow it to advance up to $2,000,000 to
Butler UK.
C. The Lender has agreed to the Borrower's request subject to the terms
and conditions of this Agreement.
AGREEMENT
---------
In consideration of the Background, which is incorporated by reference, the
parties, intending to be legally bound, agree as follows:
1. Modifications. All the terms and provisions of the Credit
-------------
Agreement and the other Loan Documents shall remain in full force and effect
except as follows:
(a) The following is added as Section 6.02(e)(iii) to the Credit
Agreement.
(iii)(A) Notwithstanding the provision of subsection (k) above,
for the period commencing May 21, 1996, and extending through December
31, 1996, the borrower shall have the right to make advances, loans or
extension of credit to Butler UK in the maximum aggregate outstanding
amount of $2,000,000 (the "UK Loan"). In consideration of the
Lender's agreement to the Borrower's extension of the UK Loan, the
Borrower agrees to pay the following amounts (the "UK Loan Extension
Fees") to the Lender on the dates specified unless on or prior to the
date specified for payment, Butler UK has satisfied all indebtedness
outstanding under the UK Loan:
<PAGE>
(1) $30,000 on June 1, 1996;
(2) $15,000 on October 31, 1996, provided that a balance of
this loan remains outstanding on this date;
(3) One percent (1.00%) of the amount then outstanding
under the UK Loan on November 30, 1996; and
(4) The lesser of (x) two percent (2.00%) of the amount
then outstanding under the UK Loan (y) $50,000 on
December 31, 1996.
(B) The Borrower agrees that the UK Loan Extension Fees shall be
deemed "Fees under the Credit Agreement".
(a) The definition of "Commitment Termination Date" contained in
Schedule "1.01" to the Credit Agreement is deleted and the following
is substituted therefor:
"Commitment Termination Date" means the earliest to occur of (I)
July 1, 1997, (ii) thirty (30) days prior to the maturity date of the
indebtedness currently secured by the Montvale Mortgage (or any
extension, renewal or refinancing of such indebtedness), and (iii) the
date on which the Lender's obligation to make, and the Borrower's
right to receive, advances under this Agreement shall terminate under
Section 7.01 hereof.
(b) The reference to "Hughes Corporation" in the definition of
"Extended Accounts" contained in Schedule "1.01" to the Credit
Agreement is deleted and the name "Day & Zimmerman, Inc." is
substituted therefor.
2. Conditions Precedent. The Lender's obligations under this
---------------------
Agreement are contingent upon the Lender's receipt of the following, all in
form, scope and content acceptable to the Lender in its sole discretion:
(a) Amendment Agreement. This Agreement duly executed by parties
-------------------
hereto.
(b) Other. Such other agreements and instruments as the Lender
-----
shall require.
3. Reaffirmation by Borrower. The Borrower acknowledges and agrees,
-------------------------
and reaffirms, that it is legally, validly and enforceably indebted to the
Lender under the Revolving Note without defense, counterclaim or offset, and
that it is legally, validly and enforceably liable to the Lender for all costs
and expenses of collection and attorneys' fees related to or in any way arising
out of this Agreement, the Credit
2
<PAGE>
Agreement, the Revolving Note and the other Loan Documents. The Borrower hereby
restates and agrees to be bound by all covenants contained in the Credit
Agreement and the other Loan Documents and hereby reaffirms that all of the
representations and warranties contained in the Credit Agreement remain true and
correct in all material respects except as disclosed in connection with the
execution and delivery of the First Amendment Agreement dated December 14, 1994
(the "First Amendment Agreement"). The Borrower represents that except as set
forth in the Credit Agreement and the First Amendment Agreement, there are not
pending or to the Borrower's knowledge threatened, legal proceedings to which
the Borrower or either of the Guarantors is a party, or which materially or
adversely affect the transactions contemplated by this Agreement or the ability
of the Borrower or either of the Guarantors to conduct its business. The
Borrower acknowledges and represents that the resolutions of the Borrower dated
May 25, 1994, remain in full force and effect and have not been amended,
modified, rescinded or otherwise abrogated.
4. Reaffirmation by Guarantors. Each of the Guarantors acknowledges
---------------------------
that each is legally and validly indebted to the Lender under the Guaranty of
each without defense, counterclaim or offset. Each of the Guarantors affirms
that the Guaranty of each remains in full force and effect and acknowledges that
the Guaranty of each encompasses, without limitation, the amount of the Maximum
Revolving Loan, as modified herein.
5. Other Representations By Borrower and Guarantors. The Borrower
------------------------------------------------
and the Guarantors each represents and confirms that (a) no Default or Event of
Default has occurred and is continuing and the Lender has not given its consent
to or waived any Default or Event of Default and (b) the Credit Agreement and
the other Loan Documents are in full force and effect and enforceable against
the Borrower and Guarantors in accordance with the terms thereof. The Borrower
and the Guarantors each represent and confirm that as of the date hereof, each
has no claim or defense (and the Borrower and the Guarantors each hereby waive
every claim and defense) against the Lender arising out of or relating to the
Credit Agreement and the other Loan Documents or the making, administration or
enforcement of the Revolving Loan and the remedies provided for under the Loan
Documents.
6. No Waiver By Lender. The Borrower and the Guarantors each
-------------------
acknowledges that (a) by the execution by each of this Agreement, the Lender is
not waiving any Default, whether now existing or hereafter occurring, disclosed
or undisclosed, by the Borrower under the Loan Documents and (b) the Lender
reserves all rights and remedies available to it under the Loan Documents and
otherwise.
3
<PAGE>
The parties have executed this Agreement as of April 30, 1996.
BUTLER SERVICE GROUP, INC.
By /s/ Michael C. Hellriegel
-------------------------
Michael C. Hellriegel
Title: Senior Vice President - Finance
BUTLER INTERNATIONAL, INC.
By /s/ Michael C. Hellriegel
-------------------------
Michael C. Hellriegel
Title: Senior Vice President - Finance
BUTLER SERVICE GROUP CANADA, LTD.
By /s/ Michael C. Hellriegel
-------------------------
Michael C. Hellriegel
Title: Senior Vice President - Finance
GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ Martin S. Greenberg
-----------------------
Martin S. Greenberg
Title: Duly Authorized Signatory
4
<PAGE>
EXHIBIT 10.38(k)
ELEVENTH AMENDMENT AGREEMENT
----------------------------
AGREEMENT, dated October 31, 1996, to be effective as of September 30,
1996, among BUTLER SERVICE GROUP, INC., a New Jersey corporation, BUTLER
INTERNATIONAL, INC., a Maryland corporation, BUTLER SERVICE GROUP CANADA, LTD.,
a Canadian corporation, and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation.
BACKGROUND
----------
A. Capitalized terms not otherwise defined shall have the meanings
ascribed to them in the Credit Agreement dated as of May 31, 1994, between
Butler Service Group, Inc. and General Electric Capital Corporation (as amended,
modified or supplemented from time to time, the "Credit Agreement").
----------------
B. The Borrower has requested that the Lender modify certain of the terms
and conditions of the Loan Documents.
C. The Lender has agreed to the Borrower's requests subject to the terms
and conditions of this Agreement.
AGREEMENT
---------
In consideration of the Background, which is incorporated by reference, the
parties, intending to be legally bound, agree as follows:
1. Modifications. All the terms and provisions of the Credit
-------------
Agreement and the other Loan Documents shall remain in full force and effect
except as follows:
(a) Section 3.01(b) of the Credit Agreement is deleted and
the following is substituted therefor:
(b) Interest Rate The Borrower shall be obligated
-------------
to pay interest to the Lender on the outstanding balance of the
Revolving Loan at an annual floating rate equal to (i) three hundred
basis points (3.00%) above the Index Rate commencing on the Closing
Date and continuing through October 31, 1996, (ii) two hundred fifty
basis points (2.50%) above the Index Rate commencing on the later to
occur of (x) November 1, 1996, and (y) the date on which all parties
to the Eleventh Amendment Agreement dated October 31, 1996 between the
Borrower and the Lender have signed such Agreement, and ending on the
last day of the month of the first Determination Date subsequent to
December 31, 1996, and (iii)
<PAGE>
commencing on the first day of the first month after the first
Determination Date subsequent to December 31, 1996, the Index Rate
plus the Applicable Margin.
