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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the period ended DECEMBER 31, 1996
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number 0-14951
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BUTLER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Maryland 06-1154321
------------------------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Summit Avenue, Montvale, New Jersey 07645
----------------------------------------------
Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code: (201) 573-8000
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
---------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X. No .
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant is approximately $68,500,661. Such aggregate market value has been
computed by reference to the $11.63 per share closing sale price of such stock
as of March 19, 1997.
As of March 19, 1997, 6,156,168 shares of the registrant's single class of
common stock, par value $.001 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended December 31,
1996 are incorporated by reference in Part II hereof.
A definitive proxy statement pursuant to Regulation 14A will be filed with the
Commission not later than April 30, 1997. Portions of the proxy statement for
the 1997 Annual Meeting of Stockholders are incorporated by reference in Part
III hereof.
PART I
ITEM 1. BUSINESS
--------
Butler International, Inc. ("the Company"), through its subsidiaries, is a
leading provider of technical services and solutions to companies throughout the
world. The Company provides services on a contract basis to clients in a wide
variety of industries, including telecommunications, aerospace, electronics,
defense, energy and machinery & equipment. Contract services are utilized by
the Company's clients for staff augmentation, project management, and strategic
outsourcing of particular programs and functions. As of March 19, 1997, the
Company had more than 6,700 employees, of which 6,200 billable employees provide
these services, generally at client facilities, from a network of over 50
offices in the United States and abroad. Through its international operations,
the Company currently provides similar services from offices in the United
Kingdom. In 1996, the Company had net sales of $409.4 million from its domestic
and foreign operations.
The Company was incorporated in Maryland on November 27, 1985. The principal
executive offices of the Company are located at 110 Summit Avenue, Montvale, New
Jersey 07645, and its telephone number is (201) 573-8000.
DESCRIPTION OF THE BUSINESS
Contract services are utilized by the Company's clients for: (i) staff
augmentation, (ii) project management and (iii) outsourcing services, as
follows:
Staff augmentation services are provided to supplement a client's existing work
force with technical professionals whose skills are tailored to the particular
needs of that business. Staff augmentation is currently the largest part of the
Company's revenues. Staff can be added or removed as needed, avoiding extra
costs of specially-skilled people during slack times. Contract technical
personnel reduce a client's personnel costs and administrative burdens.
2
Project management services are provided through the Company assuming
responsibility for specifically defined projects. Depending upon the nature of
the assignment, the type of equipment required for the task and the particular
needs of the client, project management services may be provided either on-site
at the client's facilities or at a facility designed by the Company for this
purpose. The Company frequently obtains the necessary equipment for the project
(if not available from the client) on a lease basis for the expected term of the
project.
Outsourcing services are provided through the Company managing an entire on-
going operation for or on behalf of a client, thereby reducing the cost and
relieving the client of the burden of maintaining that operation. Outsourcing
frequently involves performance of tasks which are ancillary to, and not a major
part of, the client's normal business. Outsourcing services are provided by the
company at facilities established by the Company for that purpose. In some
cases, however, where client facilities already exist for the performance of
that operation, the Company will staff and manage that operation.
Charges for the Company's services are billed to clients on the basis of an
hourly rate per contract employee, or on the basis of an hourly rate plus
equipment charges (and overhead charges, if applicable), or on a fixed price or
fixed unit price basis. Fixed price arrangements are usually subject to bid.
Staff augmentation is usually billed on an hourly rate per contract employee
supplied, and upon termination of the assignment there is no further cost to the
Company or to the client for the services of the contract employee. Outsourcing
and project management services may be billed on an hourly, per unit, or fixed
price basis, or a combination of these billing arrangements.
BUSINESS AND INDUSTRIES SERVICED
The Company's staff augmentation, project management and outsourcing services
are provided through six principal operations: (i) Butler Contract Technical
Services, (ii) Butler Telecom (iii) Butler Technology Solutions, (iv) Butler
Project Engineering Services, (v) Butler Fleet Services and (vi) Butler Service
Group, UK Ltd.
Butler Contract Technical Services provides contract staffing functions
including skilled technical personnel, managed services and payroll services to
companies worldwide and to industries ranging from aerospace to pharmaceuticals
to energy and electronics.
Butler Telecom provides a full range of human resource staffing and specialty
project services to the voice, data, and video communications industry through a
national network of branch offices. Butler Telecom contract personnel provide
applied engineering services, install, test and maintain central office and
customer premise equipment for voice and data applications, with both standard
coaxial cable and fiber optic capabilities. Such services also provided for
both campus and multi-story telecommunications management. In addition the
central service personnel and project services personnel design, install and
maintain cable television and provide related support services such as
management, clerical, drafting, training, data processing and other specialized
contract personnel services.
Butler Technology Solutions provides staffing-based technical solutions to the
information technology industry including project management, management
consulting, staff augmentation, strategic outsourcing and quality facilitation.
