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, 1998
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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
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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
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Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code: (201) 573-8000
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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(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. [_].
The aggregate market value of the voting stock held by non-affiliates of
the registrant is approximately $126,584,000. Such aggregate market value has
been computed by reference to the $20.50 per share closing sale price of such
stock as of March 8, 1999.
As of March 8, 1999, 6,626,233 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, 1998 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, 1999. Portions of the proxy statement
for the 1999 Annual Meeting of Stockholders are incorporated by reference in
Part III hereof.
PART I
Item 1. Business
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Butler International, Inc. ("the Company"), through its subsidiaries,
provides a wide range of technical and information technology services to
companies worldwide. The Company provides strategic outsourcing, project
management and staff augmentation services on a contractual basis to clients in
a wide variety of industries and service lines, including financial services,
telecommunications, banking, quality assurance, brokerage, computer software,
voice data and video communications, cable TV, entertainment, CAD design,
electronics, energy, consumer products, environmental, aerospace, aircraft, food
processing, marine, petrochemical, pharmaceutical, automotive, fleet services,
trucking, utilities and courier. As of March 5, 1999, the Company had
approximately 5,600 employees, of which approximately 5,000 billable employees
provide services, generally at client facilities, from a network of 45 offices
in the United States and abroad. Through its international operations, the
Company currently provides similar services from offices in the United Kingdom.
In 1998, the Company had net sales of $444 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 and information technology services are utilized by the Company's
clients for: (i) outsourcing services, (ii) project management and (iii) staff
augmentation, as follows:
Outsourcing services involves instances where the Company manages an entire
on-going operation on behalf of a client, thereby reducing the client's cost and
the burden of maintaining that operation. Outsourcing provides clients with an
efficient access to needed expertise. Such services are typically provided by
the Company at facilities established by the Company for that purpose.
2
Project management services involve projects wherein the Company assumes
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 Company-owned facility designed for the
client's specific purpose. The Company frequently obtains the necessary
equipment for a project (if not available from the client) on a lease basis for
the expected term of the project.
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
contributor of the Company's revenues. Staff can be added or removed as needed,
avoiding extra costs of employing specially skilled people during slack times.
Contract technical personnel reduce a client's personnel costs and
administrative burdens.
Charges for the Company's services are billed to clients based on (i) an
hourly rate per contract employee, (ii) an hourly rate plus equipment charges
(and overhead charges, if applicable), or (iii) a fixed price or a fixed unit
price. Fixed price arrangements typically are subject to bid. Staff
augmentation typically is 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 such billing arrangements.
Business Units
The Company's outsourcing services, project management and staff
augmentation services are provided through the following operating segments: (i)
Butler Technology Solutions, (ii) Butler Telecom, (iii) Butler Fleet Services,
(iv) Butler Technical Group. Additional segment information is included in Note
14 in the Company's 1998 Annual Report, which is incorporated herein by
reference.
Butler Technology Solutions provides a complete and broad range of
information technology expertise including, technical staffing, project
management, and technology solutions. To augment its service offerings the
Company recently established practice areas such as Quality Assurance,
Enterprise Networking, Web Solutions and Enterprise Architecture. Butler
Technology Solutions serves all sectors of the information technology industry,
from development through testing and final software quality assurance. Butler
employees provide a broad range of information technology specialists with
expertise in a wide variety of applications, operating systems and platforms.
Butler Telecom provides a full range of installation and test services,
specialty project services and human resource staffing 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 are also provided for both campus and multi-story
telecommunications management. Butler Telecom also provides drafting, design,
printing and graphics services to a wide range of industries.
3
Butler Fleet Services provides customized fleet operation services to major
ground fleet-holders nationwide ranging from vehicle maintenance and repair to
total fleet management solutions. Butler Fleet provides services including:
preventive maintenance, mobile maintenance repair and service, scheduling
service 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 technicians. Industries served through this division include
telecommunications, utilities, municipalities, courier, and trucking. Recently,
Butler introduced its Technicians on Demand service, a program which offers
highly qualified technicians to all types of businesses nationwide, regardless
of project scope or length.
