BUTLER NATIONAL CORP - Quarter Report: 2012 July (Form 10-Q)

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x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

Kansas		41-0834293
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

 

Large accelerated filer o

Accelerated filer o

Non-accelerated filer T

Smaller reporting company o

 

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Item 1	Financial Statements	PAGE NO.
	Condensed Consolidated Balance Sheets – July 31, 2012 and April 30, 2012	3
	Condensed Consolidated Statements of Operations - Three Months ended July 31, 2012  and 2011	4
	Condensed Consolidated Statements of Cash Flows - Three Months ended July 31, 2012  and 2011	5
	Notes to Condensed Consolidated Financial Statements	6-7
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	7-15
Item 3	Quantitative & Qualitative Disclosures about Market Risk	15
Item 4	Controls and Procedures	15-16

Item 1	Legal Proceedings	17
Item 1A	Risk Factors	17
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3	Defaults Upon Senior Securities	17
Item 4	(Removed and Reserved)
Item 5	Other Information	17
Item 6	Exhibits	17-18
Signatures		19

		July 31, 2012				April 30, 2012
ASSETS
CURRENT ASSETS:
Cash		$	7,769			$	7,431
Accounts receivable			5,276				3,589
Inventories
Raw materials			6,263				6,305
Work in process			1,160				982
Finished goods			305				424
Total inventory			7,728				7,711
Prepaid expenses and other current assets			834				1,493
Total current assets			21,607				20,224
PROPERTY, PLANT AND EQUIPMENT:
Land and building			3,915				3,915
Aircraft			6,673				6,288
Machinery and equipment			3,714				3,714
Office furniture and fixtures			3,233				3,217
Leasehold improvements			31				31
			17,566				17,165
Accumulated depreciation			(7,267	)			(6,688	)
Total property, plant and equipment			10,299				10,477
SUPPLEMENTAL TYPE CERTIFICATES (net of amortization of  $2,514 at July 31, 2012 and $2,500 at April 30, 2012)			1,663				1,677
OTHER ASSETS:
Deferred tax asset			1,167				1,167
Other assets (net of accumulated amortization of $671 at July 31, 2012 and $538 at April 30, 2012)			6,884				7,017
Total other assets			8,051				8,184
Total Assets		$	41,620			$	40,562
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit		$	304			$	462
Current maturities of long-term debt and capital lease obligations			3,719				3,757
Accounts payable			1,936				1,169
Customer deposits			1,476				1,015
Gaming facility mandated payment			1,160				1,281
Compensation and compensated absences			1,123				1,342
Accrued income tax			(241	)			47
Other			213				207
Total current liabilities			9,690				9,280
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, NET OF CURRENT MATURITIES:			8,386				8,678
Total liabilities			18,076				17,958
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $5:
Authorized 50,000,000 shares, all classes
Designated Classes A and B 200,000 shares
$1,000 Class A, 9.8%, cumulative if earned liquidation and redemption value $100, no shares issued and outstanding			-				-
$1,000 Class B, 6%, convertible cumulative, liquidation and redemption value $1,000, no shares issued and outstanding			-				-
Common stock, par value $.01:Authorized 100,000,000 shares issued and outstanding 58,146,314 shares at July 31, 2012 and 57,907,564 shares at April 30, 2012			581				579
Common stock, owed but not issued 278,573 shares at July 31, 2012 and at April 30, 2012			3				3
Capital contributed in excess of par			12,698				12,568
Treasury stock at cost, 600,000 shares			(732	)			(732	)
Retained Earnings			8,438				8,170
Total stockholders’ equity Butler National Corporation			20,988				20,588
Noncontrolling Interest in BHCMC, LLC			2,556				2,016
Total stockholders' equity			23,544				22,604
Total Liabilities and Stockholders' Equity		$	41,620			$	40,562

 

 

 