(b) The third sentence of Section 3.03 of the Credit Agreement
is deleted and the following is substituted therefor:
For purposes of computing interest, all payments (including cash
sweeps) consisting of cash, wire or electronic transfers in
immediately available funds, shall be deemed received by the
Lender one Business Day after deposit in the Collection Account
and notice to the Lender of such deposit.
(c) Section 3.08 of the Credit Agreement is deleted and the
following is substituted therefor:
3.08 Eligible Accounts and Eligible Inventory.
----------------------------------------
(a) Based on the most recent Roll Forward Borrowing Base Certificate
or Borrowing Base Certificate delivered by the Borrower to the Lender and on
other information available to the Lender, the Lender shall determine in its
reasonable discretion which Accounts shall be deemed to be "Eligible Accounts"
for purposes of determining the amounts, if any, to be advanced to the Borrower.
In determining whether a particular account constitutes an Eligible Account, the
Lender does not intend to include any such Account which does not meet the
criteria set forth under the definition of Eligible Accounts on Schedule "1.01"
---------------
hereof.
(b) Based on the most recent Roll Forward Borrowing Base Certificate
or Borrowing Base Certificate delivered by the Borrower to the Lender and other
information available to the Lender, the Lender shall determine in its
reasonable discretion which Inventory shall be deemed to be "Eligible Inventory"
for purposes of determining the amount, if any, to be advanced to the Borrower.
In determining whether any particular Inventory constitutes Eligible Inventory,
the Lender does not intend to include Inventory which does not meet the criteria
set forth under the definition of Eligible Inventory on Schedule "1.01" hereof.
---------------
(d) The following is added after the definition of "Agreement"
contained in Schedule "1.01" of the Credit Agreement:
---------------
"Applicable Margin" means the rate per annum set forth
----------------
under the relevant column heading below corresponding to the
Borrower's attainment of the following:
Fixed Charge Interest Applicable
Tangible Net Worth Coverage Ratio Coverage Ratio Margin
------------------ -------------- -------------- ----------
2
<PAGE>
(i) Greater than or equal Greater than Greater than 2.40%
to $11,500,000 or equal to or equal to
1.3 to 1.0 1.5 to 1.0
(ii) Greater than or equal Greater than Greater than 2.30%
to $13,500,000 or equal to or equal to
1.3 to 1.0 1.5 to 1.0
(iii) Greater than or Greater than Greater than 2.15%
equal to $15,000,000 or equal to or equal to
1.3 to 1.0 1.5 to 1.0
(iv) Greater than or Greater than Greater than 2.00%
equal to $17,000,000 or equal to or equal to
1.3 to 1.0 1.5 to 1.0
Notwithstanding the foregoing, if, as at a Determination Date, the Fixed Charge
Coverage Ratio is less than 1.3 to 1.0 or the Interest Coverage Ratio is less
than 1.5 to 1.0, the Applicable Margin shall be 2.50%. For purposes of the
foregoing, any change in the Applicable Margin based on the Borrower's
attainment of all of the financial tests listed across from (i), (ii), (iii) or
(iv) above shall be effective for all purposes on and after the first day of the
first month after the Determination Date and such Applicable Margin may change
based on the results of the Borrower as at each succeeding Determination Date.
(For purposes of illustration only, if, as at a Determination Date, the Borrower
attained Tangible Net Worth of $13,750,000, a Fixed Charge Coverage Ratio of
1.35 to 1.0 and an Interest Coverage Ratio of 1.75 to 1.0, the Applicable Margin
would be 2.30%).
(e) The definition of "Borrowing Base", contained in Schedule
--------
"1.01" of the Credit Agreement, is deleted and the following is substituted
- ------
therefor:
"Borrowing Base" means on any date of determination
---------------
thereof, an amount equal to the sum of (A) eighty-five percent (85%)
of Eligible Accounts, (B) seventy-five percent (75%) of Eligible
Pending Accounts Receivable and Fixed Contract Accounts Receivable (up
to the maximum amount of $10,000,000 in the aggregate), and (C) forty
percent (40%) of Eligible Inventory (valued on a first in, first out
basis) (up to the maximum amount of $2,000,000 in the aggregate).
(f) The definition of "Collateral Monitoring Fee", contained in
Schedule "1.01" of the Credit Agreement, is deleted and the following is
- ---------------
substituted therefor:
"Collateral Monitoring Fee" means the amount of $24,000 per
--------------------------
year payable on the Closing Date and on each anniversary thereof,
which shall be deemed earned in full on the date when the same is due
and payable and shall not be subject to rebate or proration upon
termination of this Agreement for any reason.
(g) The definition of "Commitment Termination Date" contained
in Schedule "1.01" of the Credit Agreement, is deleted and the
---------------
following is substituted therefor:
"Commitment Termination Date" means the earlier to occur of
----------------------------
(i) July 1, 1998 and (ii) the date on which the Lender's obligation to
3
<PAGE>
make, and the Borrower's right to receive, Advances under this
Agreement shall terminate under Section 7.01 hereof.
(h) The following is added after the definition of "Default
Rate" contained in Schedule "1.01" of the Credit Agreement:
---------------
"Determination Date" means the date of delivery by the
------------------
Borrower to the Lender a copy of the report of the Borrower on Form
10-Q or 10-K, as the case may be, as required under Paragraph A(iv) of
Schedule "6.01(b)" of the Credit Agreement.
(i) The following is added after the definition of "Eligible
Accounts" contained in Schedule "1.01" of the Credit Agreement:
---------------
"Eligible Inventory" means the finished goods Inventory of
------------------
the Borrower, as recorded at the lower of standard cost or market in
the accounting records of the Borrower, located at the Premises which
(i) for each of the Premises, has a value in excess of the aggregate
of $50,000, (ii) for each of the Premises described in the preceding
clause (i), the Lender shall have received a Lessor's Agreement, duly
executed and notarized by the parties thereto, in form and content
acceptable to the Lender, (iii) is in conformity in all respect with
the representations and warranties contained in the Security
Agreement, (iii) is in first class conditions and salable throughout
normal trade channels, (iv) is owned by the Borrower and subject to no
lien, security interest, charge or other encumbrance whatsoever,
except those in favor of the allocable to a contract with a
Governmental Authority, (v) is not produced or processed in violation
of or otherwise subject to the Fair Labor Standards Act or any similar
federal or state law, (vi) is not subject to an adjustment, positive
or negative, attributable to material price differences that result
when standard costs and actual costs differ, (vii) is not subject to
consignment or in possession under a similar arrangement, (viii) is
located on premises owned or operated by the Borrower, (ix) is not
covered by a negotiable document of title unless such document and
evidence of acceptable insurance covering such inventory has been
delivered to the Lender, (x) does not consist of display items,
packing and shipping materials or goods which have been returned by
the buyer, (xi) is of a type held for sale in the ordinary course of
the borrower's business, (xii) is not of a class or condition which
the Lender, in its sole and absolute discretion, has deemed ineligible
for advance and has notified the Borrower for such ineligibility, and
(xiii) is not manufactured for a specific customer (i.e., private
label or otherwise).
2. Conditions Precedent. The Lender's obligations under this
--------------------
Agreement are contingent upon the Lender's receipt of the following,
all in form, scope and content acceptable to the Lender in its sole
discretion:
4
<PAGE>
(a) Amendment Agreement. This Agreement duly executed by
-------------------
the parties hereto; and
(b) Other. Such other agreements and instruments as the
-----
Lender shall require.