Butler Technical Group provides skilled technical and engineering
personnel, project management, and total outsourcing solutions to companies
worldwide and to industries ranging from aerospace to pharmaceuticals to energy
and electronics. It also 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. In 1998,
the Company combined its Project Engineering Services, Contract Technical
Services and Butler Service Group, UK Ltd. Operations to form Butler Technical
Group.
International Operations
The Company's international operations ("International Operations") are
directed from offices in the United Kingdom. Currently, approximately 4.5% of
the Company's personnel are employed in its International Operations.
International Operations accounted for approximately 3.6% of the Company's net
sales in 1998, principally from 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. This
has led to the evolution of customized product and service offerings. An
integral part of customization is having the capability to quickly respond to
individual opportunities and to quickly introduce products into the market.
Companies are analyzing the most cost-effective and efficient methods for
handling each function or activity within their businesses. Many have realized
the benefits of outsourcing with a dedicated provider, such as Butler.
The search for strategic business partners has created a transition in the
technical services industry - from providing narrowly defined temporary help to
supplying technical and professional services and business solutions. Butler has
recognized this transformation and has proactively sought to meet the needs of
emerging markets with project management and human resource based solutions.
From product development to process improvements, Butler is committed to
creating value 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.
4
As the market continues to change, management believes the Company will
remain an industry leader by merging people and technology to deliver value.
Through learning policies and initiatives, Internet/intranet capabilities, and
quality programs (including customer satisfaction and value gap assessment
programs) Butler seeks to continually improve its services. Management believes
that the Company's recent marketing successes in the Technology Solutions 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 BRASS,
its proprietary computerized recruiting system and Internet capabilities
(described below, see "Employees"), and (iv) its ability to successfully bid on
projects and differentiate itself from the competition. In addition, management
works 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. A
personalized approach to understanding and meeting client needs enables the
Company to respond to clients' expectations, as well as to particular job
requirements.
As leading corporations around the world move toward doing business with a
reduced number of "preferred suppliers", they tend to form long-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 ten (10) 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 business units. Management believes that its
commitment to quality will enhance Butler's standing as a provider of quality
technical services throughout the world.
In 1998, Butler received three prestigious awards signifying the Company's
dedication to quality and customer satisfaction. Butler was the winner of the
New Jersey Technology Council (NJTC) award for Customer Service Company of the
Year. The Company's website was ranked as one of the Top 100 websites by the
Internet Business Network (IBN), out of more than 15,000 reviewed sites. Butler
was also recognized as one of the top 5 third party recruiting sites for
excellence in the electronic recruiting industry, signifying that the Company's
job board is among the best in its category. The Company was named as one of the
Top 3 companies worldwide in exceeding customer expectations by the Arthur
Andersen International Best Practices AwardsSM. Butler was the winner in the
same category for the Metro New York Area.
Butler's vision is to be the Number One Client-Rated Company in its
industry. The company's future marketing plans include a strong proactive
branding effort to let the marketplace know Butler is striving to be the best,
gaining recognition as the best and fueling its quest with strong core values
that will not change.
Business Expansion and Acquisitions
In recent years, the Company completed several acquisitions in its
Technology Solutions and Telecommunications businesses. The Company believes
acquisitions in the information technology and telecommunication services
5
markets will increase its overall margins and add to the Company's future growth
in terms of sales and profits.
The Company is currently deploying a focused growth strategy. In 1997 an
agreement was reached with GE Capital Corporation to provide a $15 million
credit facility dedicated to financing the Company's acquisition program. This
acquisition line of credit was increased to $35 million in 1998. This four year
facility provides additional resources to selectively expand and broaden the
Company's higher margin Technology Solutions and Telecommunication Services
businesses.
On March 3, 1998, the Company acquired the operations of Argos Adriatic
Corporation ("Argos"), a Silicon Valley information technology ("IT") company
headquartered in Fremont, CA. The purchase price includes $5.1 million paid in
cash ($4.1 million charged against the Company's acquisition line and $1.0
million against the revolving credit facility), plus a contingent payout to be
paid over three years based on the future earnings of Argos in excess of certain
annual thresholds. Argos provides a variety of IT support services to a wide
range of clients in Northern California, and generates approximately $10 million
in annual revenues with a staff of approximately 90 full-time employees.
