-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eo91KJ1FJBGVXemc3AWOF9+cwjk/OneIuR41kVdSDBUaOarLW/ldlAojxFApuWW6 0dY63vWaArBy6c1GiMtDSA== 0000950130-97-005053.txt : 19971117 0000950130-97-005053.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950130-97-005053 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BUTLER INTERNATIONAL INC /MD/ CENTRAL INDEX KEY: 0000786765 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 061154321 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14951 FILM NUMBER: 97719442 BUSINESS ADDRESS: STREET 1: 110 SUMMIT AVE CITY: MONTVALE STATE: NJ ZIP: 07645 BUSINESS PHONE: 2015738000 MAIL ADDRESS: STREET 1: 110 SUMMIT AVENUE STREET 2: 110 SUMMIT AVENUE CITY: MONTVALE STATE: NJ ZIP: 07645 FORMER COMPANY: FORMER CONFORMED NAME: NORTH AMERICAN VENTURES INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) {X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1997 --------------------- OR { } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-14951 ------- BUTLER INTERNATIONAL, INC. -------------------------- Exact name of registrant as specified in its charter) MARYLAND 06-1154321 ------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 110 Summit Avenue, Montvale, New Jersey 07645 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (201) 573-8000 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No _____. ----- As of November 9, 1997, 6,374,923 shares of the registrant's common stock, par value $.001 per share, were outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. -------------------- (A) Consolidated Balance Sheets - September 30, 1997 (Unaudited) and December 31, 1996 (B) Consolidated Statements of Operations (Unaudited) - quarter ended September 30, 1997 and quarter ended September 30, 1996 (C) Consolidated Statements of Operations (Unaudited) - nine months ended September 30, 1997 and nine months ended September 30, 1996 (D) Consolidated Statements of Cash Flows (Unaudited) - nine months ended September 30, 1997 and nine months ended September 30, 1996 (E) Notes to Consolidated Financial Statements (Unaudited) 2 BUTLER INTERNATIONAL, INC. -------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- (in thousands except share data)
September 30, December 31, 1997 1996 ------------ ----------- (Unaudited) ASSETS - ------ Current assets: Cash $ 531 $ 229 Accounts receivable, net 57,536 56,271 Inventories 2,204 2,292 Other current assets 2,796 2,160 -------- -------- Total current assets 63,067 60,952 Property and equipment, net 13,665 13,347 Other assets and deferred charges 1,507 1,138 Excess cost over net assets of businesses acquired, net 25,399 23,743 ------- ------ Total assets $ 103,638 $ 99,180 ======= ====== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable and accrued liabilities $ 30,247 $21,145 Current portion of long-term debt 649 7,766 ------ ------ Total current liabilities 30,896 28,911 ------ ------ Revolving credit facility 24,949 31,342 Other long-term debt 6,495 0 Other long-term liabilities 451 3,348 Stockholders' equity: Preferred stock, par value $.001 per share, authorized 5,000,000: Series B 7% Cumulative Convertible, authorized 3,500,000; issued 2,718,214 at Sept. 30, 1997 and 2,627,025 at December 31, 1996 (Aggregate liquidation preference $2,718,214 at Sept. 30, 1997 and $2,627,025 at December 31, 1996) 3 3 Common stock, par value $.001 per share, authorized 83,333,333; issued and outstanding 6,374,923 at Sept. 30, 1997 and 6,144,168 at December 31, 1996 6 6 Additional paid-in capital 94,444 93,673 Accumulated deficit (53,509) (58,112) Cumulative foreign currency translation adjustment (97) 9 ------- -------- Total stockholders' equity 40,847 35,579 ------- -------- Total liabilities and stockholders' equity $103,638 $99,180 ======== ========
The accompanying notes are an integral part of these financial statements. 3 BUTLER INTERNATIONAL, INC. -------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (in thousands except per share data) (Unaudited) Quarter Ended September 30, -------------------------- 1997 1996 -------- -------- Net sales $106,465 $103,054 Cost of sales 89,287 87,733 -------- -------- Gross margin 17,178 15,321 Depreciation and amortization 752 693 Selling, general and administrative expenses 13,170 11,991 -------- -------- Operating income 3,256 2,637 Other income (expense): Interest and other income 140 283 Interest expense (1,070) (1,333) -------- -------- Income before income taxes 2,326 1,587 Income taxes 228 108 -------- -------- Net income $ 2,098 $ 1,479 ======== ======== Net income per share: Primary $.30 $.22 Assuming full-dilution $.28 $.20 Average number of common shares and dilutive common share equivalents outstanding: Primary 6,800 6,516 Assuming full-dilution 7,626 7,308 The accompanying notes are an integral part of these financial statements. 4 BUTLER INTERNATIONAL, INC. -------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (in thousands except per share data) (Unaudited) Nine Months Ended September 30, -------------------------------- 1997 1996 ---------- ---------- Net sales $319,581 $309,104 Cost of sales 270,262 264,541 -------- -------- Gross margin 49,319 44,563 Depreciation and amortization 2,091 2,325 Selling, general and administrative expenses 38,744 35,016 -------- -------- Operating income 8,484 7,222 Other income (expense): Interest and other income 191 633 Interest expense (3,389) (4,168) -------- -------- Income before income taxes 5,286 3,687 Income taxes 544 380 -------- -------- Net income $ 4,742 $ 3,307 ======== ======== Net income per share: Primary $.69 $.50 Assuming full-dilution $.63 $.46 Average number of common shares and dilutive common share equivalents outstanding: Primary 6,644 6,339 Assuming full-dilution 7,516 7,256 The accompanying notes are an integral part of these financial statements. 