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 MARCH 31, 1997
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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 April 23, 1997, 6,156,168 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 - March 31, 1997 (Unaudited) and December 31,
1996
(B) Consolidated Statements of Operations (Unaudited) - quarter ended March
31, 1997 and quarter ended March 31, 1996
(C) Consolidated Statements of Cash Flows (Unaudited) - quarter ended March
31, 1997 and quarter ended March 31, 1996
(D) Notes to Consolidated Financial Statements (Unaudited)
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BUTLER INTERNATIONAL, INC.
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CONSOLIDATED BALANCE SHEETS
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(in thousands except share data)
March 31, December 31,
1997 1996
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(Unaudited)
ASSETS
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Current assets:
Cash $ 906 $ 229
Accounts receivable, net 61,948 56,271
Inventories 2,374 2,292
Other current assets 2,208 2,160
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Total current assets 67,436 60,952
Property and equipment, net 12,934 13,347
Other assets and deferred charges 1,181 1,138
Excess cost over net assets of
businesses acquired, net 23,650 23,743
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Total assets $105,201 $99,180
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Accounts payable and accrued liabilities $ 32,019 $21,145
Current portion of long-term debt 7,441 7,766
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Total current liabilities 39,460 28,911
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Long-term debt 28,940 31,342
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Other long-term liabilities 434 3,348
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Stockholders' equity:
Preferred stock, par value $.001 per
share, authorized 5,000,000: Series B
Cumulative Convertible, authorized
3,500,000; issued 2,627,025 at March 31,
1997 and at December 31, 1996 (Aggregate
liquidation preference $2,627,025 at
March 31, 1997 and at December 31, 1996) 3 3
Common stock, par value $.001 per share,
authorized 83,333,333; issued and
outstanding 6,156,168 at March 31, 1997
and 6,144,168 at December 31, 1996 6 6
Additional paid-in capital 93,756 93,673
Accumulated deficit (57,316) (58,112)
Cumulative foreign currency translation
adjustment (82) 9
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Total stockholders' equity 36,367 35,579
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Total liabilities and stockholders' equity $ 105,201 $ 99,180
========= ========
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 per share data)
(Unaudited)
Quarter Ended March 31,
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1997 1996
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Net sales $ 104,697 $ 100,671
Cost of sales 89,113 86,783
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Gross margin 15,584 13,888
Depreciation and amortization 671 816
Selling, general and administrative expenses 12,715 11,219
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Operating income 2,198 1,853
Other income (expense):
Interest and other income (52) 192
Interest expense (1,201) (1,438)
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Income before income taxes 945 607
Income taxes 104 95
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Net income $ 841 $ 512
========= =========
Net income per share:
Primary $ .12 $ .08
Assuming full-dilution $ .11 $ .07
Average number of common shares and dilutive
common share equivalents outstanding:
Primary 6,695 6,170
Assuming full-dilution 7,427 6,922
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 CASH FLOWS
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(in thousands)
(Unaudited)
Quarter Ended March 31,
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1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 841 $ 512
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and excess purchase
price amortization 671 816
Amortization of deferred financing 71 175
Foreign currency translation (91) (24)
(Increase) decrease in assets,
increase (decrease) in liabilities:
Accounts receivable (5,677) (2,920)
Other current assets (130) (199)
Other assets (114) (227)
Current liabilities 10,873 3,212
Other long-term liabilities (2,914) 38
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Net cash provided by operating activities 3,530 1,383
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - net 20 (191)
Cost of businesses acquired (185) (119)
Expenses paid in conjunction with
discontinued operations (44) (10)
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Net cash used in investing activities (209) (320)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under financing
agreements (2,728) (916)
Net proceeds from the issuance of
common stock 84 215
Payments on headquarters building debt -- (22)
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Net cash used in financing activities (2,644) (723)
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Net increase in cash 677 340
Cash at beginning of period 229 1,097
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Cash at end of period $ 906 $ 1,437
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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 consolidated financial statements have been
reclassified in the accompanying consolidated financial statements to conform
with current period presentation.
The accompanying financial statements are unaudited, but, in the opinion of
management, reflect all adjustments, which include normal recurring accruals,
necessary to present fairly the financial position, results of operations and
cash flows at March 31, 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. The results of operations for the quarter ended March 31,
1997 are not necessarily indicative of operating results for the full year.
NOTE 2 - CREDIT FACILITY:
Effective September 30, 1996, the Company extended its Credit Facility with
General Electric Capital Corporation ("GECC") to July 1, 1998. The Credit
Facility, as amended, provides the Company with up to $50.0 million in loans,
including $9.0 million for letters of credit. The interest rate chargeable to
the Company in the first quarter 1997 was 250 basis points above the 30 day
commercial paper rate. The interest rate has since been reduced to 240 basis
point above the commercial paper rate. Additional interest reductions are
available based upon the Company achieving certain financial results. The
interest rate in effect on March 31, 1997 was 7.9%, and the average rate since
January 1, 1997 was 8.1%. The Company has guaranteed all obligations incurred or
created under the Credit Facility. The Company is required to comply with
certain affirmative and financial covenants. The Company is in compliance with
the aforementioned covenants as amended.