3. Reaffirmation By Borrower. The Borrower acknowledges and
-------------------------
agrees, and reaffirms, that it is legally, validly and enforceably indebted to
the Lender under the Revolving Note without defense, counterclaim or offset, and
that it is legally, validly and enforceably liable to the Lender for all costs
and expenses of collection and attorneys' fees related to or in any way arising
out of this Agreement, the Credit Agreement, the Revolving Note and the other
Loan Documents. The Borrower hereby restates and agrees to be bound by all
covenants contained in the Credit Agreement and the other Loan Documents and
hereby reaffirms that all of the representations and warranties contained in the
Credit Agreement remain true and correct in all material respects except as
disclosed in connection with the execution and delivery of the First Amendment
Agreement dated December 14, 1994 (the "First Amendment Agreement"). The
Borrower represents that except as set forth in the Credit Agreement and the
First Amendment Agreement, there are not pending or to the Borrower's knowledge
threatened, legal proceedings to which the Borrower or either of the Guarantors
is a party, or which materially or adversely affect the transactions
contemplated by this Agreement or the ability of the Borrower or either of the
Guarantors to conduct its business. The Borrower acknowledges and represents
that the resolutions of the Borrower dated May 25, 1994, remain in full force
and effect and have not been amended, modified, rescinded or otherwise
abrogated.
4. Reaffirmation by Guarantors. Each of the Guarantors acknowledges
---------------------------
that each is legally and validly indebted to the Lender under the Guaranty of
each without defense, counterclaim or offset. Each of the Guarantors affirms
that the Guaranty of each remains in full force and effect and acknowledges that
the Guaranty of each encompasses, without limitation, the amount of the Maximum
Revolving Loan, as modified herein.
5. Other Representations By Borrower and Guarantors. The Borrower
------------------------------------------------
and the Guarantors each represents and confirms that (a) no Default or Event of
Default has occurred and is continuing and the Lender has not given its consent
to or waived any Default or Event of Default and (b) the Credit Agreement and
the other Loan Documents are in full force and effect and enforceable against
the Borrower and Guarantors in accordance with the terms thereof. The Borrower
and the Guarantors each represent and confirm that as of the date hereof, each
has no claim or defense (and the Borrower and the Guarantors each hereby waive
every claim and defense) against the Lender arising out of or relating to the
Credit Agreement and the other Loan Documents or the making, administration or
enforcement of the Revolving Loan and the remedies provided for under the Loan
Documents.
5
<PAGE>
6. No Waiver By Lender. The Borrower and the Guarantors each
-------------------
acknowledges that (a) by the execution by each of this Agreement, the Lender is
not waiving any Default, whether now existing or hereafter occurring, disclosed
or undisclosed, by the Borrower under the Loan Documents and (b) the Lender
reserves all rights and remedies available to it under the Loan Documents and
otherwise.
6
<PAGE>
The parties have executed this Agreement as of the date first written
above.
BUTLER SERVICE GROUP, INC.
By /s/ Michael C. Hellriegel
-------------------------
Michael C. Hellriegel
Title: Chief Financial Officer
BUTLER INTERNATIONAL, INC.
By /s/ Michael C. Hellriegel
-------------------------
Michael C. Hellriegel
Title: Chief Financial Officer
BUTLER SERVICE GROUP CANADA, LTD.
By /s/ Michael C. Hellriegel
-------------------------
Michael C. Hellriegel
Title: Chief Financial Officer
GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ Martin S. Greenberg
-----------------------
Martin S. Greenberg
Title: Duly Authorized Signatory
7
<PAGE>
EXHIBIT 13.1
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The Company achieved record earnings of $4.8 million, or $.72 per share, for the
year ended December 31, 1996, compared with a net loss of $7.9 million, or $1.36
per share, for the year ended December 31, 1995, and net income of $1.7 million,
or $.25 per share, for the year ended December 31, 1994.
The dramatic turnaround in the current year's results was driven by increased
margins, decreased overhead, lower interest expenses and the absence of certain
non-recurring charges recorded in 1995. The Company continues to benefit from
its established strategy of growing its higher margin businesses while
controlling overhead.
Net sales were $409.4 million for the year ended December 31, 1996, compared
with $433.6 recorded in 1995. The decrease reflects the Company's actions taken
in 1996 to exit certain unprofitable businesses and low margin contracts,
particularly in the Contract Technical Services division ("CTS"). The 1996
sales in the Company's Telecommunications Services, Technology Solutions and
Fleet Services operations increased by an aggregate 51%, solely on internal
growth. That growth reflects the emphasis being placed on these higher than
average margin businesses. As a result, gross margins for the 1996 year were
14.6% compared with 13.0% in 1995 and 13.6% in 1994.
Net sales for 1995 were $433.6 million, an increase of $40.3 million or 10%
compared with net sales of $393.3 million for the year ended December 31, 1994.
The 1995 increase was attributed to record sales achieved as the combined
operating groups, excluding the CTS division, increased sales by 18% over 1994.
The Company's 1995 loss was largely due to its operations in the United Kingdom
("U.K."), Latin America and other non-recurring charges. The U.K. recorded an
operating loss of $5.4 million in the fourth quarter, and a $4.5 million loss
for the full year. As a result, in 1996, the Company chose to exit its U.K.
Telecommunications, Utility, Pacific and South African operations. Proceeds
from the sale of the U.K. Telecommunications and Pacific operations, which were
completed in 1996, were sufficient to extinguish related liabilities and to
cover the cost basis of assets sold. In the fourth quarter of 1995, the Company
exited its Latin American operations and as a result, recorded a $1.5 million
non-recurring charge, which consisted principally of non-cash charges for
currency translation losses. The operating losses from these operations were
approximately $0.7 million in 1995 compared with a profit of $0.1 million in
1994. Other non-recurring charges included $0.5 million of severance costs
related to management personnel eliminated in 1995, and $0.7 million costs
related to the relocation of the Company's billing, collection and other
accounting functions. In addition, during 1995, marginal business units were
discontinued including Butler Quality Services, Butler Airport Services, and
Butler Canada. The operating losses from these operations were $0.1 million in
1995 and 1994.
Selling, General and Administrative ("SG&A") expenses decreased by $6.1 million,
to $46.8 million, or 11.4% of sales for the year ended December 31, 1996,
compared with $52.9 million, or 12.2% of sales for 1995 and $45.3 million, or
11.5% of sales for the year ended December 31, 1994. The 1996 savings were the
<PAGE>
direct result of cost reduction measures initiated in the fourth quarter of
1995, which included significant staff reductions, consolidation of senior
management, and the elimination of marginal offices through consolidation or
closure.
For the year ended December 31, 1996, interest expense was $5.2 million,
compared with $6.5 million and $4.3 million for the years ended December 31,
1995 and December 31, 1994, respectively. The $1.3 million interest reduction
in 1996 was the result of significantly improved controls on, and management of,
the Company's accounts receivable investment, which decreased by $9.7 million
on a year-to-year basis, allowing a reduction of its revolving credit facility
to $31.3 million at December 31, 1996 from $40.5 million at December 31, 1995.
At December 31, 1996, the Company had approximately $8.6 million of net future
tax deductions (temporary differences) for which a tax benefit has not been
recognized in the financial statements. The Company does not anticipate paying
significant federal income taxes in 1997, as a result of tax loss carryforwards
and the reversal of temporary differences.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are generated from operations and
borrowings under its Credit Facility. (See "Financing Activities").
Availability under the Credit Facility is based upon the amount of eligible
receivables. As of December 31, 1996, $31.3 million was outstanding under the
Credit Facility, and an additional $7.3 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.