This group serves all sectors of the software and data processing industries,
from development through testing and final software quality assurance. Butler
employees provide a broad range of software, hardware and data processing
specialists with expertise in a wide variety of applications, operating systems
and platforms.
3
Butler Project Engineering Services provides engineering support services
including strategic consulting, project management, drafting and design, and
total outsourcing, while specializing in establishing, managing, and staffing
dedicated engineering support centers carrying out both long-term and short-term
projects. Engineering support services include product and facilities design,
drafting, computer programming, technical writing and illustration.
Butler Fleet Services provides customized fleet operations services to major
ground fleet-holders nationwide, ranging from vehicle maintenance and repair to
total fleet management solutions. Services include: preventative maintenance,
mobile maintenance repair and service, scheduling servicing and inspections,
computerized fleet tracking systems (including inventory control), training,
fluid level checks and total fleet management. Most of these services are
provided by A.S.E. (Automotive Service Excellence) certified mechanics.
Butler Service Group, UK Ltd. provides technical staffing principally in the UK
and throughout Europe.
INTERNATIONAL OPERATIONS
The Company's international operations ("International Operations") are directed
from offices in the United Kingdom. In late 1995, the Company discontinued its
marginal operations in Canada, and exited its Latin American operations due to
economic uncertainties in Mexico and Venezuela. During 1996, the Company exited
its United Kingdom Telecommunications, Utility, Pacific and South African
operations. Currently, approximately 2% of the Company's personnel are employed
in its International Operations. International Operations accounted for
approximately 5.2% of the Company's net sales in 1996, principally from the
United Kingdom. The Company will continue to support its international
clientele in its staffing business in the United Kingdom.
CURRENT MARKETS AND MARKETING PLANS
Management believes that in today's environment of ever increasing competition,
companies are searching for ways to differentiate themselves and go beyond mass
production. This has led to the evolution of customized product and service
offerings. An integral part of customization is having the capability to
respond to individual opportunities and speed products to market. To achieve
this agile business strategy, organizations need to concentrate on defining core
competencies. Companies are analyzing activities in their value chain in terms
of their ability to accomplish it cost effectively and efficiently. They have
realized the benefits to their bottom line of outsourcing functions which can be
better handled by a dedicated provider, such as Butler.
This search for strategic business partners has created a transition in the
technical temporary services industry - from providing narrowly defined
temporary help to supplying services and solutions. Butler has recognized this
transformation and has proactively sought to exploit the emerging markets for
project management and human resource based solutions.
From product development to process improvements, Butler is committed to
creating the solution that is best for its client. By utilizing Butler's
expertise, customers are able to gain a strategic advantage in terms of
knowledge, quality, cost, timing and flexibility.
Management expects to participate in a meaningful manner as these changes
continue to occur in its markets. As a result, management believes that the
Company's recent marketing successes in penetrating the Technology Solutions,
Fleet Services and Telecom Services are the result of: (i) its attention to
client needs and devotion to achieving client satisfaction, (ii) its commitment
to quality, (iii) its ability to quickly locate and assemble the right
person/team through its computerized hiring system (described below, see
"Employees"), and
4
(iv) its ability to successfully bid on projects. In addition, management works
very diligently with clients to define the job/project and to determine: the
client's needs and expectations, skill sets required, education and background
suited for the tasks or projects, proper work environment, location and duration
of the project, special training needs, equipment and tool requirements, and
proper scheduling of personnel and deployment of equipment and materials. This
personalized approach to client needs enables the Company to respond to clients'
expectations, as well as to the particular job requirements.
As leading corporations around the world move toward doing business with a
reduced number of "preferred suppliers", they tend to form longer-term supplier
partnerships with quality providers who are able to respond to a wide range of
needs in the most efficient manner. The Company received its first ISO 9000
certification in 1993 and to date has received a total of nine (9) ISO 9000
certifications covering a number of different locations in the United States and
the United Kingdom. The Company has received at least one ISO 9000
certification in each of its major businesses, and continues to seek additional
ISO 9000 certifications for several other of its facilities. Management
believes that its commitment to quality will enhance Butler's standing as a
provider of quality technical services throughout the world.
BUSINESS EXPANSION AND ACQUISITIONS
In recent years the Company has completed several acquisitions in its Technology
Solutions business. The Company believes that acquisitions in the information
technology services market will increase its overall margins and add to the
Company's future growth in terms of sales and profits.
CLIENTS
The Company provides its services to over 1,600 clients. None of the Company's
clients individually represented 10% or more of the Company's net sales in 1996.
A substantial amount of the Company's 1996 net sales were derived from U.S.
companies included in the "Fortune 500" companies list.
EMPLOYEES
The Company currently has over 6,700 employees in the United States and abroad,
and believes that its relationship with its employees is good. Less than 2% of
the Company's employees are covered by collective bargaining agreements.
Historically, the Company has been able to attract and retain high caliber
employees and utilize them effectively to service client needs quickly,
efficiently and at competitive costs.
