Good day, ladies and gentlemen. Today is Monday, September 17, 2012, and welcome to the Butler National Corporation First Quarter Fiscal 2013 Financial Results Conference Call. [Operator Instructions] Your call leaders for today's call are Jim Drewitz, Creative Options Communications; and Clark Stewart, President and CEO. I would now like to turn the call over to Mr. Jim Drewitz. Mr. Drewitz, you may begin.

Thank you, Erica, and good morning, everyone. Before Mr. Stewart begins, I would like to draw your attention to: except for historical information contained herein, the statements in this conference call are forward-looking and made pursuant to the Safe Harbor provisions, as outlined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Butler National actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the loss of market share through competition or otherwise; the introduction of competing technologies by other companies; new governmental safety, health and environmental regulations, which could require Butler to make significant capital expenditures. The forward-looking statements included in this conference call are only made as of the date of this call, and Butler National undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, but are not limited to: factors described under the Risk Factors in the company's Annual Report, on Form 10-K, filed with the Securities and Exchange Commission. With that completed, I would like to turn the call over to Mr. Clark Stewart. Mr. Stewart?

Thank you, Mr. Drewitz. Good morning, ladies and gentlemen. It's nice to have you here early on Monday morning for this call. We had a relatively good quarter, we feel, and probably one of our stronger ones. As you read in the press release, our revenue is up 11% and our income are -- our income is significantly more than it was a year ago and especially 2 years ago for the same quarter in this year. We had a net income of $268,000 this year versus $108,000 last year, versus $111,000 2 years ago, and the $111,000 was a loss by the way. So we're happy with the revenue growth, we're happy with the rest of the financial numbers. If you look at the press release and the 10-Q, you'll see that our assets have increased over the last 2 years from $27.8 million to $41.6 million. Our long-term debt has gone from $4 million to $8.4 million. Stockholders equity, of course, is up about $16.2 million to $18.7 million to $23.5 million. So we're pleased with that, we continue to spend some money on research and development and new products, $372,000 in this quarter. So we're pleased with what's going on. I'm real happy with the growth of the Casino in Dodge City. We've had a substantial increase and we're beating last year by about 10% in revenues, so that is good considering we're in a -- we're 2.5 years down the road. We're probably the only one in Kansas to get that kind of growth in the last couple months. So we're pleased with our marketing efforts for doing a great job out there. So we look at the Aerospace, it's up 3%, the Professional Service up 14%, compared to the same quarter last year on revenue. The profit of the 2 divisions, or 2 segments I should say, 10% up. On the -- our gross margin is now 10%, up 4 percentage points from 6% the previous year, which is real good. Not only we're getting the volume up, we're getting profitability up a little bit. Our net income increased, like I said earlier, 148% in this quarter. I believe the Professional Services, as you say, is also significant that in the STABLES contract in Oklahoma, that was extended and approved by the federal government through September 2018, and that was just in the last week or so. So we included it in this 10-Q to let everybody know that's what's happening. We're pleased to have that, that will complete at the end of 2018, that will be 20 years with that casino in the Indian tribes which is probably a record. On the Aerospace Products where we have traditionally a problem in the first quarter of each fiscal year, we had revenue up 3%, and we had an operating loss of $83,000, where in the previous year, we had an operating loss of $267,000. So you can see that we're very sensitive to the sales volume. And so at this level of volume, roughly around $3.5 million from there on up in the quarter, the numbers really come through to the bottom line. So we just got to get it up a little bit down there and see if we can increase the contribution. Our backlog is standing at $6.2 million in the Aerospace side. The backlog in the Professional Services is primarily the architectural services contracts that are out there over the next year, and that group is significantly busy. And that's great. We're trying to add more people and be able to service the demand. They're basically sold out for the next 1.5 years, 2 years without any question. So that's where we are now. What we're doing on the backlog is foreign orders -- are significant. We have some in the pipeline. Mr. Aric Peters, who has just got back from South America, will talk about that in a minute. But we're looking to those foreign orders and new products that are in the special mission and also in the general aviation product line to bring that up, and that -- those changes should be significant in the next 2 quarters. So, Aric, if you want to talk a little bit about your experience in South America, I'd be glad to do that and you might -- I think you talked to Craig, Craig was delayed here this morning, he couldn't make it. Craig Stewart couldn't make it to the meeting at 9:00, so...