The credit facility excludes the U.K. operation, which has its own (pounds) 1.5
million facility.
Cash and cash equivalents decreased by $0.9 million during the year ended
December 31, 1996. Cash inflows amounted to $10.7 million and were derived from
net income before depreciation and amortization of $8.5 million, a decrease in
working capital requirements of $1.5 million and proceeds from the exercise of
stock options and warrants amounting to $0.7 million. Cash outflow totaled
$11.6 million and was primarily due to a $10.7 million reduction in debt.
During the year ended December 31, 1996, the Company realized $0.7 million of
net proceeds from the exercise of outstanding Common Stock Purchase Warrants and
Options. As a result, 174,964 common shares were issued by the Company during
the year.
Annual dividends paid, for the year ended December 31, 1996 on the Company's
Series B Preferred Stock amounted to $0.2 million, and were paid in the form of
additional shares of such preferred stock at the option of the holders.
In 1993, a subsidiary of the Company acquired the Company's corporate office
complex in Montvale, New Jersey 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 7/8%. In November 1996, the
lender approved an extension of the mortgage note through April 30, 1998. The
new terms of the extension include a reduced interest rate of 10%, an
amortization schedule of 15 years, and a 1% extension fee. The Company
<PAGE>
will be pursuing long term refinancing of the mortgage in 1997. The debt is
reflected in the current portion of long-term debt.
Management believes that cash flows from operations and availability under the
Credit Facility will be sufficient to meet the Company's foreseeable cash
requirements.
FINANCING ACTIVITIES
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. 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 lesser 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
GECC). During the fourth quarter of 1996, the interest rate chargeable to the
Company was reduced to 250 basis points above the 30 day commercial paper rate,
a reduction of 50 basis points. Beginning January 1, 1997, additional interest
reductions are available based upon the Company achieving certain financial
results. The interest rate in effect at December 31, 1996 was 7.95% and the
average interest rate during 1996 was 8.4%. 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. As of
December 31, 1996, $31.3 million was outstanding under the Credit Facility, and
an additional $7.3 million was used to collateralize letters of credit.
<PAGE>
BUTLER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
<TABLE>
<CAPTION>
December 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 229 $ 1,097
Accounts receivable, net of allowance for
uncollectible accounts of $1,455 and $1,574 56,271 66,020
Other current assets 4,452 3,345
-------- --------
Total current assets 60,952 70,462
Property and equipment, net 13,347 15,168
Other assets 1,138 654
Excess cost over net assets of businesses
acquired, net of accumulated amortization
of $7,843 and $6,786 23,743 24,288
-------- --------
Total assets $ 99,180 $110,572
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 21,145 $ 27,012
Current portion of long-term debt 7,766 9,347
-------- --------
Total current liabilities 28,911 36,359
-------- --------
Long-term debt 31,342 40,480
-------- --------
Other long-term liabilities 3,348 3,677
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.001 per share, authorized
5,000,000: Series B 7% Cumulative Convertible
Preferred Shares, authorized 3,500,000; issued
2,627,025 at December 31, 1996 and 2,451,898
at December 31, 1995 (Aggregate liquidation
preference $2,627,025 at December 31, 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
6,144,168 at December 31, 1996, and 5,993,783
at December 31, 1995 6 6
Additional paid-in capital 93,673 92,882
Accumulated deficit (58,112) (62,727)
Cumulative foreign currency translation adjustment 9 (107)
-------- --------
Total stockholders' equity 35,579 30,056
-------- --------
Total liabilities and
stockholders' equity $ 99,180 $110,572
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BUTLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net sales $409,353 $433,564 $393,250
Cost of sales 349,762 377,069 339,633
-------- -------- --------
Gross margin 59,591 56,495 53,617
Depreciation and amortization 3,001 3,040 2,547
Selling, general and administrative expenses 46,763 52,911 45,251
Non recurring charges - 2,680 -
-------- -------- --------
Operating income (loss) 9,827 -2,136 5,819
Other income (expense):
Interest and other income 772 628 405
Interest expense -5,215 -6,517 -4,256
-------- -------- --------
Income (loss) before income taxes 5,384 -8,025 1,968
Income tax (benefit) expense 593 -111 309
-------- -------- --------
Net income (loss) $ 4,791 -$7,914 $ 1,659
======== ======== ========
Net income (loss) per share:
Primary $0.72 -$1.36 $0.25
Assuming full dilution $0.65 - $0.25
Average number of common shares and dilutive
common share equivalents outstanding
Primary 6,417 5,943 5,935
Assuming full dilution 7,324 N/A 6,639
</TABLE>
The accompanying notes are an intregal part of these consolidated financial
statements.
18
<PAGE>
<TABLE>
<CAPTION>
BUTLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,791 $(7,914) $ 1,659
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and excess purchase
price amortization 3,001 3,040 2,547
Amortization of deferred financing
and employee stock purchase
plan loans 681 622 418
Foreign translation 116 488 (442)
(Increase) decrease in assets,
increase (decrease) in
liabilities:
Accounts receivable 8,242 (2,871) (20,561)
Other current assets (1,107) (226) 750
Other assets (1,166) 39 (860)
Current liabilities (8,420) 9,583 5,320
Other long term liabilities (329) (591) (660)
-------- -------- --------
Net cash provided by (used in) operating activities 5,809 2,170 (11,829)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of certain UK operations 5,454 - -
Capital expenditures (1,399) (3,973) (3,013)
Cost of businesses acquired (512) (569) (1,354)
Expenses paid in conjunction with
discontinued operations (117) (118) (642)
-------- -------- --------
Net cash provided by (used in) investing activities 3,426 (4,660) (5,009)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings under
financing agreements (10,628) 1,291 16,746
Net proceeds from the exercise of
common stock warrants and options 709 209 1,566
Payments on headquarters building debt (22) (73) (998)
Repurchase common stock (162) (125) -
Payment of dividends on
preferred stock - - (99)
-------- -------- --------
Net cash (used in) provided by financing activities (10,103) 1,302 17,215
-------- -------- --------
Net (decrease) increase in cash
and cash equivalents (868) (1,188) 377
Cash and cash equivalents,
beginning of period 1,097 2,285 1,908
-------- -------- --------
Cash and cash equivalents,
end of period $ 229 $ 1,097 $ 2,285
======== ======== ========
</TABLE>
The accompanying notes are an intregal part of these consolidated financial
statements.
19
<PAGE>
BUTLER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands except share data)
<TABLE>
<CAPTION>
CUMULATIVE
SERIES B 7 1/2% SR. ADD'L FOREIGN ACCUMUL- TOTAL
COMMON STOCK PREFERRED STOCK PREFERRED STOCK PAID-IN EXCHANGE LATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT DEFICIT EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993 5,134,813 $5 2,133,433 $2 1,500 - $90,890 -$153 -$56,054 $34,690
Forgive employee loans - - - - - - 25 - - 25
Issuances of Common Stock
393,845 1 - - - - 1,565 - - 1,566
Convert Preferred Stock to
Common 375,000 - - - -1,500 - -1 - - -1
Dividends Paid - - 155,445 - - - 156 - -255 -99
Current Year Foreign
Currency
Adjustments - - - - - - - -442 - -442
Net income - - - - - - - - 1,659 1,659
--------- --- --------- --- ------- -------- ------- --- -------- -------
Balance at December 31,
1994 5,903,658 6 2,288,878 2 - - 92,635 -595 -54,650 37,398
Issuances of Common Stock 110,083 - - - - - 494 - - 494
Loans issued for exercise
of options - - - - - - -285 - - -285
Repurchase and retire
shares -19,958 - - - - - -125 - - -125
Dividends Paid - - 163,020 - - - 163 - -163 -
Current Year Foreign Currency
Adjustments - - - - - - - 488 - 488
Net loss - - - - - - - - -7,914 -7,914
-------- --- --------- --- ------- -------- ------- --- -------- -------
Balance at December 31,
1995 5,993,783 6 2,451,898 2 - - 92,882 -107 -62,727 30,056
Forgive employee loans - - - - - - 69 - - 69
Issuances of Common Stock 174,964 - - - - - 709 - - 709
Repurchase and retire
shares -24,579 - - - - - -162 - - -162
Dividends Paid - - 175,127 1 - - 175 - -176 -
Current Year Foreign
Currency Adjustments - - - - - - - 116 - 116
Net income - - - - - - - - 4,791 4,791
--------- --- --------- --- -------- -------- ------- --- -------- -------
Balance at December 31,
1996 6,144,168 $6 2,627,025 $3 - - $93,673 $9 -$58,112 $35,579
========= === ========= === ======== ======== ======= === ======== =======
</TABLE>
The accompanying notes are an intregal part of these consolidated financial
statements.