The Company's services are provided by employees who are hired by the Company
and assigned to work on a full time basis on a specific project of a client.
The period of assignment depends upon the duration of the need for the skills
possessed by an individual employee, and averages approximately five to eight
months. At the end of an assignment, the employee's employment is terminated
unless the Company is able to reassign the employee to a different client. A
number of employees have worked for Butler intermittently over a period of
years.
Management believes that technical personnel are attracted to this type of
employment by the opportunity to work frequently on "state-of-the-art" projects
and by the geographic and industry diversity of the projects. The Company's
employees are on the Company's payroll and are subject to its administrative
control only during the period that the employee provides services to the
client. The client typically retains technical and supervisory control over the
performance of the employees.
5
Management expects that changing technologies will continue to create demands
for new skills faster than the permanent workforce can respond, resulting in a
shortage of specialized technical skills. At the same time, early retirees and
increased labor force mobility provide a sizable labor pool available to
technical service companies like the Company. As a result, the Company expects
that an adequate supply of qualified people will continue to be available to
recruit and satisfy client needs.
Company recruiters are trained to be skilled at providing a proper match between
the candidate and the client's requirements. Candidates are screened on the
basis of their overall career experience and technical competency. In 1996, the
Company's recruiting system was replaced with a state-of-the-art fulfillment
system that allows for full text searches, on-line reporting, systematic
management of requirements, and shared databases across all divisions.
Identification of personnel to add to the Company's employee candidate base
comes from multiple sources including national and international advertising,
the internet, employee referrals and industry contacts, including early
retirees. The Company's strategic direction for the sales and recruiting
organization is (i) to significantly lower overhead costs by centralizing field
operations and upgrading technology; achieving process standardization and cost
management; and creating a platform for integration with future systems
(payroll/billing, finance, etc.); and (ii) to have a customer driven strategy by
creating mobile sales and recruiting organizations that can move in and out of
markets. The new system is expected to produce both hard dollar savings and
productivity gains in the entire sales and recruiting process.
COMPETITION
The technical services industry in the United States is highly fragmented and
characterized by specialized regional and local firms serving specific
geographic territories and industries. The Company is one of only a few
international companies with the breadth of personnel and resources to respond
quickly to the large scale and rapidly changing personnel requirements of major
corporate clients worldwide. Based on this characteristic, management believes
the Company is a preferred provider of contract technical services and solutions
to major corporations because of its ability to service the broad range of
client needs.
Some national and international companies are larger than the Company or are
associated with companies that have greater financial or other resources than
the Company. Management believes, however, that the Company's ability to handle
efficiently the broad spectrum of specialized client needs, its commitment to
quality, the extensive network of the Company's offices, the wide array of
technical skills available, and its unique computerized system of identifying
qualified personnel for specialized tasks enable it to compete favorably with
other providers in the industry.
6
ITEM 2. PROPERTIES
----------
The Company owns its corporate office facility located at 110 Summit Avenue,
Montvale, New Jersey, 07645.
At March 19, 1997, Butler maintained office space at the following locations for
predominantly sales, recruiting and administrative functions:
UNITED STATES
Albuquerque, NM Gaylord, MI Saginaw, MI
Anaheim, CA Indianapolis, IN St. Louis, MO
Arlington Heights, IL Irving, TX San Jose, CA
Aurora, CO King of Prussia, PA Shelton, CT
Aurora, IL Kokomo, IN Springfield, MA
Austin, TX Lake St. Louis, MO Syracuse, NY
Baltimore, MD Lombard, IL Tempe, AZ
Beaverton, OR McLean, VA Twinsburg, OH
Bronx, NY Montvale, NJ West Bridgewater, MA
Burlington, MA Norcross, GA Woodside, NY
Center Line, MI Ontario, CA
Chillicothe, IL Park Ridge, IL
Cincinnati, OH Plainsboro, NJ
Citrus Heights, CA Pleasanton, CA
Dublin, CA Portsmouth, NH
Encino, CA Raleigh, NC
Euclid, OH Redmond, WA
Fairport, NY Riverside, CA
Fort Wayne, IN Rochester, NY
INTERNATIONAL
York, England
London, England
Redhill, Surrey, England
Except for its corporate headquarters facility in Montvale, New Jersey, the
Company does not own any real estate and generally leases office space. The
Company makes modest investments in leasehold improvements, equipment and other
tangible property, principally computer equipment, as required.
