Good morning, ladies and gentlemen. Today is Tuesday, December 17, 2013, and welcome to the Butler National Corporation Conference Call. [Operator Instructions] Your call leaders for today’s call are David Drewitz, Creative Options Communications; Clark Stewart, President and CEO; Craig Stewart, President of Aerospace Group. I would now turn call over to David Drewitz. Mr. Drewitz, you may begin.

Thank you, 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's actual results and future periods to differ materially from forecasted results. Those risks include among other things 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 caption 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? Clark D. Stewart: Thank you, Mr. Drewitz. First thing, I'd like to recognize that this is David Drewitz, the son of Jim, and I would offer a moment of silence since Jim passed away since the last quarter and we miss him. Thank you for your compliance. We appreciate that. This is the end of the second quarter. We have a challenging quarter as we said in the press release. And I believe that it's a very positive quarter from our standpoint. As you know, the sales were down and the backlog is up, which makes us feel real good. The hangers are full of airplanes, which is good. And the backlog of future orders that we have not recorded yet is also good, so with that positive start, let's talk about what really happened in the six months ending October 31. First of all, our revenue was $22.5 million versus $27 million, about $5 million down. And our income was negative $634,000 compared to a positive $382,000 in the 6 months in the previous year. That just reflects the downturn we've had in the Aerospace segment and we're also experiencing that in the Services segment at the casino primarily because of the fall months are weak. We have a somewhat troubled agricultural market out there and the harvest was interrupted by rain this year, last year it was drought so there is a big difference. And this time they couldn't get the crops cut very well. So that was a problem that causes a problem for our customers in Southwest Kansas and all of that area. We've also experienced some weakness in the economy out there because of the horizontal drilling that was promised to start it but really never grew like it should have and we lost some temporary oil field workers that we had a year ago, and so our business suffers from that. We also suffer from the fact that we don't have the Bussing program that we had 1.5 year ago. And we are -- we stopped that because of regulatory changes and we've now restarted it. It takes about 6 to 12 months to get that productive and we expect to see the results of that in fiscal 2015 in casino revenues, which I think is a very positive thing. We have got to draw people from outside the state of Kansas in order to make all of the casinos successful in the state and this is just a part of that. So having said that, that's the depressing things, the good things about our backlog and our sales for the quarter and every other indication in the Aerospace segment is that it is positive this year. These sales that we -- the backlog we've been talking about and the customers that we've been talking about for the last year are finally arriving with airplane in hand and we have started work on a number of those in the last 2 months. We expect that to continue. Almost all of this business is international business. It's not domestic airplane business as far as Aerospace goes. There is some airplane business in the United States that has to do with upgrading the avionic systems and we expect that to have a little turnaround and start to grow in the spring. We have got new STCs coming and new STCs that we've received in that marketplace, primarily the Garmin GTN 750s which is a major improvement for the legacy airplanes. We also have the noise suppression which is required by 2015 and that -- those things are starting to sell. We've delivered 1 noise suppression unit to a customer and we have 2 more scheduled in the next couple of months. And so those are starting to move. The deadline is about 1 year -- almost 2 years away on that. So that is a good sign. We have reduced our overall debt as even in the depressed times by $1.5 million, and I believe that's a positive indication of how we've moved since April 30. And with that, let me see if I'm missing anything else. We are developing the products. I didn't mention noise suppression. We also have hard points, which is a special mission, a feature that allows you to put electronic devices in whatever else under the wings of the airplanes and that is -- that's a good thing. We are also working on flight instruments for the legacy airplanes which updates for the obsolescence. Those are all the things we spent almost $1 million -- little over $1 million on in the last 6 months to bring these STCs to the marketplace. Let's see what else here. Backlog I said is $6 million. We need to think about that a little bit. It's primarily Aerospace. We do some comparative analysis of the backlog. We're showing $6 million plus at this point which is -- does not include the subsidiary we have in Florida which was Butler National Services Inc. that we sold at the end of last year. So that $6 million is pure. You have to go back to probably July 2012 to get a backlog equal to or greater than that. And then you go clear back before -- back to September 2011 before you get a backlog of that magnitude. So I think that the backlog looks good. The orders are strong. They now have the money. They've showed up money in hand ready to do business. The change over the previous quarter in the backlog that Aerospace at about 22.7% and over 1 year ago it's 31% which are positive -- positive things. And that's really the Aerospace segment is 40% over last year at this time. So I think that's a very positive thing and I'm -- we're excited about it. Our challenge now is to generate more orders and ship the orders we have. Our work scheduled from now through the end of April or March probably. It's going to be getting all the products we have in hand now that are -- plus those that are coming in shipped and we should have revenues in Aerospace that match couple of years ago at least, maybe even stronger. So I think that’s the challenge that we face. Since October 31 you'll be pleased to know all of our payables are current and we are financially sound we believe. So that is -- that kind of brings you up-to-date on where we stand. I could go through a whole bunch more numbers, but I don't -- you have the press releases, you have the 10-Q and I'll be glad to let you ask questions. We can do that at this point, I think. I'll ask the team here if we've missed anything that we should have covered. Craig D. Stewart: No. This is Craig, and I think we're all excited about what we've got going on in the Aerospace segment. It's the first time in long time the hanger has been full. The challenge now is a much different one of how do we get the work done rather than how do we find the work. So we're all excited about that challenge. Clark D. Stewart: It probably is appropriate that we look at page 12 of the 10-Q where we've talked about cost and expenses, and our costs have decreased 10% in the last 6 months, $22.6 million compared to $25 million. And so that's a positive sign. Marketing revenue as a percent of revenue was 10%, but the key is there, that our marketing expense increased 9% to $2.3 million in the 6 months. Primarily that's casino marketing, but there's also marketing in the Aerospace segment. And that increase is something we had to do to make sure we maintained the customers we have and continue to develop new business Our employee benefits, like all other companies, is up 8% which we think that's fortunate. There's a lot of them that are up 25% to 30%. So I think we're safe probably through the end -- through this time 1 year from now and then we'll suffer that kind of increase. We just happen to have the contracts in place to keep that from happening to us this year. Our depreciation increased 21% in the past 6 months. That is primarily the depreciation amortization related to the equipment purchases for the state of Kansas in Dodge City which is an interesting concept. But anyway, you all are familiar with that from years passed and it's still raising its head. We do not expect it to expend a lot more money on equipment in Dodge City, actually we expect to reduce the expenditures. Our G&A has increased 23% in the last 6 months. So we have reduced the staffing and we've reduced the pay in some cases as we've talked about a quarter -- last 2 quarters but we plan to reduce the administrative cost and we've managed to do that and we continue to have further reductions as time passes. So we're trying to be more efficient. And I guess those are the highlights of the numbers. The number of employees, you're always interested in that. We had 111 last time, 6 months ago; we now have 27. We've reduced that 27 to 84, is that right, yes. No, 17. That's what it is. And the casino went from 263 to 251. So we're doing cost reduction in both cases. We're trying to reduce our fixed cost component so we can be more responsive to the variations in the market. And so with that, David, I think we're finished with the summary information and ready for questions.