20
<PAGE>
BUTLER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
Consolidation and Presentation
The consolidated financial statements include the accounts of Butler
International, Inc. ("the Company") and all its wholly-owned subsidiaries.
Significant intercompany balances and transactions have been eliminated.
Certain amounts from prior years' consolidated financial statements have been
reclassified in the accompanying consolidated financial statements to conform
with the current year presentation.
Business
The Company operates in one business segment which is principally engaged in the
location, recruitment and hiring of a wide variety of skilled engineers,
computer and other technical personnel to provide services on a temporary basis
to industrial, telecommunication, service corporations as well as other
organizations.
Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Property and Equipment
Property and equipment are recorded at cost, which, for assets acquired through
the Company's corporate acquisitions, represents the fair value at date of
acquisition. Depreciation is provided on a straight-line basis over the
estimated useful lives of the assets, which generally range between one and ten
years except for the Montvale building which has a thirty year life.
Excess Cost Over Net Assets of Businesses Acquired
Excess cost over net assets of businesses acquired is being amortized using the
straight-line method generally over forty years from the date of acquisition.
Management routinely evaluates the recovery of goodwill with reference to
estimates of future profitability and operating cash flow. Such estimates, on
an undiscounted basis, are applied to the unamortized balance of goodwill.
Should the results of this analysis indicate that impairment is likely, the
Company will recognize a charge to operations at that time.
Revenue Recognition
The Company's net sales relate to net service revenues of its wholly-owned
subsidiaries. Service revenues are recognized upon performance of such services
at amounts expected to be ultimately realized.
Inventory
Inventory is valued at the lower of cost or market. Cost is determined by using
an average cost per unit. Inventory in the amount of $361,000 and $2.3 million
for 1995 and 1996, respectively, is included in other current assets.
Earnings Per Common Share
Primary earnings (loss) per common share are determined by dividing net income
(loss) (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 at the beginning of the period
presented. Fully-diluted earnings per share for the year ended December 31,
1995 are not shown since the effect of the conversion of preferred stock was
anti-dilutive.
Foreign Currency Translation
For foreign operations, the assets and liabilities are translated at the current
exchange rates, while income and expenses are translated at the average exchange
rates for the period. Resulting translation gains and losses are reported as a
component of stockholders' equity.
<PAGE>
NOTE 2 - PROPERTY AND EQUIPMENT:
Property and equipment is summarized as follows (in thousands):
1996 1995
--------- ---------
Land $ 5,662 $ 5,662
Buildings 4,168 4,168
Machinery, motor vehicles, and office equipment 14,768 17,022
Leasehold improvements 1,591 1,615
-------- --------
26,189 28,467
Less accumulated depreciation (12,842) (13,299)
-------- --------
Property and equipment, net $ 13,347 $ 15,168
======== ========
Depreciation expense for the years ended December 31, 1996, 1995, and 1994 was
$1,944, $2,042, and $1,661, respectively.
NOTE 3 - CURRENT LIABILITIES:
Accounts payable and accrued liabilities are summarized as follows (in
thousands):
1996 1995
------- -------
Accounts payable $ 5,917 $ 7,523
Accrued compensation 3,825 6,264
Accrued pension and 401(k) contributions 2,750 1,198
Taxes other than income taxes 2,436 4,963
Insurance related payables 1,393 270
Deferred compensation 582 637
Accrued lease obligations 445 1,229
Other 3,797 4,928
------- -------
Accounts payable and accrued liabilities $21,145 $27,012
======= =======
NOTE 4 - OTHER LONG-TERM LIABILITIES:
Other long-term liabilities are summarized as follows (in thousands):
1996 1995
------ ------
Long-term insurance-related liabilities $2,914 $3,289
Other 434 388
------ ------
Other long-term liabilities $3,348 $3,677
====== ======
NOTE 5 - LONG-TERM DEBT:
Long-term debt is summarized as follows (in thousands):
1996 1995
--------- ---------
Credit Facility, due July, 1998 $31,342 $40,480
UK Credit Facility 889 2,295
Note payable, due August, 1996 - 153
Notes payable related to headquarters facility
purchase 6,877 6,899
------- -------
39,108 49,827
Less current portion (7,766) (9,347)
------- -------
Long-term debt $31,342 $40,480
======= =======
<PAGE>
Credit Facility
Effective September 30, 1996, the Company extended its Credit Facility with
General Electric Capital Corporation ("GECC") to July 1, 1998. This Credit
Facility, as amended, provides the Company with up to $50.0 million in loans
including $9.0 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 lesser 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 GECC). During the fourth quarter, the interest rate chargeable to the
Company was reduced to 250 basis points above the 30 day commercial paper rate,
a reduction of 50 basis points. Beginning January 1, 1997, additional interest
reductions are available based upon the Company achieving certain financial
results. The interest rate in effect at December 31, 1996 was 7.95% and the
average interest rate during 1996 was 8.4%. 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. As of December
31, 1996, $31.3 million was outstanding under the Credit Facility, and an
additional $7.3 million was used to collateralize letters of credit.
U.K. Credit Facility
The Company's U.K. operation has a credit facility with TSB Commercial
Finance Ltd. which provides up to (Pounds)1.5 million in loans. The total
amount of loans outstanding under this facility may not exceed 80% of eligible
receivables. The interest rate chargeable to the Company is 8%. The balance
outstanding as of December 31, 1996 was (Pounds)525,000 or $889,000.
Facility Purchase
In May 1993, the Company, through its wholly-owned subsidiary, Butler of
New Jersey Realty Corp. ("BNJRC"), acquired its corporate office complex in
Montvale, New Jersey for approximately $9.4 million. BNJRC financed this
transaction principally through the assumption of an existing mortgage as well
as issui ng short and long-term notes.
The Company issued an unsecured promissory note in the amount of
$510,000 payable to North American Investment Realty of New Jersey, Inc. with an
interest rate of 9 7/8% per annum. Principal payments were made in 1994, 1995
and 1996 bringing the balance down to $127,000. In 1996, the Company exercised
its options to extend the term of the note
Pursuant to the mortgage agreement, a note for $6.75 million was issued
to CNA Insurance Company. The note bears interest at a fixed rate per annum of
10 7/8%. The principal balance of the note was due on October 31, 1996.
Effective November 7, 1996, the Company entered into an agreement to extend the
mortgage note through April, 1998. The new terms include an interest rate of 10%
and an amortization schedule of 15 years. The note is secured by the corporate
office complex and is guaranteed by the Company. The Company will pursue long-
term refinancing of the mortgage in 1997.
In 1995, the Company issued a promissory note in the amount of $250,000
payable to the Mercantile Bank of St. Louis National Association bearing
interest at the rate of 6.83% per annum in connection with its relocation of
certain financial and administrative functions from Montvale, NJ to Lake St.
Louis, MO. The outstanding balance at December 31, 1995 was $153,000. The
remaining balance of the note was paid off in 1996.