ITEM 3. LEGAL PROCEEDINGS
------------------
The Company and its subsidiaries are parties to various legal proceedings and
claims incidental to normal business operations for which any material
liability, beyond that which is recorded, is remote except for the following
matter. In 1995, the Company filed a complaint against CIGNA Property and
Casualty Insurance Company in the alleging negligence, breach of contract,
breach of fiduciary duty, and negligent misrepresentation arising out of CIGNA's
and other defendants' acts and omissions in the processing, handling and
investigation of claims against the Company under general liability and
workmen's compensation insurance contracts. The defendants filed an answer, new
matter and counterclaim denying the Company's allegations, asserting certain
affirmative defenses, and alleging that the Company has failed to pay
retrospective premiums amounting to approximately $7.6 million. On March 14,
1997, CIGNA notified the Company that it intended to draw down on
7
three letters of credit, posted by the Company, in the aggregate amount of
approximately $2.9 million. This amount is fully reserved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-----------------------------------------------------------------
MATTERS
- -------
Information regarding the market for the Company's common stock and related
stockholder matters is on page 32 of the Company's 1996 Annual Report, which
information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
Selected financial data is included on page 32 of the Company's 1996 Annual
Report, which is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
-----------------------------------------------------------------
FINANCIAL CONDITION
-------------------
Management's discussion and analysis of results of operations and financial
condition is included on pages 14-16 of the Company's 1996 Annual Report, which
discussion and analysis are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The following financial statements and supplementary data are herein
incorporated by reference to the Company's 1996 Annual Report:
Consolidated Balance Sheets at December 31, 1996 and December 31, 1995 PAGE 17
Consolidated Statements of Operations for the years ended December 31, 1996,
December 31, 1995, and December 31, 1994 PAGE 18
Consolidated Statements of Cash Flows for the years ended December 31, 1996,
December 31, 1995, and December 31, 1994 PAGE 19
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, December 31, 1995, and December 31, 1994 PAGE 20
Notes to Consolidated Financial Statements PAGES 21-30
Independent Auditors' Report PAGE 31
Other supporting schedules are submitted in a separate section of this report
following Item 14.
8
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not Applicable.
PART III
A definitive proxy statement pursuant to Regulation 14A will be filed with the
Commission not later than April 30, 1997, which is 120 days after the close of
the Registrant's fiscal year. The proxy statement will be incorporated in Part
III (Items 10 through 13) of Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a)(1) The following consolidated financial statement schedules of Butler
International, Inc. and subsidiaries are included following Item 14:
Schedule I - Condensed financial information of Registrant
Schedule II - Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(a)(3) Exhibits: The exhibit listing and exhibits follow the schedules.
(b) No reports on Form 8-K were filed by the Company during the fiscal
quarter ended December 31, 1996.
9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 27, 1997 BUTLER INTERNATIONAL, INC.
(Registrant)
By: /s/ Edward M. Kopko
------------------
Edward M. Kopko, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
/s/Edward M. Kopko Chairman of the Board of March 27, 1997
- ------------------ Directors and CEO
Edward M. Kopko (Principal Executive Officer)
/s/John F. Hegarty Director March 27, 1997
- ------------------
John F. Hegarty
/s/Frederick H. Kopko, Jr. Director March 27, 1997
- --------------------------
Frederick H. Kopko, Jr.
/s/Hugh G. McBreen Director March 27, 1997
- ------------------
Hugh G. McBreen
/s/Nikhil S. Nagaswami Director March 27, 1997
- ----------------------
Nikhil S. Nagaswami
/s/Michael C. Hellriegel Senior Vice President March 27, 1997
- ------------------------ and Chief Financial Officer
Michael C. Hellriegel
/s/Warren F. Brecht Senior Vice President March 27, 1997
- ------------------- and Secretary
Warren F. Brecht
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 27, 1997 BUTLER INTERNATIONAL, INC.
(Registrant)
By:_____________________________
Edward M. Kopko, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
___________________________ Chairman of the Board of March 27, 1997
Edward M. Kopko Directors and CEO
(Principal Executive Officer)
__________________________ Director March 27, 1997
John F. Hegarty
__________________________ Director March 27, 1997
Frederick H. Kopko, Jr.
__________________________ Director March 27, 1997
Hugh G. McBreen
__________________________ Director March 27, 1997
Nikhil S. Nagaswami
__________________________ Senior Vice President March 27, 1997
Michael C. Hellriegel and Chief Financial Officer
__________________________ Senior Vice President March 27, 1997
Warren F. Brecht and Secretary
11
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Butler International, Inc.:
We have audited the consolidated financial statements of Butler International,
Inc. as of December 31, 1996 and December 31, 1995, and for each of the three
years in the period ended December 31, 1996, and have issued our report thereon
dated March 19, 1997; such financial statements and report are included in your
1996 Annual Report to Stockholders and are incorporated herein by reference.
Our audits also included the financial statement schedules of Butler
International, Inc. listed in Item 14. These financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/Deloitte & Touche LLP
- ------------------------
Parsippany, New Jersey
March 19, 1997
12
Schedule I
- ----------
BUTLER INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(in thousands)
December 31,
--------------------
1996 1995
-------- --------
ASSETS
- ------------------------------------------------
Current Assets
Cash $ $ 2
-
Other current assets 78 117
-------- --------
Total current assets 78 119
Investment in and receivable from subsidiaries 36,324 30,781
Other assets 67 77
-------- --------
Total assets $ 36,469 $ 30,977
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable and accrued liabilities $ 639 $ 532
Current portion of long-term debt 127 149
-------- --------
Total current liabilities 766 681
-------- --------
Long-term liabilities 133 133
-------- --------
Stockholders' equity:
Preferred stock 3 2
Common stock 6 6
Additional paid-in capital 93,673 92,882
Accumulated deficit (58,112) (62,727)
-------- --------
Total stockholders' equity 35,570 30,163
-------- --------
Total liabilities and
stockholders' equity $ 36,469 $ 30,977
======== ========
The accompanying notes are an integral part of these financial statements.