All right. Thank you, Clark. This is Aric Peters, the Sales Manager for Butler. We have a slight slowdown at Avcon in that we're not scheduled out for to 2 to 3 months what we normally feel like we are. The slowdown at Avcon is kind of due to a lack of military spending and significantly slower times to get the contracts processed. We're working very hard in South America to alleviate those problems. In fact, I just returned from South America where I believe we won a contract over the weekend. We have sales and engineering staff going back to South America today to iron out more details on that contract. We're going to continue to focus more efforts on Columbia, Ecuador, Brazil, Chile, Bolivia and Peru. We believe there's serious growth potential in those countries. There seems to be like there's not much competition for us on the type of modifications we do in those countries. So we started this process of really focusing on South America just a few weeks ago, 3 or 4 weeks ago, and it's already seeming like it's paying off. We've got something pretty big this last week.

Thank you, Aric. Appreciate your report on the South American ventures. I think there are a couple other items in Aerospace that we are working on the consumer side of it. The Lear 20 Series Garmin equipment, the GTN 750s, had that STC was approved, we have another STC for the 30 series, which should be moving along here in the next month. And the airplane is flying, we have test flights, so we're in that position. We, of course, would then be looking at additional applications for that equipment. And of course, as we grow out of the 20 series into the 30s and on up in the product line, that adds a significant number. The number of airplanes flying are in, instead of 100 or less, are now in the 500 or less -- so 600s. So that's a good thing. We are looking at merger and acquisition activity, Craig has been working on that. And I believe that we have a couple of candidates. We haven't gotten all the nondisclosures and everything all approved yet so we're in the process of doing that. Going back to Professional Services. We, of course, you know that the development in Dodge City has been a special event center with the city in 2011. In March 2012, the investors opened a Hampton Inn next to the casino. We expanded the casino from 580 machines, approximately, to 800 in late August. And that seems to have been a good move, the expansion fits right, you would never know we expanded. And relative to the drought and all of the crises out there actually in the Dodge City market, we were lucky to have some timely rain that we didn't get in the Kansas City market, but Kansas City area. But the rain just happened to be timely, it's still very dry. The other thing that's going on out there, of course, is the oil and gas development. As you all know, that's on the edge of the Permian basin, and that's one of the largest gas fields in the world. So we have a position out there that's kind of unique in the market, and we just got to continue to address it. So I'll -- I don't have anything else, Jim, on my list of items that I wanted to cover.

All right. Erika, let's go ahead and go to the Q&A then.

[Operator Instructions] Our first question comes from Tim Macmillan [ph].

Sounds like things are moving forward here. I think the big concern amongst investors is the stocks not moving forward at all. I realize you don't control every daily activity in that. But we've mentioned a stock buyback before, is there any update on your thoughts on that? And if not, when do you feel like you may address that seriously?

Actually we have the attorneys working on it. So far they have not come up with how we should do it. So whenever we get to that point, we will let you know. But that's -- we've -- that's been going on for about 2 months Cathy [ph] ?

Yes.

So we're...

But you feel like now, with them working on it, that would be perhaps with the stock at a 30% discount to book value might not be a bad idea. Is that your opinion at this time?

My opinion is dependent upon what they come up with what we can do. And apparently the rules aren't like they used to be. And so we're learning as we go along. So I think it's all depending upon what the law firm comes back, the SEC firm comes back and says you can do this, this and that. So we've got some alternatives. I quite frankly don't know the alternatives at this point, except I know that we just can't do a press release and say, "We're going to buy back shares." That's not proper. So I can't have an opinion until I know what the rules are.

Okay. On your new machines and the expansion, are you depreciating those on a quick depreciation like you did the first round? Or how you're doing that as far as...

It's interesting that you asked that question. As a matter of fact, it looks like we're going to have to expense them as we pay for them, which will be over a 2-year period. Because we don't own them, remember?

Right.

