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, 1995
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OR
{_} TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-14951
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BUTLER INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
MARYLAND 06-1154321
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Summit Avenue, Montvale, New Jersey 07645
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 573-8000
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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 _____.
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As of November 13, 1995, 5,993,783 shares of the registrant's common stock, par
value $.001 per share, were outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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(A) Consolidated Balance Sheets - September 30, 1995 (Unaudited) and
December 31, 1994
(B) Consolidated Statements of Operations (Unaudited) - quarter ended
September 30, 1995 and quarter ended September 30, 1994
(C) Consolidated Statements of Operations (Unaudited) - nine months ended
September 30, 1995 and nine months ended September 30, 1994
(D) Consolidated Statements of Cash Flows (Unaudited) - nine months ended
September 30, 1995 and nine months ended September 30, 1994
(E) Notes to Consolidated Financial Statements (Unaudited)
2
BUTLER INTERNATIONAL, INC.
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CONSOLIDATED BALANCE SHEETS
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(in thousands except share data)
September 30, December 31,
1995 1994
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(Unaudited)
ASSETS
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Current assets:
Cash and cash equivalents $ 4,380 $ 2,285
Accounts receivable, net 81,192 63,149
Other current assets 4,486 3,119
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Total current assets 90,058 68,553
Property and equipment, net 15,170 13,237
Other assets and deferred charges 672 1,303
Excess cost over net assets of
business acquired, net 24,396 24,717
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Total assets $130,296 $107,810
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 27,273 $ 17,535
Current portion of long-term debt 3,730 2,863
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Total current liabilities 31,003 20,398
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Long-term debt 56,561 45,746
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Other long-term liabilities 3,867 4,268
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Stockholders' equity:
Preferred stock, par value $.001 per share,
authorized 5,000,000: Series B Cumulative Convertible,
authorized 2,400,000; issued 2,368,329 at September 30, 1995
and 2,288,878 at December 31, 1994 (Aggregate
liquidations preference $2,368,329 at September 30, 1995
and $2,288,878 at December 31, 1994) 2 2
Common stock, par value $.001 per share, authorized
83,333,333; issued and outstanding 5,968,783 at
September 30, 1995 and 5,903,658 at December 31, 1994 6 6
Additional paid-in capital 92,695 92,635
Accumulated deficit (53,070) (54,650)
Cumulative foreign currency translation adjustment (768) (595)
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Total stockholders' equity 38,865 37,398
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Total liabilities and stockholders' equity $130,296 $107,810
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The accompanying notes are an integral part of these financial statements.
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BUTLER INTERNATIONAL, INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(in thousands except share and per share data)
(Unaudited)
Quarter Quarter
ended ended
September 30, September 30,
1995 1994
---- ----
Net sales $ 108,222 $ 100,234
Cost of sales 92,776 86,387
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Gross margin 15,446 13,847
Depreciation and amortization 682 636
Selling, general and administrative expenses 13,031 11,217
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Income before other income (expense)
and income taxes 1,733 1,994
Other income (expense):
Interest and other 168 97
Interest expense (1,835) (1,120)
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Income before income taxes 66 971
Income taxes (benefits) (17) 199
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Net income $ 83 $ 772
========== ==========
Net income per share:
Primary $ .01 $.13
Assuming full-dilution $ .01 $.12
Average number of common shares and
common stock equivalents outstanding:
Primary 6,354,258 5,648,581
Assuming full-dilution 7,004,219 6,659,243
The accompanying notes are an integral part of these financial statements.
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BUTLER INTERNATIONAL, INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(in thousands except share and per share data)
(Unaudited)
Nine Months Nine Months
ended ended
September 30, September 30,
1995 1994
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Net sales $ 335,030 $ 281,655
Cost of sales 288,458 242,312
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Gross margin 46,572 39,343
Depreciation and amortization 2,004 1,882
Selling, general and administrative expenses 38,056 32,832
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Income before other income (expense)
and income taxes 6,512 4,629
Other income (expense):
Interest and other 442 235
Interest expense (4,832) (2,960)
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Income before income taxes 2,122 1,904
Income taxes 421 417
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Net income $ 1,701 $ 1,487
========== ==========
Net income per share:
Primary $ .25 $ .23
Assuming full-dilution $ .24 $ .23
Average number of common shares and
common stock equivalents outstanding:
Primary 6,281,293 5,579,187
Assuming full-dilution 6,982,273 6,608,237
The accompanying notes are an integral part of these financial statements.