13
Schedule I (continued)
- -----------------------
BUTLER INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
(in thousands)
Year ended December 31,
----------------------------------
1996 1995 1994
---------- ---------- ---------
Revenues
Interest income (includes intercompany
interest of $1,181, $2,349 and $1,609) $ 1,200 $ 2,363 $ 1,624
--------- --------- --------
Expenses
Compensation and benefits 7 16 (21)
Administrative and operating expenses 623 671 911
Interest expense 12 24 45
------ ------ ------
642 711 935
------ ------ ------
Equity in income (loss) of subsidiaries 4,826 (9,677) 1,279
------ ------ ------
Income from operations before income taxes 5,384 (8,025) 1,968
Income taxes (benefit) 593 (111) 309
------ ------ ------
Net income (loss) $4,791 (7,914) $1,659
====== ====== ======
The accompanying notes are an integral part of these financial statements.
14
Schedule I (continued)
- ----------------------
BUTLER INTERNATIONAL, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Year ended December 31,
--------------------------
1996 1995 1994
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,791 $(7,914) $ 1,659
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 9 23 (12)
(Gains) losses of subsidiaries (4,363) 9,534 (1,007)
(Increase) decrease in assets, increase
(decrease) in liabilities:
Other current assets 41 223 128
Other assets - - 4
Accounts payable and accrued liabilities 107 316 (459)
Long-term liabilities - - (75)
------- ------- -------
Net cash provided by operating activities 585 2,182 238
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in note receivable from Butler
Service Group, Inc. (1,181) (2,349) (1,442)
Capital expenditures - net - - (27)
Other - 53 (4)
------- ------- -------
Net cash used in investing activities (1,181) (2,296) (1,473)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the exercise of common
stock options and warrants 547 84 1,566
Net payments of note payable 47 (72) (289)
Payment of dividends - - (99)
------- ------- -------
Net cash provided by financing activities 594 12 1,178
------- ------- -------
Net decrease in cash (2) (102) (57)
Cash at beginning of year 2 104 161
------- ------- -------
Cash at end of year $ - $ 2 $ 104
======= ======= =======
The accompanying notes are an integral part of these financial statements.
15
Schedule I (continued)
- ----------------------
BUTLER INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT AT DECEMBER 31, 1996
NOTE 1 - ACCOUNTING POLICIES:
The investments in the Company's subsidiaries are carried at the Company's
equity of the subsidiary which represents amounts invested less the Company's
equity in the losses to date. Significant intercompany balances and activities
have not been eliminated in this unconsolidated financial information.
No cash dividends were received from subsidiaries during the past three years.
Certain information and footnote disclosures normally included in financial
statements prepared in conformity with generally accepted accounting principles
have been condensed or omitted. Accordingly, these financial statements should
be read in conjunction with the Company's consolidated financial statements in
its 1996 Annual Report to Stockholders.
NOTE 2 - CONTINGENT LIABILITIES:
The Company has guaranteed the Butler Service Group, Inc. ("BSG") revolving
credit loan. Under the terms of the agreement, transfer of funds to the Company
by BSG is restricted (see Note 5 of the Company's consolidated financial
statements in its 1996 Annual Report).
16
Schedule II
- -----------
BUTLER INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
Additions
----------------------
Balance at Charged to Charged to Balance
beginning costs and other end of at
Description of period expenses accounts Deductions period
- ------------- ---------- ---------- ---------- ---------- ---------
1994
- -------------
Allowance for
uncollectible
accounts receivable $ 651,000 $ 447,000 - $ 225,000 $ 873,000
Reserve for
discontinued
operations $1,014,400 - - $ 642,400 $ 372,000
1995
- --------------
Allowance for
uncollectible
accounts receivable $ 873,000 $ 783,000 - $ 82,000 $1,574,000
Reserve for
discontinued
operations $ 372,000 - - $ 118,000 $ 254,000
1996
- ---------------
Allowance for
uncollectible
accounts receivable $1,574,000 $ 453,000 - $ 572,000 $1,455,000
Reserve for
discontinued
operations $ 254,000 - - $ 118,000 $ 136,000
17
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
3.1 Articles of Incorporation of the Registrant, as amended, filed as
Exhibit No. 3(a) to the Registrant's Registration Statement on
Form S-4, Registration No. 33-10881 (the "S-4"), and hereby
incorporated by reference.