All right. Anyone with questions?

[Operator Instructions] Our first question comes from Tony Preshoda [ph].

This is Tony Preshoda. You've often stated in the past that one of the main objectives of Butler's current management team is to increase -- your words -- shareholder value. As you know, the only real measure of shareholder value is the price of the common stock. Now while the overall stock market is at all time highs, Butler stock is selling at a fresh brand new 10 year low and less than 1/3 of book value. I think we'd all like to hear your specific plan to rectify the situation and how we can better monetize that book value. I'd also like to point out that during this same 10-year period there's not been a case of a Director or company executive ever purchasing stock in the open market with his own money. And don't you think this lack of commitment on the part of management and the board sends a negative message to Wall Street? That's my question. Clark D. Stewart: I don't know, Tony, whether it sends a negative message or not. We all do have a significant investment in this operation and especially I do. I have spent a lot of money on the stock in the past so just like all the rest of the shareholders have. So I think that it's appropriate. I don't -- the question is appropriate. I feel like we -- the better the news the lower the price and I can't really understand that but that's the way it seems to work. As far as enhancing shareholder value, I somehow don't believe the shareholder value is going to come from the Aerospace side; it's going to come from the Services side. And I think that the Aerospace is hard for people to understand. What we really do, we really can't discuss what we do very much because of the type of work that it is. And so we end up with -- we can't really explain the real business, where on the other side of the business in the services we can describe that. And like I say, we are continuing to work on the plan we talked about 2 meetings ago and we see that even though that the economy -- there are, as we see the economy, it's a little depressed. We are still having positive reaction on that plan of acquisition I guess, if you would call that. And once that starts to work then we'll be in a position where we think we can really enhance the shareholder value, but it probably won't be the Aerospace area. As far as buying stock, I don't know. There have been people buy stock, but I don't know whether it's -- the employees buy it and sell it, but it's not the controlled employees. So we don't have a reading on them. So I don't know whether I answered your question, but I tell you that that's how I'm seeing it.

Well, you've very expertly sort of skirted around the main issue here. If the value of the company is such that it's compelling enough for those of us in the outside world to buy the stock, why wouldn’t those people inside? Why wouldn't the Directors? Well, let me just ask you very quickly. To your knowledge, is there one Director that's currently sitting on the board other than yourself who has purchased stock in the open market as part of a 10b5-1 program? Clark D. Stewart: I don't know what a 10b5-1 program is.