5
BUTLER INTERNATIONAL, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(in thousands)
(Unaudited)
Nine Months Nine Months
ended ended
September 30, September 30,
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,701 $ 1,487
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and excess purchase
price amortization 2,003 1,882
Amortization of deferred financing
and employee stock purchase
plan loans 453 262
Foreign currency translation (173) 89
(Increase) decrease in assets,
increase (decrease) in liabilities:
Accounts receivable (18,043) (13,122)
Other current assets (1,367) (534)
Other assets 187 (710)
Current liabilities 9,796 2,511
Other long-term liabilities (401) (532)
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Net cash used in operating activities (5,844) (8,667)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - net (3,196) (1,875)
Cost of business acquired (419) (322)
Expenses paid in conjunction with
discontinued operations (108) (571)
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Net cash used in investing activities (3,723) (2,768)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under financing
agreements 11,755 10,652
Net proceeds from the issuance of
common stock 106 884
Net payments in conjunction with
headquarters building purchase (73) (800)
Payment of dividends on preferred stock - (50)
Repurchase common stock (126) -
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Net cash provided by financing activities 11,662 10,686
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Net increase (decrease) in cash and
cash equivalents 2,095 (749)
Cash and cash equivalents,
beginning of period 2,285 1,908
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Cash and cash equivalents,
end of period $ 4,380 $ 1,159
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The accompanying notes are an integral part of these financial statements.
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BUTLER INTERNATIONAL, INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(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 condensed consolidated financial statements
have been reclassified in the accompanying consolidated financial statements to
conform with current period presentation.
The accompanying financial statements are unaudited, but, in the opinion of
management, reflect all adjustments, which include normal recurring accruals,
necessary to present fairly the financial position, results of operations and
cash flow at September 30, 1995 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 period ended
December 31, 1994. The results of operations for the three and nine months
ended September 30, 1995 are not necessarily indicative of operating results for
the full year.
NOTE 2 - CREDIT FACILITY:
In May, 1994, certain of the Company's U.S and Canadian operating subsidiaries
entered into a three-year Credit Facility with General Electric Capital
Corporation ("GECC"). This Credit Facility provides the Company with up to
$55.0 million in loans including $6.0 million for letters of credit. The sum of
the aggregate amount of loans outstanding under the Credit Facility plus the
aggregate amount available for letters of credit may not exceed the lessor of
(i) $55.0 million or (ii) an amount equal to 85% of eligible receivables plus
75% of eligible pending receivables (which percentages are subject to adjustment
from time to time by the Company's principal lender - GECC). The interest rate
chargeable to the Company is fixed at the beginning of each month based upon the
30 day commercial paper rate in effect at the close of the last business day of
each month, plus three hundred basis points. The interest rate in effect on
September 30, 1995 was 8.84%, and the average rate since January 1, 1995 was
9.03%. The Company and Butler Service Group - Canada Ltd. have each guaranteed
all obligations incurred or created under the Credit Facility. The Company is
also required to comply with certain affirmative and financial covenants as
amended. The Company is in compliance with the aforementioned covenants.
NOTE 3 - COMMON STOCK:
In the nine months ended September 30, 1995, the Company issued 85,083 shares of
common stock upon the exercise of various stock options and repurchased and
retired 19,958 shares of common stock.
NOTE 4 - PREFERRED STOCK:
On June 30, 1995, approximately $80,000 of dividends in kind were paid to
holders of Series B Preferred Stock.
NOTE 5 - EARNINGS PER SHARE:
Primary earnings per share are determined by dividing net earnings (after
deducting preferred stock dividends) by the weighted average number of common
shares outstanding and common stock equivalents. On a fully-diluted basis, both
earnings and shares outstanding are adjusted to assume the conversion of
convertible preferred stock.
7
NOTE 6 - CONTINGENCIES:
The Company and its subsidiaries are parties to various legal proceedings and
claims incidental to its normal business operations. In June, 1995, the Company
filed a complaint against CIGNA Property and Casualty Insurance Company in the
Court of Common Pleas of Philadelphia County, Pennsylvania alleging negligence,
breach of contract, breach of fiduciary duty, and negligent misrepresentation
arising out of CIGNA's and other defendants' acts and omissions in the
processing, handling and investigation of claims against the Company under
general liability and workmen's compensation insurance contracts. On August 31,
1995, the defendants filed an answer, new matter and counterclaim denying the
Company's allegations, asserting certain affirmative defenses, and alleging that
the Company has failed to pay retrospective premiums amounting to approximately
$7.0 million. In the opinion of management, based on the advice of counsel, all
of the proceedings and claims in which the Company and its subsidiaries are
involved with can ultimately be defended and resolved without a material adverse
effect on the financial position or results of operations of the Company.
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Item 2. Management's Discussion and Analysis of Results of Operations and
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Financial Condition
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RESULTS OF OPERATIONS
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Net sales for the quarter ended September 30, 1995 were $108.2 million compared
to $100.2 million, representing an 8.0% increase over the third quarter of 1994.