On April 1, 1998, the Company acquired the operations of Norwood Computer
Services, Inc. ("Norwood") an IT services company headquartered in Hicksville,
NY. The purchase price includes $8.4 million paid in cash ($6.7 million drawn
down on the acquisition line and $1.7 charged to the revolving credit facility),
plus a contingent payout of $1.3 million that was paid in March 1999. Norwood
has been serving a wide range of mid-sized and Fortune 500 companies in the New
York metropolitan area since 1978 and generates approximately $17 million in
annual revenues through a staff of approximately 120 consultants.
On June 2, 1998, the Company's Telecommunication Services operation
acquired WCC Telephone Services, Inc. ("WCC") a California based
telecommunications services company. WCC specializes in central office services
for customers such as Pacific Bell and Northern Telecom. It generates annual
sales of approximately $2 million. This business has been merged with the
existing Butler Telecom business in Southern California. The purchase price
includes $1.9 million paid in cash ($1.5 million drawn down on the acquisition
line and $0.4 million charged to the revolving credit facility), plus a
contingent payout based on the earnings of WCC for the next year.
Also, on June 2, 1998, the Company's Technology Solutions operation
acquired certain assets of the Reston, VA branch operations of Automated
Concepts, Inc. This business generates annual sales of approximately $3
million. Employees and consultants of this operation have been merged with the
existing Butler office in McLean, VA. The purchase price was $550,000 of which
$440,000 was drawn down on the acquisition line and $110,000 was charged to the
revolving credit facility plus a contingent payout based on earnings for one
year.
On July 1, 1998, the Company acquired Data Performance, Inc. ("DPI") a
Chicago area IT services business. The purchase price was $10.3 million ($8.2
charged to the acquisition line and $2.1 charged against the revolving credit
facility). DPI has provided a variety of IT support services to a wide range of
customers in the Chicago marketplace for the past eleven years. Its offerings
include contract programming, software consulting, IT staffing and
6
Year 2000 project work. DPI currently generates approximately $10 million in
annual revenues through its staff of 80 consultants.
On August 5, 1998, the Company completed the acquisition of ISL
International, Inc. ("ISL"), an IT services company headquartered in Iselin, NJ.
The purchase price includes $7.4 million paid in cash ($5.9 charged was drawn
down on acquisition line and $1.5 charged to the revolving credit facility),
plus a multi-year contingent payout based on the future earnings of ISL. ISL
has provided services to a wide range of companies in the metropolitan New York
area since 1978. It generates approximately $20 million in annual revenues
through a staff of approximately 150 consultants.
In connection with these 1998 acquisitions, the Company acquired
substantially all of the operating assets and assumed certain liabilities of the
acquired businesses. The transactions were recorded using the purchase method
of accounting. Excess cost over net assets of businesses acquired has been
recorded as goodwill and is being amortized over forty years.
The Company continues to review potential acquisition candidates in the
information technology and telecommunications service industries. There are no
acquisition transactions currently pending.
Clients
The Company provides its services to over 1,600 clients. In 1998, Boeing
accounted for approximately 11.7% of the Company's net sales. No other clients
individually represented 10% of the Company's net sales in 1998. A substantial
amount of the Company's 1998 net sales were derived from U.S. companies included
in the "Fortune 500" companies list.
Employees
The Company currently has approximately 5,600 employees in the United
States and abroad, and believes that its relationship with its employees is
positive. Approximately 10% 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 serve
client needs quickly, efficiently and at competitive costs. The Company's number
one priority is to exceed its customers' expectations by providing superior
customer value. By empowering their employees through innovative training
initiatives, the Company continuously improves the services it provides to its
customers. Included in the Company's training initiatives are Butler On-Line
Learning, video, and seminar training. Through such training opportunities,
employees are able to update their skills as soon as new products reach the
market, giving both the employees and the Company an advantage over the
competition.