That's where you have a stated plan of systematic acquisition of the company stock you filed with the SEC and so forth and so on, where every month you buy X number of shares to show your commitment to the company, to show your confidence in the future of the company. Clark D. Stewart: No, we don't have that plan. I do know that some of the people sitting on the board have spent well over $100,000 buying stock in the past.

Is that in the open market or was that exercise of options? Clark D. Stewart: No, it wasn't exercise of options. It was -- try to figure out what that was. That was in the -- that's been a long time ago, Tony, probably even before your time, when we did the financing for the stables Reg D. They bought it at that point and some of them are still here. And when that Reg D was finally over with, we bought those shares that were being sold on the open market. And all the Directors at that time bought those and kept them from being dumped on the market. But that's been, I don't know, 10 years ago maybe or more, at least, maybe 15 years ago. But there's -- yes -- there's people on the Board at this point besides me that have money invested here, yes, no question. Mr. Hayden, Mr. Wagoner for sure, both have money in this, real cash not part of the planned acquisition like you're saying, maybe we need to look into that. We don't have that plan. There was a plan like that where there was payroll deduction back in the 1980s, but I don't think it's active anymore.

Do you think that it would send a message to the investment community if perhaps some of the executives or Board Members' compensation was tied to the value of the stock? In other words, give you just an example, let's say a mid-level management person who is making, again just hypothetically, let's say they are making $150,000 a year. To pay them a $100,000 a year, which I think would be a livable wage in your part of the world and make the rest of his compensation tied to the price of the stock, in other words, give him stock options or common stock in lieu of cash to show his commitment or management's commitment to the future of this company. Clark D. Stewart: No. We don't have that program set up but we could set something up like that. We will -- we'll look into that and get something going on, Tony. That's a good suggestion. I think it is a good idea.

Our next question comes from Kalle Ahl from Breakstone Group.

Just a few comments. First of all, I think you guys are doing a great job blocking and tackling during the challenging quarter. I guess a challenging few quarters here. I can see the improvements on the cost expense side. You guys are still generating cash flow, paying down debt. And it seems like you're managing the businesses the best you can with some external factors that are taking place, that are sort of out your control. Now, my call was to make a few comments and I agree with the previous caller on purchase of stock in the open market. That definitely will send a positive value to the market, in my opinion, especially for a smaller stock like this that is sort of operate a screen of a lot of investors and operate a screen of Wall Street. I'm just surprised that management hasn't actually -- you don't see the value that we see as external parties looking from the outside. And so, I was wondering what your thoughts are in terms of the long term in terms of unlocking shareholder value for the company given that there's a very strong backlog at the Aerospace division right now relatively speaking compared to the recent past. You mentioned that hangers are full, and also given that some of the things might be falling into place on the Gaming side. I guess it sounds like the Bussing program is going to be back and up and running. There's probably some other things that might, somewhat in your favor. It seems like it's a perfect time to take advantage of that share price that we're looking at right now. I think the previous caller mentioned 1/3 of book value. I was wondering what's your view as a management team. I know you guys tend to be longer term looking and do you think the stock price will eventually work itself out as you execute, but as shareholders, we're looking at $0.11 per share stock price right now. So that's basically my feedback. Clark D. Stewart: My reaction to that is we're working on a way to unlock the value that's really in the casino. I think that's understandable to everyone and that's where the value really is as far as in the marketplace. Or like I said -- told Mr. Preshoda, the value in the Aerospace side of it is so hard to describe that it takes 20 minutes to describe what we're doing and we can't really describe it all.

Sure. Clark D. Stewart: So in this case in the gaming market and that side of the business, it's easier to understand the markets -- the products are not near that complex and it's really -- is a retail type business. So I think that we're working hard to get to that point and release that value, and get it out there so that we can see it.

So I'm sorry. I'm relatively new to the story. Is that -- does that -- would that involve some sort of separation of the 2 businesses potentially. Can you clarify that in intrinsic value or does it involve some other steps? I mean can you elaborate, or is it something that you can't discuss at this point? I'm trying to… Clark D. Stewart: We really can't discuss it any more than we have in the past. And essentially that's just saying that we're dealing with our business partners to try to work through that. We have a relationship with them and we share all the information with them. And they are truly business partners in the casino and we're working to maximize the shareholder value with their systems.

Okay. Okay, and then one last question just on the -- I don't know if you can provide any background on the -- changing the CFO role or position. Was there anything that you wanted to add there? Clark D. Stewart: There's nothing negative there. Everything is positive. We have people that are able to replace the CFO, just fine with credentials. We filed an 8-K on that. If you look at it, you'll have the description of that situation.