3.2 By-laws of the Registrant, as amended, filed herewith as Exhibit
3.2.
4.1 Specimen Stock Certificate for the Registrant's common stock, par
value $.001 per share, filed as Exhibit No. 4.1 to the
Registrant's Registration Statement on Form S-1, Registration No.
33-2479 (the "S-1"), and hereby incorporated by reference.
4.2 Articles Supplementary to the Articles of Incorporation of the
Registrant's 7 1/2% Senior Cumulative Convertible Preferred
Stock, filed as Exhibit No. 4.1 to Form 10-Q for the period ended
September 27, 1992, and hereby incorporated by reference.
4.3 Specimen Stock Certificate representing the Registrant's Series B
7% Cumulative Convertible Preferred Stock, par value $.001 per
share, filed as Exhibit No. 4.5 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992 (the "1992 10-
K"), and hereby incorporated by reference.
10.1* Incentive Stock Option Plan of the Registrant, as amended, filed
as Exhibit No. 10.1 to the 1990 10-K, and hereby incorporated by
reference.
10.2* Stock Option Plan of the Registrant, as amended, filed as Exhibit
No. 10.2 to the 1990 10-K, and hereby incorporated by reference.
10.3 Agreement dated May 26, 1993, by and among Butler International,
Inc. ("Butler"), Butler of New Jersey Realty Corp., a New Jersey
corporation ("BNJRC"), Frederick H. Kopko, Jr. and Hugh G.
McBreen, filed as Exhibit No. 10.6 to the S-2, and hereby
incorporated by reference.
10.4 Purchase and Sale Agreement, dated May 26, 1993, by and between
110 Summit Limited Partnership, a New Jersey limited partnership
("110 Summit") and BNJRC, filed as Exhibit 10.7 to the
Registrant's Registration Statement on Form S-2, Registration No.
33-72550 (the "S-2), and hereby incorporated by reference.
10.5(a) Promissory Note, dated May 26, 1993, in the principal amount of
$1,200,000 by BNJRC to 110 Summit, as lender, filed as Exhibit
No. 10.8(a) to the S-2, and hereby incorporated by reference.
10.5(b) Amended and Restated Promissory Note, dated May 26, 1993, in the
amount of $6,750,000 by BNJRC to Firemen's Insurance Company of
Newark, New Jersey, as lender ("Firemen's"), filed as Exhibit No.
10.8(b) to the S-2, and hereby incorporated by reference.
* Denotes compensatory plan, compensation arrangement or management contract.
E-1
Exhibit
No. Description
- -------- -----------
10.6 Amended and Restated Mortgage and Assignment of Leases and Rents
and Security Agreement, dated May 26, 1993, from BNJRC, as
mortgagor, to Firemen's as mortgagee, filed as Exhibit No. 10.9
to the S-2, and hereby incorporated by reference.
10.7 Guaranty Agreement, dated May 26, 1993, by Butler in favor of 110
Summit, filed as Exhibit 10.10 to the S-2, and hereby
incorporated by reference.
10.8* 1989 Directors Stock Option Plan of the Registrant, dated
November 1, 1988, as amended, filed as Exhibit 10.18 to the 1990
10-K, and hereby incorporated by reference.
10.9* Stock Purchase Agreement, dated September 19, 1990, between North
American Ventures, Inc. and Edward M. Kopko, filed as Exhibit
10.31 to the 1990 10-K, and hereby incorporated by reference.
10.10* Plan Pledge Agreement, dated September 19, 1990, between North
American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No.
10.32 to the 1990 10-K, and hereby incorporated by reference.
10.11* Plan Promissory Note, dated January 16, 1991, executed by Edward
M. Kopko, and made payable to the order of North American
Ventures, Inc. in the amount of $445,000, filed as Exhibit No.
10.33 to the 1990 10-K, and hereby incorporated by reference.
10.12* Pledge Agreement, dated January 16, 1991, between North American
Ventures, Inc. and Edward M. Kopko, filed as Exhibit No. 10.34 to
the 1990 10-K, and hereby incorporated by reference.
10.13* Promissory Note, dated January 16, 1991, executed by Edward M.
Kopko and made payable to the order of North American Ventures,
Inc. in the amount of $154,999.40, filed as Exhibit No. 10.35 to
the 1990 10-K, and hereby incorporated by reference.
10.14* Form of Plan Pledge Agreement, dated September 19, 1990, between
North American Ventures, Inc. and each of John F. Hegarty, Hugh
G. McBreen, and Frederick H. Kopko, Jr. ("outside directors"),
filed as Exhibit No. 10.36 to the 1990 10-K, and hereby
incorporated by reference.
10.15* Form of Plan Promissory Note, dated September 19, 1990, each
represented by an outside director and each made payable to the
order of North American Ventures, Inc. in the amount of $185,000,
filed as exhibit no. 10.37 to the 1990 10-K, and hereby
incorporated by reference.