Butler On-Line Learning offers over 150 training titles available via the
Company's Internet/intranet site. Self-paced, interactive training experiences
from the desktop allow employees to develop the skills necessary to work with
today's most desired technologies. Video and seminar training opportunities
enable employees to enhance their knowledge in many technical and management
topics. Guided by its Corporate Learning Policy, the Company provides personal
learning programs with measurable objectives for each staff employee.
7
The Company's Internet strategy is an example of how the Company uses
technology to enhance communication and the sharing of knowledge. Staff
employees have Internet access at their desktops. Through Butler's web site,
technical/professional employees participate in chatrooms to discuss jobs,
training, compensation and other important topics with their peers.
The Company's services are provided by technical/professional employees who
are hired by the Company and assigned to work on a full-time basis for a
specific client project. The duration of the assignment depends on the demand
for the skills individual employees possess, and averages approximately five to
eight months. Technical/professional fall into three categories (1) salaried
employees, (2) contracted employees, and (3) independents. Salaried employees
continue to work for Butler after an assignment ends, usually starting their
next assignment immediately, but sometimes working on internal projects while
"on the bench." Contracted and independent employees are terminated if a new
assignment is not identified. However, Butler has many initiatives and programs
in place to secure reassignment of technical/professional employees.
Management believes that technical personnel are attracted to this type of
project employment because it provides varied opportunities to work on high-end
technological advancements with industry leaders and offers diversity as to the
geographic location and type of industry assigned. Company 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.
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. In addition, the Company will
proactively increase the pool of qualified people through training,
communication via the Internet, and aggressive recruiting efforts.
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 BRASS, 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. In 1998, BRASS was recognized by the Internet Business Network for
its recruiting capabilities. 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 result in lower costs and productivity gains in the entire sales and
recruiting process.
8
Competition
The Company's 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 with the ability to serve a broad range of client needs.
Some national and international companies are larger than the Company or
are associated with companies that have greater financial, technical, or other
resources than the Company. Management believes, however, that the Company's
ability to efficiently handle 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. Rather than aspiring to be the
biggest, the Company is clearly focused on being the number one client-rated
company in the industry.
Item 2. Properties
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The Company owns its corporate office facility located at 110 Summit
Avenue, Montvale, New Jersey, 07645.
At March 5, 1999, Butler maintained office space at the following locations
for predominantly sales, recruiting and administrative functions:
UNITED STATES
Albuquerque, NM Hicksville, NY Raleigh, NC
Aurora, IL Huntington Beach, CA Redmond, WA
Austin, TX Indianapolis, IN Riverside, CA
Baltimore, MD Irving, TX Rochester, NY
Burlington, MA Iselin, NJ Rolling Meadows, IL
Center Line, MI King of Prussia, PA Saginaw, MI
Chillicothe, IL Lake St. Louis, MO San Jose, CA
Cincinnati, OH Maryland Heights, MO Schaumburg, IL
Encino, CA McLean, VA Shelton, CT
Euclid, OH New York, NY St. Louis, MO
Fairport, NY Norcross, GA Tempe, AZ
Fort Wayne, IN Ontario, CA Twinsburg, OH
Fremont, CA Park Ridge, IL
Gaylord, MI Pleasanton, CA
INTERNATIONAL
Portsmouth, 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.
9
The Company makes modest investments in leasehold improvements, equipment and
other tangible property, principally computer equipment, as required.
Item 3. Legal Proceedings
-----------------
In 1995, the Company filed a complaint against CIGNA Property and Casualty
Insurance Company regarding 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. In 1997, the
Company entered into an agreement with CIGNA which, in the absence of a
settlement, would result in the respective parties undertaking binding
arbitration in late 1998. In accordance with the terms of the agreement the
Company paid $2.1 million to CIGNA. In August 1998, the Company exercised its
option to settle the remaining disputed amounts with CIGNA for $1.5 million plus
interest of $255,000. This settlement had no impact on current year operating
results.
The Company and its subsidiaries are parties to various legal proceedings
and claims incidental to its normal business operations for which no material
liability is expected beyond which is recorded. While the ultimate resolution
of the above matters is not known, management does not expect that the
resolution of such matters will have a material adverse effect on the Company's
financial statements and results of operations.