Maturities of long-term debt of $31.3 million are due in 1998.
NOTE 6 - COMMON STOCK:
In 1995 and 1996, the Company received net proceeds of $116,625 and
$618,588, respectively, from the exercise of 28,000 and 143,714 common stock
purchase warrants. At December 31, 1996, the Company had 300,008 common stock
purchase warrants outstanding with exercise prices ranging from $3.62 to $6.00
per share and expiration dates from April, 1997 to July, 2003.
The Company received proceeds of $12,891, $345,203 and $123,750 in 1994,
1995 and 1996, respectively, from the exercise of 4,125, 75,833 and 37,500
options granted under various stock option plans.
Also in 1995 and 1996 the Company repurchased and retired 19,958 and 24,579
shares of its common stock.
NOTE 7 - CUMULATIVE CONVERTIBLE PREFERRED STOCK:
The Company's 7 1/2% Senior Cumulative Convertible Preferred Stock
("Senior Preferred Shares") accrued dividends at the rate of 7 1/2% per annum
based upon a liquidation value of $1,000 per share, payable semi-annually on the
last day of June and December of each year in cash. In 1994, dividends in the
amounts of $99,247 were paid to the holders of Senior Preferred Shares. In 1994,
all holders of Senior Preferred Shares exercised their option and converted the
1,500 Senior Preferred Shares into 375,000 shares of common stock.
<PAGE>
The Company's Series B Cumulative Convertible Preferred Stock ("Series B
Preferred Shares") accrues dividends at the rate of 7% per annum, based upon a
liquidation value of $1.00 per share, payable in cash or kind at the option of
the holder. In 1994, 1995 and 1996, dividends in kind amounting to $155,445,
$163,020, and $175,127, respectively, were paid to the holders of Series B
Preferred Shares. Series B Preferred Shares are convertible at a ratio of one
Series B Preferred Share to .285 Common Shares.
NOTE 8 - STOCK OPTIONS
The Company has in effect a number of stock-based incentive and benefit
programs designed to attract and retain qualified directors, executives and
management personnel. To accomplish these objectives, the Company has adopted a
1985 Incentive Stock Option Plan (the "ISOP"), a 1985 non-qualified Stock Option
Plan (the "Non-qualified Plan"), a 1989 Directors Stock Option Plan ("Directors
Plan"), a 1992 Stock Option Plan ("1992 Non-qualified Plan"), a 1992 Incentive
Stock Option Plan ("1992 ISOP"), a 1992 Stock Bonus Plan ("1992 Bonus Plan"),
and a 1992 Stock Option Plan for Non-employee Directors ("1992 Directors Plan").
In addition, the Company has encouraged its directors to subscribe for shares of
common stock from time to time at a price equal to the market price of the
common stock at the time of their subscription.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and other related interpretations in
accounting for its stock option plans. No compensation expense has been
recognized for these plans. Had compensation cost been determined based upon the
fair value at grant date consistent with the methodology prescribed under SFAS
No. 123, "Accounting for Stock Based Compensation", the Company's net income and
earnings per share would have been reduced by approximately $227,000, or $.04
per share, and $311,000, or $.05 per share for 1995 and 1996, respectively. The
weighted average fair value of options granted during 1995 and 1996 is estimated
as $4.42 and $4.27, respectively, on the date of grant using the Black-Scholes
option-pricing model with the following assumptions for 1995 and 1996,
respectively: volatility of 71% and 43%, risk free interest rates of 6.82% and
6.76%, assumed forfeiture rates of 13.2% and expected lives of 6.76 years.
Changes in stock options outstanding are as follows:
Qualified Stock Options
<TABLE>
<CAPTION>
1996 1995 1994
----------------------- ---------------------- ---------------------
Shares Price (a) Shares Price (a) Shares Price (a)
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding balance at
beginning of year 430,168 $ 4.73 345,001 $4.07 324,126 $3.98
Granted 30,000 9.63 132,000 6.04 25,000 5.00
Exercised (37,500) 3.30 (15,833) 3.80 (4,125) 3.13
Canceled (44,833) 4.85 (31,000) 3.13 - -
Transferred (12,000) 7.00 - - -
------- ------ ------- ----- ------- -----
Outstanding at end
of year 365,835 $ 5.19 430,168 $4.73 345,001 $4.07
======= ======= =======
Options exercisable at
end of year 253,917 $ 4.70 267,418 $4.36 241,667 $4.02
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Non-Qualified Stock Options
1996 1995 1994
----------------------- ---------------------- ---------------------
Shares Price (a) Shares Price (a) Shares Price (a)
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding balance at
beginning of year 145,833 $6.18 165,833 $5.60 115,833 $5.91
Granted 165,000 7.40 40,000 6.44 50,000 4.88
Exercised - - (60,000) 4.75 - -
Canceled - - - - - -
Transferred 12,000 7.00 - - -
------ ------- -------
Outstanding at end
of year 322,833 $6.83 145,833 $6.18 165,833 $5.60
-------- ------- -------
Options exercisable at
end of year 222,833 $6.70 145,833 $6.18 160,833 $5.60
======= ===== ======= ===== ======= =====
</TABLE>
(a) Weighted average exercise price
As of December 31, 1996, the 688,668 stock options outstanding have exercise
prices between $3.13 and $10.02 and a weighted average remaining contractual
life of 6.7 years.
<PAGE>
NOTE 9 - EMPLOYEE STOCK PURCHASE PLAN:
The Butler International, Inc. 1990 Employee Stock Purchase Plan (the "Plan")
made available $2.5 million for loans to officers, directors, and other key
employees to purchase Company stock. Except for the loans to outside
directors, the Company, subject to the Plan provisions, may reduce the amount
due with respect to each loan by twenty-five percent of the original principal
balance on successive anniversary dates of the loan, provided that the employee
remains employed by the Company or one of its subsidiaries on such anniversary
dates, or has not terminated his employment for other than a reason permitted
by the Plan. The shares acquired by the outside directors pursuant to the Plan
were subject to forfeiture ratably under certain conditions. During 1996, plan
loans totaling $68,726, previously granted to employees who have been
terminated, were forgiven and charged to expense.
NOTE 10 - EMPLOYEE BENEFIT PLANS:
Defined Benefit Plan
The Company has a defined benefit pension plan covering substantially all of
its full-time staff employees. Benefits under the plan are determined based on
earnings and period of service. The Company funds the pension plan in
accordance with the minimum funding requirements of the Employees Retirement
Income Security Act of 1974. Benefits payable under the plan are reduced by a
participant's Employee Stock Option Plan ("ESOP") credits.
Pension expense consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Service cost-benefits earned during the
period $432 $543 $480
Interest cost on projected benefit
obligations 250 213 178
Actual return on assets (194) (159) (46)
Net amortization and deferral 99 99 (26)
----- ----- -----
Net pension expense $ 587 $ 696 $ 586
===== ===== =====
Assumptions used in determining net pension
expense were:
1996 1995 1994
----- ----- -----
Discount rate 7.25% 7.25% 8.5%
Rates of increase in compensation levels 4% 4% 4%
Expected long-term rate of return on assets 9% 9% 10%
</TABLE>
The following table sets forth the funded
status and amount recognized in the
balance sheets (in thousands):
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 1,945 $ 1,996
------ ------
Accumulated benefit obligation $ 2,709 $ 2,231
------ ------
Plan assets at fair value $ 2,686 $ 2,059
Less projected benefit obligation 4,134 3,691
------ ------
Projected benefit obligation in excess of plan assets (1,448) (1,632)
Unrecognized net gain (107) (238)
Prior service cost not yet recognized in
net periodic pension cost 1,183 1,282
------ ------
Accrued liability recognized in
the financial statements $ (372) $ (588)
====== ======
</TABLE>
<PAGE>
At December 31, 1996, approximately 53% of plan assets were held in fixed
income investments and 47% in equity investments compared to 69% in fixed
investments and 31% in equity investments at December 31, 1995.