And we aren't the owner, we aren't the principal. We are -- we're the keeper of the floor. We're not the operator of the machines or of the owner. So we've got -- we've spent a lot of money with a big-time accounting firm to -- one of the top 5, to study this fact. And it looks like that we might have done it right the first time. But that appears that's what the pattern is going to be on this next group of machines, we're paying for them over 2 years. Some of them we’ve already paid for, but that's -- generally that's what the pattern looks like it has to be.

Any update on the 400 acres surrounding Dodge -- the casino out there as far as any activity?

We have activity. As far as any productive activity, I'm not -- I don't have any today. We have people looking for hotels, we have people talking about restaurants. We have all of that activity. But we haven't seen anybody with a check book yet, wanting to do something. So they're all studying. I think it's probably 1 year or 2 years too early for that to really come into play. I think that we've got to stabilize the market and everybody really understand that this is stable entertainment district that we have setup. And once that happens, then I think we'll be able to really get some serious people in there. But we have -- we've had a lot of activity that occurs every week...

And one other thing on land. Years ago you bought quite a bit of land down there, Miami County. That project doesn't seem to be too much alive. Is there any thought to selling that land with farm prices up on land now?

Don't have any oil and gas on it. So the farm prices haven't gone up anywhere as near like it did in the southern half of Kansas. So I don't think the prices moved that much, Tim, to tell you the truth. But, yes we've talked about it. I'm not sure whether we think the Indian thing is dead or not. We -- I don't know, we don't have that much money tied up in it anymore. So...

Okay. With the gambling doing so well, are there any other opportunities that you could see coming down the pipe for future gaming contracts?

I don't know. I think that -- I think that's a real challenge. We've had some activity in that area, people talking about various kinds of mergers and acquisitions. But I think it's all just talk, I mean, I'd -- like I say, we've got to have 3 or 4 years of stability out there, and then we can talk about possibilities of expanding to additional locations and so on. Everybody's looking to see if we're able to run the thing, and I think that's what we're trying to prove that we really can run it. And I think we're doing that pretty well so far. But it just takes a while. We got to get past the green -- greenfield development which is what everybody calls it.

[Operator Instructions] Our next question comes from Matt Miller [ph].

I was wondering if you might be able to address on the PP&E side of things, the aircraft balance. It's now up to $6.8 million, it looks like a fair addition was made in the quarter. Could you comment on that?

The fair addition in the quarter. I don't know. I'll have to look that up for you, Matt and we'll get back for you. I don't know what that really ends up from.

Okay. And maybe just generally speaking, your thoughts on what to do with that aircraft. I think we've talked in the past that it's used a bit for productive reasons on the business side of things. But just looking at the number now, it's about $6.8 million. I think you did about, 17 -- a little over $17 million last year in revenue out of this segment that, I guess, is associated with those aircraft. Is there any contemplation given to try to generate some value out of what is a pretty big line item on the balance sheet by selling some of those assets?

We have tried to sell them. We, of course, written most of them down substantially. But the key is that the Learjets, the market's not there, unless we get the noise suppression fixed somehow. The Cessna that we acquired was along the lines of adding the -- continuing to grow the Garmin installations into the -- with STC, so we can sell these things internationally. And that's the purpose there, that's where we are there. We're also in that same place on that Lear 60. Special mission applications, as soon as we get FAA approval for various products there which is what we're working on. And that whole marketplace basically requires that you have the airplane, that you can demonstrate to the FAA that you are capable of modifying, and that it's still safe to fly. So that kind of goes with the real -- that goes with the territory, if you will. So I guess, I'm not -- the addition that would have occurred in the quarter would have been Cessna 501. But that is -- that's what they're all about. We don't expect that we're going to ever be a retail airplane salesman. But we have tried to sell a couple of them and well really one of them, we had a cash offer supposedly, except the cash never showed up. So, I mean, that seems to be the story on most of those airplanes. We have plenty of interest, but nobody with money, and I'm not ready to give them away. We're talking about the price here now, amount of $150,000 for one of them. So -- and we didn't -- we couldn't get the cash for that. So, I mean, it's not a high level market that were dealing with.

But there are alternatives to the company, actually owning these planes? I mean, could you lease these types of assets to do what you need to do with...