10.16* Form of Stock Purchase Agreement, dated November 4, 1988, between
North American Ventures, Inc. and each of the outside directors,
filed as Exhibit No. 10.38 to the 1990 10-K, and hereby
incorporated by reference.
10.17* Form of Pledge Agreement, dated January 16, 1991, between North
American Ventures, Inc. and each of the outside directors, filed
as Exhibit No. 10.39 to the 1990 10-K, and hereby incorporated by
reference.
* Denotes compensatory plan, compensation arrangement or management contract.
E-2
Exhibit
No. Description
- -------- -----------
10.18* Form of Promissory Note, dated January 16, 1991, executed by each
of the outside directors and each payable to the order of North
American Ventures, Inc., in the amount of $63,000, filed as
Exhibit No. 10.40 to the 1990 10-K, and hereby incorporated by
reference.
10.19* Form of Pledge Agreement, dated January 16, 1991, between North
American Ventures, Inc. and each of the outside directors, filed
as Exhibit No. 10.41 to the 1990 10-K, and hereby incorporated by
reference.
10.20* Form of Promissory Note, dated January 16, 1991, executed by each
of the outside directors and each made payable to the order of
North American Ventures, Inc. in the amount of $54,000, filed as
Exhibit No. 10.42 to the 1990 10-K, and hereby incorporated by
reference.
10.21* Form of Promissory Note, dated January 16, 1991, executed by each
of the outside directors and each payable to the order of North
American Ventures, Inc., in the amount of $225,450, filed as
Exhibit No. 10.43 to the 1990 10-K, and hereby incorporated by
reference.
10.22* Form of Pledge Agreement, dated January 16, 1991, between North
American Ventures, Inc. and each of the outside directors, filed
as Exhibit No. 10.44 to the 1990 10-K, and hereby incorporated by
reference.
10.23* Form of Security Agreement, dated January 16, 1991, between North
American Ventures, Inc. and each of the outside directors, filed
as Exhibit No. 10.45 to the 1990 10-K, and hereby incorporated by
reference.
10.24* 1990 Employee Stock Purchase Plan of the Registrant, as amended,
filed as Exhibit No. 10.46 to the 1990 10-K, and hereby
incorporated by reference.
10.25* Employment Agreement, dated December 17, 1991, among North
American Ventures, Inc., Butler Service Group, Inc., and Edward
M. Kopko, filed as Exhibit 10.33 to the Registrant's Annual
Report on Form 10-K for the year ended December 29, 1991 (the
"1991 10-K"), and hereby incorporated by reference.
10.26* Stock Purchase Agreement, dated December 17, 1991, between North
American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No.
10.34 to the 1991 10-K, and hereby incorporated by reference.
10.27* Plan Pledge Agreement, dated December 17, 1991, between North
American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No.
10.35 to the 1991 10-K and hereby incorporated by reference.
10.28* Plan Promissory Note, dated December 17, 1991, executed by Edward
M. Kopko, and made payable to the order of North American
Ventures, Inc. in the amount of $84,000, filed as Exhibit No.
10.36 to the 1991 10-K, and hereby incorporated by reference.
10.29* Form of Stock Purchase Agreement, dated December 17, 1991,
between North American Ventures, Inc. and each of the outside
directors, filed as Exhibit 10.37 to the 1991 10-K, and hereby
incorporated by reference.
* Denotes compensatory plan, compensation arrangement or management contract.
E-3
Exhibit
No. Description
- -------- -----------
10.30* Form of Plan Pledge Agreement, dated December 17, 1991, between
North American Ventures, Inc. and each of the outside directors,
filed as Exhibit 10.38 to the 1991 10-K, and hereby incorporated
by reference.
10.31* Form of Plan Promissory Note, dated December 17, 1991, each
executed by an outside director, and each made payable to the
order of North American Ventures, Inc., in the amount of $42,000,
filed as Exhibit No. 10.39 to the 1991 10-K, and hereby
incorporated by reference.
10.32* 1992 Stock Option plan, filed as Exhibit 10.40 to the 1992 10-K,
and hereby incorporated by reference.
10.33* 1992 Incentive Stock Option Plan, filed as Exhibit 10.41 to the
1992 10-K, and hereby incorporated by reference.
10.34* 1992 Stock Bonus Plan, filed as Exhibit No. 10.42 to the 1992 10-
K, and hereby incorporated by reference.
10.35* 1992 Stock Option plan for non-employee directors, filed as
Exhibit 10.43 to the 1992 10-K, and hereby incorporated by
reference.
10.36* Butler Service Group, Inc. employee stock ownership plan and
trust agreement, filed as Exhibit No. 19.2 to the registrant's
annual report on form 10-K for the year ended December 31, 1987
(the "1987 10-K"), and hereby incorporated by reference.
10.37 Credit Agreement dated as of May 31, 1994 between Butler Service
Group, Inc. and General Electric Credit Corporation, filed as
Exhibit 10.41 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994 (the "1994 10-K"), and hereby
incorporated by reference.