NOTE 3 - COMMON STOCK:
During the first quarter of 1997, the Company issued 12,000 shares of common
stock upon the exercise of common stock options.
NOTE 4 - EARNINGS PER SHARE:
Primary earnings per share are determined by dividing net income (after
deducting preferred stock dividends) 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 computed under the provisions of SFAS 128
for the quarter ended March 31, 1997 are $.13 basic earnings per share and $.11
diluted
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earnings per share. Pro forma basic and diluted earnings per share are the same
as previously reported for the quarter ended March 31, 1996 which were $.08 and
$.07, respectively.
NOTE 5 - CONTINGENCIES:
The Company and its subsidiaries are parties to various legal proceedings and
claims incidental to its normal business operations for which material
liability, beyond that which is recorded, is remote except for the following
matter. In 1995, the Company filed a complaint against CIGNA Property and
Casualty Insurance Company alleging negligence, breach of contract, breach of
fiduciary duty, and negligent misrepresentation arising out of CIGNA's and other
defendants' acts and omissions in the processing, handling and investigation of
claims against the Company under general liability and workmen's compensation
insurance contracts. The defendants filed an answer, new matter and counterclaim
denying the Company's allegations, asserting certain affirmative defenses, and
alleging that the Company has failed to pay retrospective premiums amounting to
approximately $7.6 million. On April 18, 1997, CIGNA drew down on three letters
of credit, posted by the Company, in the aggregate amount of $2.9 million. There
was no impact on current operating results. These letters of credit had been
posted as collateral for estimated retrospective premiums.
NOTE 6 - MORTGAGE NOTE:
Effective November 7, 1996, the Company entered into an agreement to extend the
$6.75 million mortgage note on its corporate headquarters facility through April
30, 1998. The terms of the agreement include an interest rate of 10%, down from
10 7/8%, and an amortization schedule of 15 years. The Company is currently
pursuing long-term refinancing of the mortgage.
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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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The first quarter of 1997 net income increased by 64% to $841,000, or $.12 per
share, up from the $512,000, or $.08 per share, reported in the first quarter of
1996. Revenues for the period increased by 4% to $104.7 million, compared with
$100.7 million recorded in the first quarter of 1996.
The increased profitability was principally due to increased margins and reduced
interest expense. Gross margins for the quarter were 14.9%, up from 13.8%
recorded in the prior year's first quarter, reflecting the Company's continuing
improvement in business mix. Interest expense was lower primarily due to reduced
borrowings and lower interest rates.
Driving the improved results was continued growth in the Company's higher margin
businesses which include Technology Solutions and Telecommunication Services.
These groups enjoyed a 14% sales growth as well as an operating income
improvement of 32%. Sales from domestic operations increased by 10%, while
international operations declined due to the previously announced sale of
certain of the Company's United Kingdom operations in 1996.
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 March 31, 1997, $28.9 million was
outstanding under the Credit Facility, and an additional $8.4 million was used
to collateralize letters of credit. Proceeds from the Credit Facility are used
by the Company to finance its internal business growth, working capital and
capital expenditures.
Improved controls over the Company's investment in its accounts receivable
continue to yield results as reflected in the decrease in the borrowings under
its Credit Facility to $28.9 million at March 31, 1997, down from $38.6 million
at March 31, 1996.
During the first quarter of 1997, the Company received net proceeds of $84,000
from the exercise of 12,000 common stock options.
Effective September 30, 1996, the Company extended its Credit Facility with
General Electric Capital Corporation ("GECC") to July 1, 1998. The Credit
Facility, as amended, provides the Company with up to $50.0 million in loans,
including $9.0 million for letters of credit. The interest rate chargeable to
the Company is 250, since reduced to 240, basis points above the 30 day
commercial paper rate. Interest reductions are available based upon the Company
achieving certain financial results. The interest rate in effect on March 31,
1997 was 7.9%, and the average rate since January 1, 1997 was 8.1%. 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.
Effective November 1996, the Company entered into an agreement to extend the
$6.75 million mortgage note on its corporate headquarters facility through April
30, 1998. The terms of the extension include an interest rate of 10%, down from
10 7/8%, an amortization schedule of 15 years and a 1% extension fee. The
Company is currently pursuing long term refinancing of the mortgage. The
mortgage balance is reflected in the current portion of long-term debt.
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RECENT ACCOUNTING PRONOUNCEMENT
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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 computed under the provisions of SFAS 128
for the quarter ended March 31, 1997 are $.13 basic earnings per share and $.11
diluted earnings per share. Pro forma basic and diluted earnings per share are
the same as previously reported for the quarter ended March 31, 1996 which were
$.08 and $.07, respectively.
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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
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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)
May 8, 1997 By: /s/ Edward M. Kopko
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Edward M. Kopko,
Chairman and Chief Executive
Officer
May 8, 1997 By: /s/ Michael C. Hellriegel
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Michael C. Hellriegel
Senior Vice President and Chief
Financial Officer
May 8, 1997 By: /s/ Warren F. Brecht
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Warren F. Brecht
Senior Vice President and
Secretary
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