5 BUTLER INTERNATIONAL, INC. -------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (in thousands) (Unaudited) Nine Months Ended September 30, ------------------------------- 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,742 $ 3,307 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and excess purchase price amortization 2,091 2,325 Amortization of deferred financing 115 605 Foreign currency translation (106) 18 (Increase) decrease in assets, increase (decrease) in liabilities: Accounts receivable (1,265) 6,377 Inventories 88 (47) Other current assets (636) 579 Other assets (484) (917) Current liabilities 9,123 (2,916) Other long-term liabilities (2,897) 47 ------- ------- Net cash provided by operating activities 10,771 9,378 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures - net (1,549) 145 Cost of businesses acquired (2,515) (382) Expenses paid in conjunction with discontinued operations (70) (80) ------- ------- Net cash used in investing activities (4,134) (317) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net payments under financing agreements (7,015) (9,601) Net proceeds from the issuance of common stock 680 742 Payments on headquarters building debt - (22) ------- ------- Net cash used in financing activities (6,335) (8,881) ------- ------- Net increase in cash 302 180 Cash at beginning of period 229 1,097 ------- ------- Cash at end of period $ 531 $ 1,277 ======= ======= The accompanying notes are an integral part of these financial statements. 6 BUTLER INTERNATIONAL, INC. -------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (Unaudited) NOTE 1 - PRESENTATION: The consolidated financial statements include the accounts of Butler International, Inc. ("the Company") and its wholly-owned subsidiaries. Significant intercompany balances and transactions have been eliminated. Certain amounts from prior period consolidated financial statements have been reclassified in the accompanying consolidated financial statements to conform with the current period presentation. The accompanying financial statements are unaudited, but, in the opinion of management, reflect all adjustments, which include normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows at September 30, 1997 and for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted. Accordingly, this report should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 1996. NOTE 2 - CREDIT FACILITY: On November 13, 1997, the Company amended and restated its Credit Facility with General Electric Capital Corporation ("GECC") to include an acquisition facility (in addition to the original facility). The Credit Facility provides the Company with up to $50.0 million in loans, including $9.0 million for letters of credit. The interest rate in effect at the end of the third quarter 1997 was 230 basis points above the 30 day commercial paper rate. Additional interest reductions are available based upon the Company achieving certain financial results. The interest rate in effect on September 30, 1997, was 7.86%, and the average rate since January 1, 1997, was 7.98%. The Company has guaranteed all obligations incurred or created under the Credit Facility. The Company is required to comply with certain affirmative and financial covenants. The Company is in compliance with the aforementioned covenants as amended. The acquisition facility is for up to $15 million and bears interest at 300 basis points above the 30 day commercial paper rate. NOTE 3 - COMMON STOCK: During the first nine months of 1997, the Company issued 230,755 shares of common stock upon the exercise of common stock options and purchase warrants. NOTE 4 - EARNINGS PER SHARE: Primary earnings per share are determined by dividing net income (after deducting preferred stock dividends of $48,000 and $139,189 for the quarter and nine months ended September 30, 1997 and $44,775 and $130,357 for the quarter and nine months ended September 30, 1996) by the weighted average number of common shares outstanding and dilutive common stock equivalents. On a fully- diluted basis, both earnings and shares outstanding are adjusted to assume the conversion of convertible preferred stock. The Company will adopt the Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128") in the fourth quarter of 1997, as required. The Company will continue to apply APB Opinion No. 15 until the adoption of SFAS 128. The pro forma earnings per share ("EPS") computed under the provisions of SFAS 128 for the quarter and nine months ended September 30, 1997 are as follows: Basic EPS 7 of $.32 and $.74, respectively, and diluted EPS of $.28 and $.63, respectively. Pro forma basic and diluted EPS for the quarter and nine months ended September 30, 1996 were as follows: Basic EPS of $.23 and $.52, respectively and diluted EPS of $.20 and $.46, respectively. NOTE 5 - CONTINGENCIES: The Company and its subsidiaries are parties to various legal proceedings