		THREE MONTHS ENDED July 31,
		2012				2011
REVENUES:
Professional services		$	9,807			$	8,598
Aerospace products			3,661				3,548
Total revenues			13,468				12,146
COSTS AND EXPENSES:
Cost of professional services			5,137				4,977
Cost of aerospace products			2,924				2,936
Marketing and advertising			1,120				945
Employee benefits			482				758
Depreciation and amortization			711				463
General, administrative and other			1,809				1,393
Total costs and expenses			12,183				11,472
OPERATING INCOME			1,285				674
OTHER INCOME (EXPENSE):
Interest expense			(346	)			(89	)
Other income (expense), net			9				3
Total other income (expense),			(337	)			(86	)
INCOME BEFORE INCOME TAXES			948				588
PROVISION FOR INCOME TAXES
Provision for income taxes			140				82
NET INCOME			808				506
Net income attributable to noncontrolling interest in BHCMC, LLC			(540	)			(398	)
NET INCOME ATTRIBUTABLE TO BUTLER NATIONAL CORPORATION		$	268			$	108
BASIC EARNINGS PER COMMON SHARE		$	.00			$	.00
WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION			57,527,949				56,594,262
DILUTED EARNINGS PER COMMON SHARE		$	.00			$	.00
WEIGHTED AVERAGE SHARES USED IN PER SHARE CALCULATION			57,527,949				56,594,262

 

 

 

 

 

 

§

2,420,688 options that can be exercised on or after December 31, 2011 if and when the share price reaches $0.92

§

2,420,688 options that can be exercised on or after December 31, 2012 if and when the share price reaches $1.41

§

2,420,688 options that can be exercised on or after December 31, 2013 if and when the share price reaches $1.90

 

 

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS REFERENCE TO EXHIBIT 99 OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K

(dollars in thousands)		Three Months Ended July 31, 2012				Percent of total revenue				Three Months Ended July 31, 2011				Percent of total revenue				Percent Change 2011-2012
Revenues:
Professional services		$	9,807				73	%		$	8,598				71	%			14	%
Aerospace products			3,661				27	%			3,548				29	%			3	%
Total revenues			13,468				100	%			12,146				100	%			11	%
Costs and expenses:
Cost of professional services			5,137				38	%			4,977				41	%			3	%
Cost of aerospace products			2,924				22	%			2,936				24	%			0	%
Marketing and advertising			1,120				8	%			945				8	%			19	%
Employee benefits			482				4	%			758				6	%			(36	)%
Depreciation and amortization			711				5	%			463				4	%			54	%
General, administrative and other			1,809				13	%			1,393				11	%			30	%
Total costs and expenses			12,183				90	%			11,472				94	%			6	%
Operating income		$	1,285				10	%		$	674				6	%			91	%

 

·

Professional services derives its revenues from professional management services in the gaming industry through BNSC and BHCMC, licensed architectural and civil engineering services to the business community through BCS Design and monitoring services to owners and operator of SCADA through BNSI.  Revenues from professional services increased 14% to $9.8 million in the three months ended July 31, 2012 from $8.6 million in the three months ended July 31, 2011. The increase in professional services revenues was driven by increased revenues from gaming activities.

·

Aerospace products derives it revenues by designing, engineering, manufacturing, installing, servicing and repairing products for classic and current production aircraft.  Aerospace products revenues increased 3% for the three months from $3.7 million at July 31, 2012 compared to $3.5 million at July 31, 2011. This increase is attributable to increased military support products.  We anticipate future domestic military spending reductions and the continued slow growth of the United States economy.

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)		Three Months Ended July 31, 2012				Percent of Revenue				Three Months Ended July 31, 2011				Percent of Revenue				Percent Change 2011-2012
Professional Services
Revenues
Boot Hill Casino and Resort		$	7,701				78	%		$	6,623				77	%			16	%
Management/Professional Services			2,106				22	%			1,975				23	%			7	%
Net Revenue			9,807				100	%			8,598				100	%			14	%
Costs of professional services			5,137				52	%			4,977				58	%			3	%
Expenses			3,302				34	%			2,680				31	%			23	%
Total costs and expenses			8,439				86	%			7,657				89	%			10	%
Professional services operating income (loss) before noncontrolling interest in BHCMC, LLC			1,368				14	%			941				11	%			45	%
Noncontrolling interest in BHCMC, LLC			(540	)			6	%			(398	)			5	%			36	%
Professional services operating income (loss) after noncontrolling interest in BHCMC, LLC		$	828				8	%		$	543				6	%			52	%

(dollars in thousands)		Three Months Ended July 31, 2012				Percent of Revenue				Three Months Ended July 31, 2011				Percent of Revenue				Percent Change 2011-2012
Aerospace Products
Revenues		$	3,661				100	%		$	3,548				100	%			3	%
Costs of aerospace products			2,924				80	%			2,936				83	%			0	%
Expenses			820				22	%			879				25	%			(7	)%
Total costs and expenses			3,744				102	%			3,815				108	%			(2	)%
Aerospace products operating income (loss)		$	(83	)			(2	)%		$	(267	)			(8	)%			69	%

·

Revenues from professional services increased 14% to $9.8 million in the three months ended July 31, 2012 from $8.6 million in the three months ended July 31, 2011. The increase in professional services revenues was driven by increased revenues from gaming activities.