Postemployment and Postretirement Benefits
The Company currently does not provide postemployment and postretirement
benefits other than pensions.
401(K) Plan
The Company provides a non-contributory 401(K) savings plan. At its option,
the Company may contribute to the plan. The Company did not make any
contributions to the plan in 1996, 1995 and 1994.
NOTE 11 - INCOME TAXES:
The income tax expense (benefit) included in the Consolidated Statements of
Operations consists of the following
(in thousands):
1996 1995 1994
----- ----- -----
Current taxes:
Federal $ 130 $ 32 $ 38
State 463 73 137
Foreign - (216) 134
----- ----- -----
Income tax (benefit) expense $ 593 $ (111) $ 309
===== ===== =====
SFAS No. 109 requires that a valuation allowance be recorded and offset against
the deferred tax assets if, based on existing facts and circumstances, it is
more likely than not that some portion or all of the deferred asset will not be
realized. To date, the Company has provided a 100% valuation allowance.
Consequently, the Company's net deferred tax assets remain unchanged from
December 31, 1995. However, individual components (temporary differences and
carryforwards) giving rise to this asset have changed. The principal changes
have been an increase in temporary differences (deferred tax assets) and
utilization of U.S. net operating loss carryforwards. As a result, at December
31, 1996 and December 31, 1995, the Company had approximately $8.6 million and
$8.0 million, respectively, of net future tax deductions (temporary
differences) for which a tax benefit has not been recognized in the financial
statements. The tax effected temporary differences and carryforwards which
give rise to deferred tax assets and valuation allowances are as follows (in
thousands):
1996 1995
------- ------
Allowance for doubtful accounts $ 444 $ 428
Deferred compensation 233 258
Depreciation and amortization 360 325
Accruals for exiting and discontinued
operations 54 102
Accrual for termination and exiting
operations 105 541
Accruals for workers compensation 1,510 714
Other items 744 852
Capital loss carryforwards 1,840 1,876
Tax loss carryforwards:
U.S. regular operating losses 2,240 4,280
U.S. SRLY operating losses 4,800 5,160
U.K. regular operating losses 1,056 1,320
Tax credit carryforwards 729 607
Valuation allowance (14,115) (16,463)
------- -------
Net deferred tax asset (liability) $ 0 $ 0
======= =======
<PAGE>
A reconciliation between the income tax expense (benefit) compared by
applying the federal statutory rate to income (loss) from continuing operations
before income taxes to the actual expense (benefit) is as follows:
1996 1995 1994
-------- -------- --------
Income tax (benefit) expense at
statutory rate 34.0% (34.0)% 34.0%
Amortization of excess of cost over
net assets of businesses acquired 4.0 2.7 11.4
Limitation on utilization (utilization)
of net operating loss and credit
carryforwards (37.6) 24.2 (40.6)
State income tax expense net of
federal tax benefit 8.4 .9 6.8
Other, including foreign rate differential 2.2 4.8 4.1
---- ---- ----
Effective tax rate 11.0% (1.4)% 15.7%
==== ==== ====
U.S. net operating loss carryforwards from 1993, 1992, 1991 and from separate
return limitation years (SRLY) are available to reduce future taxable income,
subject to applicable Internal Revenue Service carryforward rules and
limitations. U.K. net operating loss carryforwards from 1995 and 1996 are
available to reduce future U.K. taxable income. U.K. tax law provides an
unlimited life for net operating loss carryforwards. The benefit of these net
operating losses have not been recognized for financial reporting purposes.
These carryforwards expire as follows (in thousands):
U.S.-SRLY U.S.-Regular U.K.
Year of Net Operating Net Operating Net Operating
Expiration Loss Loss Loss
- ---------- ---- ---- ----
1997 $ 700 $ - $ -
1998 2,600 - -
1999 5,200 - -
2000 3,500 - -
2006 - - -
2007 - 2,400 -
2008 - 3,200
Indefinite - - 3,200
------ ------ ------
$12,000 $ 5,600 $ 3,200
====== ====== ======
The Company has capital loss carryforwards for financial reporting and tax
reporting purposes of approximately $4.6 million expiring in 1997 which are
available to offset future capital gains, if any. The Company has regular tax
credit carryforwards for financial reporting and/or tax reporting purposes of
approximately $729,000 expiring from 2000 onward.
<PAGE>
NOTE 12 - COMMITMENTS AND CONTINGENCIES:
The Company has operating leases for office space and various computer
equipment. Estimated minimum future rental commitments under non-cancelable
leases at December 31, 1996 are as follows (in thousands):
1997 $3,357
1998 2,717
1999 1,935
2000 796
2001 315
Thereafter 96
------
Total $9,216
======
Substantially all of the leases provide for increases based upon use of
utilities and lessors' operating expenses. Total rent expense for the years
ended December 31, 1996, 1995 and 1994 was approximately $3.9 million, $4.0
million and $4.1 million, respectively.
The Company and its subsidiaries are parties to various legal proceedings and
claims incidental to its normal business operations for which any 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 March 14,
1997, CIGNA notified the Company that it intended to draw down on three letters
of credit, posted by the Company, in the aggregate amount of approximately $2.9
million. This amount is fully reserved by the Company.
NOTE 13 - RELATED PARTY TRANSACTIONS:
Three non-employee directors have non-interest bearing notes payable to the
Company, totaling $952,200 in connection with common stock purchased pursuant
to various stock option plans. In 1990, the Chairman issued a $155,000
non-interest bearing note due in 1998 to purchase 35,880 shares of the
Company's common stock. Notes of $84,000 by the Chairman and $42,000 by each
of three outside directors were issued to purchase stock pursuant to the 1990
Employee Stock Purchase Plan ("ESPP"). As of December 31, 1996 and 1995, a
balance under a note from a non-employee director was $105,629 and $100,312,
respectively, relating to the purchase of common stock.
During 1996, 1995 and 1994, the Company paid or accrued $519,000, $346,000 and
$654,000, respectively, in fees and expenses to McBreen, McBreen & Kopko, its
outside counsel.
In 1993, Frederick H. Kopko Jr. and Hugh G. McBreen, provided collateral and
guaranteed a letter of credit issued as collateral for a promissory note to a
lender to the Company in connection with the purchase of the headquarters
building presently occupied by the Company. The note was fully paid in 1994
and the letter of credit was returned to the Company in 1995. As
consideration, warrants to purchase 90,000 and 60,000 shares of the Company's
common stock, at the then market price of $3.62 per share, were granted to an
assignee of Mr. Kopko and to Mr. McBreen, respectively.
In May, 1995, two non-employee directors, executed notes of $142,500 each, in
connection with their purchase of 60,000 shares of the Company's common stock
pursuant to the 1992 Directors Stock Option Plan.
<PAGE>
NOTE 14 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
During 1996, 1995 and 1994, the Company received $62,000, $18,000 and $77,000,
respectively, in federal, state and foreign income tax refunds.
Cash paid for interest and federal, state and foreign income taxes for the
years ended December 31, 1996, 1995 and 1994 is as follows (in thousands):
1996 1995 1994
------ ------ ------
Interest $4,767 $5,711 $3,649
Income taxes $144 $304 $242
NOTE 15 - INFORMATION ABOUT THE COMPANY'S FOREIGN OPERATIONS:
(in thousands):
1996 1995 1994
------ ------ ------
Net Sales $21,280 $42,354 $39,657
Operating Income
(loss) (942) (5,013) 1,608
Identifiable Assets 2,773 9,226 12,453
Operating income (loss) consists of earnings (losses) from continuing
operations before interest expense, corporate expenses and income taxes.