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
------------------------------------------------------------------
Matters
-------
Information regarding the market for the Company's common stock and related
stockholder matters is on page 40 of the Company's 1998 Annual Report, which
information is incorporated herein by reference.
Item 6. Selected Financial Data
-----------------------
Selected financial data is included on page 39 of the Company's 1998 Annual
Report, which is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Results of Operations and
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Financial Condition
-------------------
Management's discussion and analysis of results of operations and financial
condition is included on pages 14-19 of the Company's 1998 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 1998 Annual Report:
Consolidated Balance Sheets at December 31, 1998 and
December 31, 1997 PAGE 20
10
Consolidated Statements of Operations for the years
ended December 31, 1998, December 31, 1997, and
December 31, 1996 PAGE 21
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, December 31, 1997, and
December 31, 1996 PAGE 22
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1998, December 31, 1997,
and December 31, 1996 PAGE 23
Notes to Consolidated Financial Statements PAGES 24-37
Independent Auditors' Report PAGE 38
Other supporting schedules are submitted in a separate section of this
report following Item 14.
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, 1999, 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
----------------------------------------------------------------
(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, 1998.
11
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 24, 1999 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 24, 1999
- ------------------ Directors and CEO
Edward M. Kopko (Principal Executive Officer)
/s/Michael C. Hellriegel Senior Vice President March 24, 1999
- ------------------------ and Chief Financial Officer
Michael C. Hellriegel
/s/John F. Hegarty Director March 24, 1999
- ------------------
John F. Hegarty
/s/Frederick H. Kopko, Jr. Director March 24, 1999
- --------------------------
Frederick H. Kopko, Jr.
/s/Hugh G. McBreen Director March 24, 1999
- ------------------
Hugh G. McBreen
/s/Nikhil S. Nagaswami Director March 24, 1999
- ----------------------
Nikhil S. Nagaswami
12
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, 1998 and December 31, 1997, and for each of the three
years in the period ended December 31, 1998, and have issued our report thereon
dated February 26, 1999; such financial statements and report are included in
your 1998 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
February 26, 1999
13
Schedule I
- ----------
BUTLER INTERNATIONAL, INC. - PARENT
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(in thousands)
December 31,
------------------
1998 1997
-------- --------
ASSETS
- ------
Total current assets $ 5,820 $ 3,937
Investment in and receivable from subsidiaries 56,710 43,832
Other assets 116 112
------- --------
Total assets $62,646 $ 47,881
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable and accrued liabilities $ 4,287 $ 632
Current portion of long-term debt 127 127
-------- --------
Total current liabilities 4,414 759
-------- --------
Long-term liabilities 3,033 2,033
-------- --------
Stockholders' equity:
Preferred stock 3 3
Common stock 7 6
Foreign exchange translation (133) (64)
Additional paid-in capital 95,244 94,710
Accumulated deficit (39,922) (49,566)
-------- --------
Total stockholders' equity 55,199 45,089
-------- --------
Total liabilities and
stockholders' equity $ 62,646 $ 47,881
======== ========
The accompanying notes are an integral part of these financial statements.
14
Schedule I (continued)
- -----------------------
BUTLER INTERNATIONAL, INC. - PARENT
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
(in thousands)
Year ended December 31,
--------------------------
1998 1997 1996
------- ------- -------
Revenues
Interest income (includes intercompany
interest of $160, $118 and $1,181) $ 172 $ 167 $1,200
------- ------- ------
Expenses
Administrative and operating expenses 456 721 630
Interest expense 13 11 12
------- ------- ------
469 732 642
------- ------- ------
Equity in income of subsidiaries 12,946 7,573 4,363
------- ------- ------
Income from operations before income taxes 12,649 7,008 4,921
Income taxes (benefit) 2,805 (1,725) 130
------- ------- ------
Net income $ 9,844 $ 8,733 $4,791
======= ======= ======
The accompanying notes are an integral part of these financial statements.