In the quarter ended July 31, 2012 Boot Hill Casino and Resort received gross receipts for the State of Kansas of $11.2 million compared to $10.7 million for the three months ended July 31, 2011.  Mandated fee, taxes and distributions reduced gross receipts by $3.5 million leaving net gaming revenue of $7.7 million for the three months ended July 31, 2012 compared to $6.6 million for the three months ended July 31, 2011 an increase of 16%.

The remaining management and professional services revenues includes professional management services in the gaming industry, licensed architectural and civil engineering services, food and beverage retail from Boot Hill Casino and Resort,  and monitoring services for SCADA systems.  Management and professional services revenue increased 7% to $2.1 million in the three months ended July 31,012 from $2.0 million in the three months ended July 31, 2011.  Gaming related revenue including food and beverage retail increased 2.3% to $1.5 million for the three months ended July 31, 2012 compared to $1.47 million for the three months ended July 31, 2011.  Professional services revenue including architectural, civil engineering and monitoring services increased 19% to $603 thousand for the current three months ended July 31, 2012.

 

 

·

Costs increased 3% in the three months ended July 31, 2012 to $5.1 million compared to $5.0 million in the three months ended July 31, 2011.  Costs were 52% of segment total revenues in the three months ended July 31, 2012, as compared to 58% of segment total revenues in the three months ended July 31, 2011.

·

Expenses increased 23% in the three months ended July 31, 2012 to $3.3 million compared to $2.7 million in the three months ended July 31, 2011.  Expenses were 34% of segment total revenues in the three months ended July 31, 2012, as compared to 31% of segment total revenues in the three months ended July 31, 2011.

·

Revenues increased 3% from $3.7 million in the three months ended July 31, 2012 compared to $3.5 million in the three months ended July 31, 2011. This increase is attributable to military support products.  We anticipate future domestic military spending reductions and the continued slow growth of the United States economy.

·

Costs were relatively unchanged in the three months ended July 31, 2012 to $2.92 million compared to $2.94 million in the three months ended July 31, 2011.  Costs were 80% of segment total revenues in the three months ended July 31, 2012, as compared to 83% of segment total revenues in the three months ended July 31, 2011.

·

Expenses decreased 7% in the three months ended July 31, 2012 at $820 thousand compared to $879 thousand in the three months ended July 31, 2011.  Expenses were 22% of segment total revenues in the three months ended July 31, 2012, as compared to 25% of segment total revenues in the three months ended July 31, 2011.

Membership Interest		Members of Board of Managers				Equity Ownership				Income (Loss) Sharing
Class A			3				20	%			40	%
Class B			4				80	%			60	%

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Item 4.

CONTROLS AND PROCEDURES

 

Item 1.

LEGAL PROCEEDINGS.

BHCMC, LLC and BHC Development, LC filed a lawsuit in the United States District Court for the District of Kansas on June 21, 2012, against Bally Gaming Inc. doing business as Bally Technologies for breach of contract and negligent representation among other claims related to the performance of computer software systems.  BHCMC and BHC Development seek damages in excess of $75,000.

As of September 3, 2012, there are no other significant known legal proceedings pending against us.  We consider all such unknown proceedings, if any, to be ordinary litigation incident to the character of the business.  We believe that the resolution of any claims will not, individually or in the aggregate, have a material adverse effect on the financial position, results of operations, or liquidity of the Company.

Item 1A.

RISK FACTORS.

There are no material changes to the risk factors disclosed under Item 1A of our Form 10-K for the fiscal year ended April 30, 2012.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

Item 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

Item 4.

(REMOVED AND RESERVED)

Item 5.

OTHER INFORMATION.

None.

Item 6.

EXHIBITS.