Identifiable assets consist of total assets excluding any intercompany
receivables or payables employed by the Company's foreign operations. Foreign
operations consist principally of the United Kingdom. During 1996, the Company
completed the sale and disposal of the U.K. telecommunications, Indonesian and
South African operations of its United Kingdom subsidiary.
NOTE 16 - NON-RECURRING CHARGES:
In 1995, the Company recorded non-recurring charges totaling $2.7 million,
consisting of $1.5 million of expenses and reserves in connection with the sale
and exiting of certain of its foreign and non strategic operations, one-time
costs of approximately $650,000 related to the relocation of its payroll,
billing, accounts payable, collections and other administrative functions, and
$535,000 of costs related to the termination of certain management level
personnel. The foreign and non strategic operations that were ceased in the
fourth quarter of 1995 included Butler Telecom's operations in Mexico and
Venezuela, Butler Quality Services, Butler Airport Services and the Butler
Canadian operations. The operating results for these operations, excluding the
loss on disposal, are shown below (in thousands):
1995 1994
------ ------
Net sales $ 4,577 $ 9,458
Gross margin 839 2,284
Depreciation and
amortization 23 42
Selling, general and
administrative expense 1,615 2,066
Other (income) expense (45) 148
Income (loss) before
interest and taxes $ (754) $ 28
<PAGE>
NOTE 17 - INTERIM FINANCIAL INFORMATION:
(in thousands, except per share data) (unaudited)
1996 QUARTERS FIRST SECOND THIRD FOURTH
- ------------- ------- ------- ------- ------
Operations:
- -----------
Net Sales $100,671 $105,379 $103,054 $100,249
Gross Margin 13,888 15,354 15,321 15,028
Net income 512 1,316 1,479 1,484
------- ------- ------- -------
Per share data:
- ---------------
Primary earnings
per share $ 0.08 $ 0.20 $ 0.22 $ 0.22
------- ------- ------- -------
1995 QUARTERS FIRST SECOND THIRD FOURTH
- ------------- ------- ------- ------- ------
Operations:
- -----------
Net Sales $116,294 $110,514 $108,222 $98,534
Gross margin 14,836 16,290 15,446 9,923
Non-recurring
charges (125) (205) (163) (2,187)
Net income (loss) 451 1,167 83 (9,615)
------- ------- ------- ------
Per share data:
- --------------------
Primary earnings
(loss) per share $ 0.07 $ 0.18 $ 0.01 $ (1.61)
------- ------- ------- ------
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS OF BUTLER INTERNATIONAL, INC.:
We have audited the accompanying consolidated balance sheets of Butler
International, Inc. as of December 31, 1996 and December 31, 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Butler International, Inc. as of
December 31, 1996 and December 31, 1995, and the results of their operations
and cash flows for each of the three years in the period ended December 31,
1996 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
Parsippany, New Jersey
March 19, 1997
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operations Data:
Net sales $409,353 $433,564 $393,250 $307,715 $267,581
Gross margin $59,591 $56,495 $53,617 $41,744 $34,116
Income (loss) from continuing
operations $4,791 -$7,914 (a) $1,659 $1,227 -$4,561
Income (loss) from discontinued
operations - - - -$3,427 -$182
-------- -------- -------- -------- --------
Net income (loss) $4,791 -$7,914 (a) $1,659 -$2,200 -$4,743
Per Share Data:
Income (loss) per share:
<S> <C> <C> <C> <C> <C>
Continuing operations $ 0.72 -$1.36 $ 0.25 $ 0.20 -$1.03
Discontinued operations - - - -$0.70 -$0.04
-------- -------- -------- -------- --------
Net income (loss) per share $ 0.72 -$1.36 $ 0.25 -$0.50 -$1.07
======== ======== ======== ======== ========
Weighted average number of
shares outstanding 6,417 5,943 5,935 4,928 4,477
Balance Sheet Data:
Working capital $32,041 $ 34,103 $ 48,155 $34,753 $28,841
Total assets $99,180 $110,572 $107,810 $85,381 $69,406
Long-term debt $31,342 $ 40,480 $ 45,746 $32,151 $18,378
Total liabilities $63,601 $ 80,516 $ 70,412 $50,691 $35,906
Stockholders' equity $35,579 $ 30,056 $ 37,398 $34,690 $33,500
</TABLE>
(a) 1995 includes $2,680 of non-recurring charges (See Note 16).
MARKET INFORMATION ON BUTLER'S COMMON STOCK
The Common Stock is quoted under the symbol "BUTL" and is listed on the
NASDAQ National Market System. As of March 19, 1997, there were approximately
4,186 holders of record of Common Stock. Not reflected in the number of record
holders are persons who beneficially own shares of the Common Stock held in
nominee or street name.
HIGH LOW
1995
First Quarter $7.75 $5.38
Second Quarter 7.13 5.88
Third Quarter 8.50 6.50
Fourth Quarter 8.06 4.00
1996
First Quarter $6.00 $4.63
Second Quarter 9.50 5.50
Third Quarter 9.88 6.25
Fourth Quarter 11.38 9.25
1997
First Quarter (Through March 18, 1997) $13.75 $10.00
No cash dividends were declared on the Company's Common Stock during the
years ended December 31, 1996 and 1995. The Company has no present intention of
paying cash dividends during the year ending December 31, 1997
32
<PAGE>
EXHIBIT 22.1
SUBSIDIARIES OF REGISTRANT
--------------------------
PERCENTAGE
OF VOTING STATE OR
SECURITIES JURISDICTION OF
CORPORATION OWNED BY OWNED INCORPORATION
- ----------------------------------- ---------- ---------- ---------------
Butler Service Group, Inc. Registrant 100 New Jersey
AAC Corp. Registrant 100 Delaware
Sylvan Insurance Co. Ltd. Registrant 100 Bermuda
Butler Airport Services, Corp. Registrant 100 Maryland
Butler of New Jersey Realty Corp. Registrant 100 New Jersey
BUTLER SERVICE GROUP, INC. ("BSG") SUBSIDIARIES
-----------------------------------------------
Butler Service Group-UK, Ltd. BSG 100 United Kingdom
Butler Airport Services, Ltd. BSG 100 United Kingdom
Butler Services International, Inc. BSG 100 Delaware
Butler Telecom, Inc. BSG 100 Delaware
Butler Services, Inc. BSG 100 Delaware
Butler Utility Services, Inc. BSG 100 Delaware
Butler Airport Services, Inc. BSG 100 Cayman Islands
BSG-Africa, Ltd. BSG 100 Africa
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No. 333-
22263, No. 33-58481 and No. 33-87012 on Form S-8, Registration Statement No. 33-
59427 on Form S-3 and Post-Effective Amendment No. 4 to Registration Statement
No. 33-58278 on Form S-2 of our reports dated March 19, 1997, appearing in and
incorporated by reference in this Annual Report on Form 10-K of Butler
International, Inc. for the year ended December 31, 1996.
- ------------------------
Parsippany, New Jersey
March 19, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BUTLER INTERNATIONAL, INC. FORM 10-K FOR PERIOD ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 229
<SECURITIES> 0
<RECEIVABLES> 57,726
<ALLOWANCES> 1,455
<INVENTORY> 2,292
<CURRENT-ASSETS> 60,952
<PP&E> 26,189
<DEPRECIATION> 12,842
<TOTAL-ASSETS> 99,180
<CURRENT-LIABILITIES> 28,911
<BONDS> 0
0
3
<COMMON> 6
<OTHER-SE> 35,570
<TOTAL-LIABILITY-AND-EQUITY> 99,180
<SALES> 409,353
<TOTAL-REVENUES> 409,353
<CGS> 349,762
<TOTAL-COSTS> 349,762
<OTHER-EXPENSES> 48,992
<LOSS-PROVISION> 453
<INTEREST-EXPENSE> 5,215
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