10.38(a) First Amendment Agreement, dated December 14, 1994 among Butler
Service Group, Inc., the Company, Butler Service Group Canada,
Ltd., and General Electric Capital Corporation, filed as Exhibit
10.42(a) to the 1994 10-K, and hereby incorporated by reference.
10.38(b) Second Amendment Agreement, dated March 21, 1995 and effective as
of December 14, 1994, among Butler Service Group, Inc., the
Company, Butler Service Group Canada, Ltd., and General Electric
Capital Corporation, filed as Exhibit 10.42(b) to the 1994 10-K,
and hereby incorporated by reference.
10.38(c) Third Amendment Agreement, dated May 15, 1995 and effective as of
March 31, 1995, among Butler Service Group, Inc., the Company,
Butler Service Group Canada, Ltd., and General Electric Capital
Corporation, filed as Exhibit 10.42(c) to Form 10-Q for the
period ended September 30, 1995, and hereby incorporated by
reference.
10.38(d) Fourth Amendment Agreement, dated August 3, 1995 and effective as
of June 1, 1995, among Butler Service Group, Inc., the Company,
Butler Service Group Canada, Ltd., and General Electric Capital
Corporation, filed as Exhibit 10.42(d) to Form 10-Q for the
period ended September 30, 1995, and hereby incorporated by
reference.
* Denotes compensatory plan, compensation arrangement or management contract.
E-4
Exhibit
No. Description
- -------- -----------
10.38(e) Fifth Amendment Agreement, dated October 4, 1995 and effective as
of September 30, 1995, among Butler Service Group, Inc., the
Company, Butler Service Group Canada, Ltd., and General Electric
Capital Corporation, filed as Exhibit 10.42(e) to Form 10-Q for
the period ended September 30, 1995, and hereby incorporated by
reference.
10.38(f) Sixth Amendment Agreement, dated November 3, 1995 and effective
as of September 30, 1995, among Butler Service Group, Inc., the
Company, Butler Service Group Canada, Ltd., and General Electric
Capital Corporation, filed as Exhibit 10.39(f) to the 1995 10-K,
and hereby incorporated by reference.
10.38(g) Seventh Amendment Agreement, dated December 6, 1995 and effective
as of November 30, 1995, among Butler Service Group, Inc., the
Company, Butler Service Group Canada, Ltd., and General Electric
Capital Corporation, filed as Exhibit 10.39(g) to the 1995 10-K,
and hereby incorporated by reference.
10.38(h) Eighth Amendment Agreement, dated March 26, 1996 and effective as
of December 31, 1995, among Butler Service Group, Inc., the
Company, Butler Service Group Canada, Ltd., and General Electric
Capital Corporation, filed as Exhibit 10.39(h) to the 1995 10-K,
and hereby incorporated by reference.
10.38(i) Ninth Amendment Agreement, dated May 1, 1996, among Butler
Service Group, Inc., the Company, Butler Service Group Canada,
Ltd., and General Electric Capital Corporation, filed herewith as
Exhibit 10.38(i).
10.38(j) Tenth Amendment Agreement, dated June 1, 1996, among Butler
Service Group, Inc., the Company, Butler Service Group Canada,
Ltd., and General Electric Capital Corporation, filed herewith as
Exhibit 10.38(j).
10.38(k) Eleventh Amendment Agreement, dated October 31, 1996 and
effective as of September 30, 1996, among Butler Service Group,
Inc., the Company, Butler Service Group Canada, Ltd., and General
Electric Capital Corporation, filed herewith as Exhibit 10.38(k).
10.39* Employment Agreement dated May 15, 1994 between Butler Fleet
Services, a division of Butler Services, Inc., and James
Vonbampus, filed as Exhibit 10.44 to the 1994 10-K, and hereby
incorporated by reference.
10.40* Employment Agreement dated April 18, 1995 between Butler
International, Inc., and Harley R. Ferguson, filed as Exhibit
10.42 to the 1995 10-K, and hereby incorporated by reference.
10.41* Form of Promissory Note dated May 3, 1995 in the original
principal amount of $142,500 executed by Frederick H. Kopko, Jr.
and Hugh G. McBreen, and made payable to the order of Butler
International, Inc., filed as Exhibit 10.43 to the 1995 10-K, and
hereby incorporated by reference.
10.42* Form Pledge Agreement dated May 3, 1995 between Butler
International, Inc. and each of Frederick H. Kopko, Jr. and Hugh
G. McBreen, filed as Exhibit 10.44 to the 1995 10-K, and hereby
incorporated by reference.
13.1 1996 Annual Report to Stockholders, Financial Section (Pages 14-
32), filed herewith as Exhibit 13.1.
* Denotes compensatory plan, compensation arrangement or management contract.
E-5
Exhibit
No. Description
- -------- -----------
22.1 List of Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule.
E-6