15
Schedule I (continued)
- ----------------------
BUTLER INTERNATIONAL, INC. - PARENT
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Year ended December 31,
----------------------------
1998 1997 1996
-------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,844 $ 8,733 $ 4,791
Adjustments to reconcile net income
to net cash (used in) provided
by operating activities:
Depreciation and amortization 1 2 9
Gains of subsidiaries (12,946) (7,573) (4,363)
(Increase) decrease in assets, increase
(decrease) in liabilities:
Other current assets (1,883) (3,859) 41
Accounts payable and accrued liabilities 3,654 (7) 107
Long-term liabilities 1,000 1,900 -
-------- ------- -------
Net cash (used in) provided by
operating activities (330) (804) 585
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in note receivable from Butler
Service Group, Inc. - - (1,181)
Capital expenditures - net - (4) -
Other (5) (42) -
-------- ------- -------
Net cash used in investing activities (5) (46) (1,181)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the exercise of common
stock options and warrants 335 831 547
Net payments of note payable - 19 47
-------- ------- -------
Net cash provided by financing activities 335 850 594
-------- ------- -------
Net decrease in cash - - (2)
Cash at beginning of year - - 2
-------- ------- -------
Cash at end of year $ - $ - $ -
======== ======= =======
The accompanying notes are an integral part of these financial statements.
16
Schedule I (continued)
- ----------------------
BUTLER INTERNATIONAL, INC. PARENT
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT AT DECEMBER 31, 1998
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 1998 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 4 of the Company's consolidated financial
statements in its 1998 Annual Report).
17
Schedule II
- -----------
BUTLER INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
Additions
-----------------------------------
Balance at Charged to Charged to Balance at
beginning costs and other end of
Description of period expenses accounts Deductions period
- --------------------------------------------------------------------------
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
1997
--------------
Allowance for
uncollectible
accounts
receivable $1,455,000 $1,004,000 - $ 994,000 $1,465,000
Reserve for
discontinued
operations $ 136,000 - - $ 89,000 $ 47,000
1998
--------------
Allowance for
uncollectible
accounts
receivable $1,465,000 $2,058,000 - $ 214,000 $3,309,000
Reserve for
discontinued
operations $ 47,000 - - $ 47,000 -
18
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 as Exhibit 3.2 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "1997 10-K"), and hereby incorporated by
reference.
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* 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.
10.4* 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.
10.5* 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.
10.6* 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.
*Denotes compensatory plan, compensation arrangement, or management
contract.
E-1
Exhibit No. Description
- ----------- -----------
10.7* 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.
10.8* 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.
10.9* 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.
10.10* Form of Plan Promissory Note, dated September 19, 1990, each
executed 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.
10.11* 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.
10.12* 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.
10.13* 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 10.40 to the 1990 10-K, and hereby incorporated by
reference.
10.14* 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.
10.15* 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.
10.16* 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.
10.17* Form of Pledge Agreement, dated January 16, 1991, between North
American Ventures, Inc. and each of the Outside Directors, filed
as Exhibit No. 10.44 to the 1990 10-K, and hereby incorporated by
reference.
10.18* 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.
*Denotes compensatory plan, compensation arrangement, or management
contract.
E-2
Exhibit No. Description
- ----------- -----------
10.19* 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.
10.20* 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.
10.21* 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.
10.22* 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.
10.23* 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.
10.24* 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.
10.25* 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.
10.26* 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.
10.27* 1992 Stock Option Plan, filed as Exhibit 10.40 to the 1992 10-K,
and hereby incorporated by reference.
10.28* 1992 Incentive Stock Option Plan, filed as Exhibit 10.41 to the
1992 10-K, and hereby incorporated by reference.
10.29* 1992 Stock Bonus Plan, filed as Exhibit No. 10.42 to the 1992
10-K, and hereby incorporated by reference.
10.30* 1992 Stock Option Plan for Non-Employee Directors, filed as
Exhibit 10.43 to the 1992 10-K, and hereby incorporated by
reference.
10.31* 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.
*Denotes compensatory plan, compensation arrangement, or management
contract.
E-3
Exhibit No. Description
- ----------- -----------
10.32* 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.