We have done that in the past, Matt. We've used other people's airplanes and leased them, and those -- every one of those events doesn't work out very well because you're modifying somebody's pet airplane structurally and you need to own it if you're going to do it, do those kinds of things to it because you may or may not add to the value as a result of the modification. Most likely you will not. So if you get a leased airplane in there to try to do this, you're going to have a fiasco because you're going to end up paying for the airplane and it still isn't yours years. So I don't -- that side of it -- plus you can't schedule it, you can't manage the sequencing with the FAA, which is really the critical item. So true they sit around and accumulate a lot of dust, but when you actually need one to function for the flight test, they're there and ready to go and you have full control, which we've early in the game, we used to try to do it for other people. And I would suppose if we hadn't of done that before my time in -- at Avcon, we would have -- if we'd owned the airplanes we've probably been 10x this size. And that's really -- really a problem in the industry is being able to control the airplane. So that's a very good question.

And then secondly, if I might on the casino side. I wonder if you have any thoughts on the second lease regarding some of the expansion. I see that the rate there on that second lease is 12%, were there any alternative financing -- financings that were considered to expand that operation? Or is this kind of the best that was out there?

That was the best that's out there in that time. We're really looking at that as a short-term thing. We're not -- we're hoping that we generate enough cash to pay that off quickly. There's no prepayment penalty to it. So we're looking at that. And that's really there as cushion. You can see that we didn't even draw down the total amount, and we may not need it at all. But we wanted to make sure we'd -- weren't running out of cash when we had to pay for all these modifications to the plane. And the real thing is that's a landlord lease, standard improvement lease. So it's the landlord providing the money. And I think that's -- in that situation, we really don't own the assets so it's not -- it's hard for us to go out and mortgage somebody else's assets. So that's the situation there.

[Operator Instructions] Our next question comes from Edward Arnold [ph] from the Riley Brothers [ph].

I had 2 questions, if possible. Totally different and unrelated. Any possibility, or would it be too prohibitive, to pay something like a 4% stock dividend annually?

We could do that, Edgar. My question is if I gave you a 4% stock dividend and the price stayed at $0.25 to $0.30, would you be happy?

It would be a return, Clark. That's okay. I just -- what I'm looking for are things that would maybe spark some interest or $0.005 cash dividend a quarter, or something like that, or would it be much too prohibitive?

I don't know that it's prohibitive. But I think that the -- both the buyback program and the cash dividends require approval from the financing authorities, the banks and so on. But I think that -- I don't know. I haven't really thought through the stock dividend Arnold, that's a very good suggestion, we can talk about that. I'll work -- I'll do some work on that, at the same time we're working on this -- the buyback program. It's all kind of related.

All right. Second question is you mentioned oil and oil properties. And with oil now at $99 a barrel, do you own properties that people are looking at or sampling or anything like that? Do you own the land?

We own the land in Dodge City, about 400 acres, but it's within the 3-mile limit of the city. I don't know that -- there's no activity within 20 miles of where we are. So I don't know. It's all to the south, in the east, and moving east along the Oklahoma-Kansas border. And I happen to have -- there's some -- one of my brother and I own some family farmland that's down in Southern Kansas. But it's -- I mean, the lease rates are $300, $400 an acre, it's not the big time stuff like you see in further south in Oklahoma. Where it's [indiscernible]

It adds a different dimension to you guys. But at least the thought of maybe hundreds of thousands or more people coming to Dodge City would be a great thing.

That is a big deal. The hotels and everything are full, if you don't get ahead on the reservations, you won't be staying in Dodge City. And so they're full of gaming people and oil people and the normal traveler that stops by there. But it's definitely in -- the occupancy rate is well over 90%. So...

[Operator Instructions] Gentlemen, at this time I have no further questions.

Well, Clark, a great call. Why don't you go ahead and close it out?

Thank you, everybody, for being on the call here this Monday morning. And we appreciate all your interest in Butler National. We hope that we can continue to grow and survive in what appears to be a very uncertain economy. I mean, we -- our Aerospace is suffering a little bit from that, from the Beech Aircraft Chapter 11 and potential sale to the Chinese that substantially slowed up the sale of their airplanes and desire of the customers to use them. So we really appreciate everybody listening to our story this morning. And thank you very much for your support of Butler National. Jim, I'm done.

This concludes today's conference call. Thank you for attending.