and claims incidental to its normal business operations for which material liability, beyond that which is recorded, is remote except for the following matter. In 1995, the Company filed a complaint against CIGNA Property and Casualty Insurance Company alleging negligence, breach of contract, breach of fiduciary duty, and negligent misrepresentation arising out of CIGNA's and other defendants' acts and omissions in the processing, handling and investigation of claims against the Company under general liability and workmen's compensation insurance contracts. The defendants filed an answer, new matter and counterclaim denying the Company's allegations, asserting certain affirmative defenses, and alleging that the Company has failed to pay retrospective premiums amounting to approximately $7.6 million. On April 18, 1997, CIGNA drew down on three letters of credit, posted by the Company, in the aggregate amount of $2.9 million. There was no impact on current year operating results. These letters of credit had been posted as collateral for estimated retrospective premiums. On July 29, 1997, the Company entered into an agreement with CIGNA which, in the absence of a settlement, will result in the respective parties undertaking binding arbitration in late 1998. The parties further agreed to grant the Company an option to settle this matter in lieu of arbitration. NOTE 6 - MORTGAGE NOTE: On November 12, 1997, the Company closed on a new 7 year mortgage loan for its corporate office facility. The loan, which totals $6.75 million, bears interest at 8.6%. $6.4 million of the mortgage is repayable based upon a 15 year amortization schedule, while the remaining $350,000 is based upon a 4 year schedule. This facility replaces the previous $6.75 million mortgage which had borne interest at 10%. NOTE 7 - ACQUISITION: On August 11, 1997, the Company acquired Corporate Information Systems, Inc. ("CIS"), a Chicago based information technology ("IT") company with offices in Chicago and Phoenix. CIS has provided IT support services to its clients for the last 15 years, and currently generates approximately $6 million in annual sales. Their service offerings in technology include staffing projects (e.g., Year 2000 compliance conversion and software programming) and management consulting. They cover a wide range of industries with current emphasis on insurance and banking. CIS has doubled in size in the past three years due to quality performance at national accounts. CIS's founder and President will remain with the Company in a management capacity. The acquisition was not material to the financial results of the Company. NOTE 8 - RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS: In June of 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") 130, "Reporting Comprehensive Income", which requires a statement of comprehensive income to be included in the financial statements for fiscal years beginning December 15, 1997. The Company is in the process of reviewing this statement and will include the required information with financial statements beginning with the first quarter of 1998. 8 Also in June of 1997, the FASB issued SFAS 131, "Disclosures About Segments of an Enterprise and Related Information". SFAS 131 requires disclosures of certain information about operating segments and about products and services, the geographic areas in which a company operates, and their major customers. The Company is presently in the process of evaluating the effect this new standard will have on disclosures in the Company's financial statements and the required information will be reflected in the year ended December 31, 1998 financial statements. 9 Item 2. Management's Discussion and Analysis of Results of Operations and ----------------------------------------------------------------- Financial Condition - ------------------- RESULTS OF OPERATIONS - --------------------- The third quarter of 1997 net income increased by 42% to $2.1 million, or $.30 per share, up from the $1.5 million, or $.22 per share, reported in the third quarter of 1996. On a year-to-date basis, net income was $4.7 million, or $.69 per share, compared to $3.3 million, or $.50 per share reported for the comparable period last year. The increased earnings were driven by higher margins and lower interest expense. Gross margins in the current quarter were 16.1%, up from 14.9% reported in the third quarter of 1996. This improvement was fueled by the higher end Technology Solutions and Telecommunications Services operations. Further providing earnings leverage was an overall increase in hourly billing rates, representative of the Company's focus on its higher end business. The decrease in interest expense was principally due to decreased borrowings. Revenues in the quarter were $106.5 million, up 3% from the $103.1 million recorded in 1996. Growth in the current year quarter was attributable to a 19% increase in the Company's Technology Solutions operation and a 10% increase in the Telecommunications Services unit, which more than offset a 1% decrease in the Contract Technical Services division. On a year-to-date basis, revenues were $319.6 million, or 3% higher than that reported for the comparable period in 1996. As part of its initiative to expand its Technology Solutions business, the Company acquired Corporate Information Systems, Inc. ("CIS"), a Chicago based information