10.33* 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.
10.34* 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.
10.35* 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.
10.36 Amended and Restated Credit Agreement, dated November 7, 1997,
between Butler Service Group, Inc. and General Electric Capital
Corporation, filed as Exhibit 10.38 to the 1997 10-K, and hereby
incorporated by reference.
10.37(a) First Amendment Agreement, dated as of June 26, 1998 among Butler
Service Group, Inc., Butler International, Inc. and General
Electric Capital Corporation, filed herewith as Exhibit 10.37(a).
10.37(b) Second Amendment Agreement, dated as of August 31, 1998, among
Butler Service Group, Inc., Butler International, Inc. and
General Electric Capital Corporation, filed herewith as Exhibit
10.37(b).
10.38 Credit Agreement, dated November 12, 1997, between Butler of New
Jersey Realty Corp. and Fleet Bank, National Association, filed
as Exhibit 10.39 to the 1997 10-K, and hereby incorporated by
reference.
10.39 Asset Purchase Agreement, dated August 11, 1997, between Butler
Telecom, Inc. and Jack W. Shoemaker, filed as Exhibit 10.40 to
the 1997 10-K, and hereby incorporated by reference.
10.40* Form of Promissory Note dated January 28, 1998 in the original
amount of $168,278.74 executed by Hugh G. McBreen and made
payable to the order of Butler International, Inc., filed
herewith as Exhibit 10.40.
10.41* Form Pledge Agreement dated January 28, 1998 between Butler
International, Inc. and Hugh G. McBreen, filed herewith as
Exhibit 10.41.
10.42 Asset Purchase Agreement, dated February 28, 1998 by and between
Butler Telecom, Inc., Argos Adriatic Corporation, Shashi Mahendru
and Vinod Wadhawan, filed as Exhibit 10.41 to the 1997 10-K, and
hereby incorporated by reference.
10.43 Asset Purchase Agreement, dated March 17, 1998, by and between
Butler Telecom, Inc., Norwood Computer Services Inc., Vassilis
Chaimanis and Henry Piscitelli, filed as Exhibit 10.42 to the
1997 10-K, and hereby incorporated by reference.
*Denotes compensatory plan, compensation arrangement, or management
contract.
E-4
Exhibit No. Description
- ----------- -----------
10.44 Stock Purchase Agreement, dated May 29, 1998, by and among Butler
Telecom, Inc., Tom Cannon, Ted Connolly, Marianne A. Adams, and
Jacqueline Anne Hirst, filed as Exhibit 10.43 to Form 10-Q for
the period ended June 30, 1998, and hereby incorporated by
reference.
10.45 Acquisition Agreement, dated May 27, 1998, between Butler
Telecom, Inc. and Automated Concepts, Inc. filed as Exhibit 10.44
to Form 10-Q for the period ended June 30, 1998, and hereby
incorporated by reference.
10.46 Stock Purchase Agreement, dated June 30, 1998, by and among
Butler Telecom, Inc., Prem Advani, Sharon K. Advani, and Prem
Advani 1997 Charitable Remainder Trust filed as Exhibit 10.45 to
Form 10-Q for the period ended June 30, 1998 and hereby
incorporated by reference.
10.47 Asset Purchase Agreement, dated July 26, 1998, by and between
Butler Telecom, Inc., ISL International, Inc. and Meryvn Haft,
filed as Exhibit 10.46 to Form 10-Q for the period ended June 30,
1998, and hereby incorporated by reference.
10.48* Form of Promissory Note dated October 13, 1998 in the original
amount of $181,000 executed by Frederick H. Kopko, Jr. and made
payable to Butler International, Inc., filed herewith as Exhibit
10.48.
10.49* Form Pledge Agreement dated October 13, 1998 between Butler
International, Inc. and Frederick H. Kopko, Jr., filed herewith
as Exhibit 10.49.
13.1 1998 Annual Report to Stockholders, Financial Section (pages 14-
40), filed herewith as Exhibit 13.1.
22.1 List of Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule.
*Denotes compensatory plan, compensation arrangement, or management
contract.
E-5