Net income was approximately $0.1 million, or $.01 per share, as compared to
$0.8 million, or $.13 per share for the same period in 1994. For the nine
months ended September 30, 1995, net sales of $335.0 million were 19% above the
$281.7 million recorded in the first nine months of 1994. Net income for the
first nine months of 1995 was $1.7 million, or $.25 per share compared to $1.5
million, or $.23 per share for the same period in 1994. Operating cash flow was
$4.2 million for the nine months ended September 30, 1995 as compared to $3.6
million for the same period in 1994. Average common stock and common stock
equivalents outstanding for the first nine months of 1995 increased to 6.3
million in 1995 from 5.6 million in 1994.
Operating profits from the Company's various business groups, before interest,
taxes and corporate expenses were greater than 1994 by $0.5 million and $3.5
million for the third quarter and year-to-date, respectively. Operating profits
for Company were $1.9 million for the quarter compared to $2.1 million for the
same period in 1994. Operating profits for the nine months were $7.0 million, a
$2.1 million increase over 1994. The $2.1 million increase was offset by a $1.9
million increase in interest expense.
Interest expenses were up $0.7 million and $1.9 million for the quarter and
year-to-date, respectively, primarily due to the increased use of the Company's
credit facility to finance working capital requirements. The Company's
relocation of its billing, collection and certain other administrative
operations from Montvale, NJ to Lake St. Louis, MO earlier in the year has
negatively impacted the billing and collection process, resulting in
significantly higher accounts receivable which are financed by the credit
facility.
The Company has taken significant actions to rectify the processing
inefficiencies in the Lake St. Louis operation. Some of these actions include
dedicating a senior financial officer, on site, hiring a new officer to take
direct charge of the day-to-day operations, upgrading current staff personnel,
expanding training, and further dedication of certain personnel from the
operating groups. The Company anticipates interest expense will decrease as the
billing and collection process gets back to normal and the Days Sales
Outstanding returns to a normalized level.
Company-wide selling, general and administrative expenses were up by $1.8
million and $5.2 million over 1994 for the third quarter and year-to-date,
respectively. Major contributors to the increases were expanded field
operations which supported a 19% increase in year-to-date sales and the Lake St.
Louis relocation and operation.
Income taxes consist of federal, state and foreign income taxes.
LIQUIDITY AND CAPITAL RESOURCES
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The Company's primary sources of funds are generated from operations and
borrowings under its Credit Facility. As of September 30, 1995, $49.6 million
was outstanding under the Credit Facility, and an additional $4.3 million was
used to collateralize letters of credit. Proceeds from the Credit Facility were
used by the Company to finance working capital, capital expenditures and other
business related expenses.
In May, 1994, certain of the Company's U.S and Canadian operating subsidiaries
entered into a three-year Credit Facility with General Electric Capital
Corporation ("GECC"). This Credit Facility provides the Company with up to
$55.0 million in loans including $6.0 million for letters of credit. The sum of
the aggregate amount of loans outstanding under the Credit Facility plus the
aggregate amount available for letters of credit may not exceed the lessor of
(i) $55.0 million or (ii) an amount equal to 85% of eligible receivables plus
75% of eligible pending receivables (which percentages are subject to adjustment
from time to time by the Company's principal lender - GECC). The interest rate
chargeable to the Company is fixed at the beginning of each month based upon the
30 day commercial paper rate in effect at the close of the last business day of
each month, plus three hundred basis points. The interest rate in effect on
September 30, 1995 was 8.84%, and the average rate since January 1, 1995 was
9.03%. The Company and Butler Service Group - Canada Ltd. have each guaranteed
all obligations incurred or created under the Credit Facility. The Company is
also required to comply with certain affirmative and financial covenants as
amended. The Company is in compliance with the aforementioned covenants.
9
Discussions are currently underway with GECC and other potential lenders to
address the Company's financial needs for the short and medium term.
Cash and cash equivalents increased by $2.1 million in the nine months of 1995.
Principal sources of cash inflows consisted of: borrowings under the Credit
Facility of $10.6 million, borrowings under short-term financing agreements of
$1.1 million and net income before depreciation and amortization of $4.2
million. Cash outflows consisted of: increased working capital requirements of
$10.0 million, capital expenditures of $3.2 million and other expenditures of
$0.6 million.
10
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) Exhibits - 10.42(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
herewith as Exhibit 10.42(c).
10.42(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
herewith as Exhibit 10.42(d).
10.42(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 herewith as Exhibit 10.42(e).
27 Financial Data Schedule
(b) Reports on Form 8-K - None
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUTLER INTERNATIONAL, INC.
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(Registrant)
November 13, 1995 By: /s/ Edward M. Kopko
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Edward M. Kopko,
Chairman and Chief Executive
Officer
November 13, 1995 By: /s/ Warren F. Brecht
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Warren F. Brecht
Vice President, Secretary,
and Treasurer
November 13, 1995 By: /s/ Michael C. Hellriegel
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Michael C. Hellriegel
Vice President and
Controller
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