	3.1	Articles of Incorporation, as amended and restated are incorporated by reference to Exhibit 3.1 of our Form DEF 14A filed on December 26, 2001.
	3.2	Bylaws, as amended, are incorporated by reference to Exhibit 3.2 of our Form DEF 14A filed on December 15, 2003.
	10.1	Management Agreement between BNSC and the Modoc Tribe of Oklahoma, dated December 12, 1996.
	10.2	First Amendment to the Management Agreement between BNSC and the Modoc Tribe of Oklahoma, dated April 30, 2003.
	10.3	Second Amendment to the Management Agreement between BNSC and the Modoc Tribe of Oklahoma, dated November 30, 2006.
	10.4	Third Amendment to the Management Agreement between BNSC and the Modoc Tribe of Oklahoma, dated October 19, 2009.
	10.5	Fourth Amendment to the Management Agreement between BNSC and the Modoc Tribe of Oklahoma, dated September 22, 2011.
	10.6	Lottery Gaming Facility Management Contract between the State of Kansas and Butler National Service Corporation, approved by the Kansas Racing and Gaming Commission on December 8, 2008.
	10.7	First Amendment to the Lottery Gaming Facility Management Contract between the State of Kansas and Butler National Service Corporation, dated December 29, 2009.
	10.8	Lease between BHCMC, LLC as tenant and BHC Investment Company, L.C. as landlord, dated May 1, 2011 and amended via addendum dated January 1, 2012.

	10.9	Lease between BHCMC, LLC as tenant and BHC Investment Company, L.C. as landlord, dated August 24, 2012.
	31.1	Certificate of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a).
	31.2	Certificate of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a).
	32.1	Certifications of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certifications of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	99	Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995, are incorporated by reference to Exhibit 99 of the Form 10-K for the fiscal year ended April 30, 2012.
	101	The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2012, formatted in XBRL (Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of July 31, 2012 and April 30, 2012, (ii) Condensed Consolidated Statements of Operations for the three months ended July 31, 2012 and 2011, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended July 31, 2012 and 2011, and (iv) the Notes to Consolidated Financial Statements, with detail tagging.  In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise this Exhibit 101 shall be deemed “furnished” and not “filed.”

 

	BUTLER NATIONAL CORPORATION (Registrant)
September 14, 2012	/s/ Clark D. Stewart
Date	Clark D. Stewart
	(President and Chief Executive Officer)
September 14, 2012	/s/ Angela D. Shinabargar
Date	Angela D. Shinabargar
	(Chief Financial Officer)

 

 

Exhibit Index
Exhibit Number	Description of Exhibit
3.1	Articles of Incorporation, as amended and restated are incorporated by reference to Exhibit 3.1 of our Form DEF 14A filed on December 26, 2001.
3.2	Bylaws, as amended, are incorporated by reference to Exhibit 3.2 of our Form DEF 14A filed on December 15, 2003.
10.1	Management Agreement between BNSC and the Modoc Tribe of Oklahoma, dated December 12, 1996.
10.2	First Amendment to the Management Agreement between BNSC and the Modoc Tribe of Oklahoma, dated April 30, 2003.
10.3	Second Amendment to the Management Agreement between BNSC and the Modoc Tribe of Oklahoma, dated November 30, 2006.
10.4	Third Amendment to the Management Agreement between BNSC and the Modoc Tribe of Oklahoma, dated October 19, 2009.
10.5	Fourth Amendment to the Management Agreement between BNSC and the Modoc Tribe of Oklahoma, dated September 22, 2011.
10.6	Lottery Gaming Facility Management Contract between the State of Kansas and Butler National Service Corporation, approved by the Kansas Racing and Gaming Commission on December 8, 2008.
10.7	First Amendment to the Lottery Gaming Facility Management Contract between the State of Kansas and Butler National Service Corporation, dated December 29, 2009.
10.8	Lease between BHCMC, LLC as tenant and BHC Investment Company, L.C. as landlord, dated May 1, 2011 and amended via addendum dated January 1, 2012.
10.9	Lease between BHCMC, LLC as tenant and BHC Investment Company, L.C. as landlord, dated August 24, 2012.
31.1	Certificate of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a).
31.2	Certificate of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a).
32.1	Certifications of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certifications of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99	Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995, are incorporated by reference to Exhibit 99 of the Form 10-K for the fiscal year ended April 30, 2012.
101	The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2012, formatted in XBRL (Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of July 31, 2012 and April 30, 2012, (ii) Condensed Consolidated Statements of Operations for the three months ended July 31, 2012 and 2011, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended July 31, 2012 and 2011, and (iv) the Notes to Consolidated Financial Statements, with detail tagging.  In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise this Exhibit 101 shall be deemed “furnished” and not “filed.”

 

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