technology ("IT") company with offices in Chicago and Phoenix. CIS has provided IT support services to its clients for the last 15 years, and currently generates approximately $6 million in annual sales. Their service offerings in technology include staffing projects (e.g., Year 2000 compliance conversion and software programming) and management consulting. They cover a wide range of industries with current emphasis on insurance and banking. CIS has doubled in size in the past three years due to quality performance at national accounts. CIS's founder and President will remain with the Company in a management capacity. Information contained in this Management's Discussion and Analysis of Results of Operations and Financial Condition, other than historical information, may be considered forward-looking in nature, as such it is based upon certain assumptions and is subject to various risks and uncertainties, which may not be controllable by the Company. To the extent that these assumptions prove to be incorrect, or should any of these risks or uncertainties materialize, the actual results may vary materially from those which were anticipated. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company's primary sources of funds are generated from operations and borrowings under its Credit Facility. As of September 30, 1997, $24.9 million was outstanding under the Credit Facility, and an additional $5.5 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, capital expenditures and acquisitions. Continued earnings and improved controls over the Company's investment in its accounts receivable continue to yield results as reflected in the decrease in the borrowings under its Credit Facility to $24.9 million at September 30, 1997, down from $33.0 million at September 30, 1996. 10 During the first nine months of 1997, the Company received net proceeds of $1,050,681 from the exercise of 230,755 common stock options and purchase warrants. On Novenber 13, 1997, the Company amended and restated its Credit Facility with General Electric Capital Corporation ("GECC") to include an acquisition facility (in addition to the original facility). The Credit Facility provides the Company with up to $50.0 million in loans, including $9.0 million for letters of credit. The interest rate in effect at the end of the third quarter 1997 was 230 basis points above the 30 day commercial paper rate. Additional interest reductions are available based upon the Company achieving certain financial results. The interest rate in effect on September 30, 1997, was 7.86%, and the average rate since January 1, 1997, was 7.98%. The Company has guaranteed all obligations incurred or created under the Credit Facility. The Company is required to comply with certain affirmative and financial covenants. The Company is in compliance with the aforementioned covenants as amended. The acquisition facility is for up to $15 million and bears interest at 300 basis points above the 30 day commercial paper rate. On November 12, 1997, the Company closed on a new 7 year mortgage loan for its corporate office facility. The loan, which totals $6.75 million, bears interest at 8.6%. $6.4 million of the mortgage is repayable based upon a 15 year amortization schedule, while the remaining $350,000 is based upon a 4 year schedule. This facility replaces the previous $6.75 million mortgage which had borne interest at 10%. RECENT ACCOUNTING PRONOUNCEMENT - ------------------------------- The Company will adopt the Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128") in the fourth quarter of 1997, as required. The Company will continue to apply APB Opinion No. 15 until the adoption of SFAS 128. The pro forma earnings per share ("EPS") computed under the provisions of SFAS 128 for the quarter and nine months ended September 30, 1997 are as follows: Basic EPS of $.32 and $.74, respectively, and diluted EPS of $.28 and $.63, respectively. Pro forma basic and diluted EPS for the quarter and nine months ended September 30, 1996 were as follows: Basic EPS of $.23 and $.52, respectively and diluted EPS of $.20 and $.46, respectively. 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings - None 2. Changes in Securities - None 3. Defaults Upon Senior Securities - None 4. Submission of Matters to a Vote of Security Holders - None 5. Other Information - None 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K - None 12 SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BUTLER INTERNATIONAL, INC. -------------------------- (Registrant) November 13, 1997 By: /s/ Edward M. Kopko -------------------------------- Edward M. Kopko, Chairman and Chief Executive Officer November 13, 1997 By: /s/ Michael C. Hellriegel -------------------------------- Michael C. Hellriegel Senior Vice President and Chief Financial Officer November 13, 1997 By: /s/ Warren F. Brecht -------------------------------- Warren F. Brecht Senior Vice President and Secretary 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BUTLER INTERNATIONAL, INC. FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FIANANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 JUL-01-1997 SEP-30-1997 531 0 59,068 1,532 2,204 63,067 27,243 13,578 103,638 30,896 0 0 3 6 40,838 103,638 319,581 319,581 270,262 270,262 40,194 450 3,389 5,286 544 4,742 0 0 0 4,742 .69 .63
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