Okay, okay. Well, great. Well, keep up the good work in terms of managing in this difficult time. And I'll stay tuned for some of these other initiatives to unlock shareholder value. And meantime, any share purchases could probably work miracles for the stock at the current levels. Clark D. Stewart: You bet. Thank you for the question and I will certainly work on that program. I guess that we lost sight of that Mr. Preshoda and for you, both in the process of trying to recover the backlog and keep the doors open. But lights are on and I appreciate you both bringing up this topic and we'll get something going on that. Thank you.

Our next question comes from Timothy McMillan [ph].

You've mentioned in the report a little software problem on the gaming devices. Is that getting corrected at this point in time or where do you stand on that issue? Craig D. Stewart: The fix has been completed. We have replaced 6 of 111 or 110 machines on the floor. We have the rest of them to go. It's now in the hands of the manufacturer of the software, which is the gaming suppliers, to get the changes made that the state wants so that we can update the games. And that's going on right now. It will probably be complete by end of January we hope, maybe February. That is significant revenue generating item. That's making sure that you have the current game on the floor and that the floor doesn't get old on you. So it's just like arcade at the shopping center, got to add new games.

On your $2.2 million expense reduction how much of that $2.2 million was related to the selling of the Florida operation of that reduction? Craig D. Stewart: Minimum.

Wasn't that much then? Clark D. Stewart: No. Most of it's -- we've got 1 person doing the job of 2 and we've reduced the salary cost and we've not replaced people that have left. So we're just cutting staffing.

Well, that's good. I've always heard third time is a charm so I will emphasize that what the 2 gentlemen prior to me said, that there can be no clearer message that you can send into market. If we start seeing officers and people buying the stock at these levels and you're clearly indicating in your message this morning their turnaround is coming. And to add to that credibility there's nothing better you can do than me buying stock and continue moving forward. We've had a problem the last 2 years. The credibility -- because all of a sudden business went down and it's a tough nut to fight and I think you're getting through it. And as I say, if you do those other things that have been suggested and continue improving the business, Clark, we're not going to be sitting here at $0.11 and $0.12 stock. Clark D. Stewart: We understand that. I'm taking Tony's suggestions seriously. I think we need to set up this -- the 144 provision that we tell them we're going to buy so many shares in the next 90 days or whatever the regulations say and we implement something like that and see what happens. I think the only way to determine that, Tim, is to test it.

Well, I bet you have a positive result. Clark D. Stewart: I'm not betting.

Our next question comes from David Elfenbein from Wells Fargo.

I do apologize I was late onto it. So if my question was already answered, I appreciate you indulging me. Regarding the casino, actually I've got 2 points, but regarding the casino could you discuss or could you give us some idea in terms of what do you expect from -- how you expect the operations to proceed from here in terms of both growth of top line and profitability of the casino? And then the second point I'll bring up is in relation to the difficulty that you say that people have in understanding the Avionics business and the Aircraft business that you've got. At the end of the day what people will understand is when it becomes a stable profitable division, right. So they might not understand what you're doing and might not care as much if we saw consistency. So just as an idea, I know that you guys have seemingly turned the corner and are working on that. But that's -- I think the message that most people will positively respond those positively too just seeing a stable positive cash flow generating division. That can be kind of, if not quarterly, on annual or some regular basis be anticipated in terms of -- or forecasted in terms of profitability. So getting back to the casino, what are you guys' thoughts? Craig D. Stewart: Well, the casino -- we're coming into the stronger months of the spring and we expect it, of course, to pick up what it's lost in the last 2 or 3 months, and the revenue to get back up, may not as be good as last year but it won't be that bad. We also expect that the -- as you go into the spring, the attitude of the agriculture market is more positive. Everybody tells us that they are going to continue the oil and gas activity and the wind generators and all the other activity that brings people in, but the real growth we think is going to come from the Bussing which will probably be after April of 2014. Through the period, the spring of first quarter we have tried to get as much scheduled as we could, but really we're -- it’s a 6-month lead time to get the Bussing program going and so we have it set for the April-May period to start really contributing. And so, I see us recovering in the spring here as the business recovers. I see that our advertising programs are directed toward doing that. I see that the attitude of the agriculture market turns around in the spring. Grass starts turning green and everybody feels better and that will help. But we've got to get the outside tourist, visitor into southwest Kansas to really help us big time. So that's where we're going with that and I think that's the first item. The second item in the Aerospace, if I knew how to make that smooth we would do it, but so far we've had some pretty good runs in a 2 or 3, couple of years at a time and then something usually happens. It's about a 4-year cycle from one good season to the next. And we just -- that's just all there is to it. We are dependent on the lot of the government spending cycles of the various countries around the world and a lot of the special mission stuff and it's really hard to figure out what's really happening. We've got some new people on board that maybe understand that better than we do and they are definitely involved in that type of market and we'll see how that works out. But I think there's some positive smoothing factor as we get -- expand that market more and more and we get the -- some of the legacy products more on board in the Avionic side of the business. And we're working hard on that. So I think that's our best solution is get more in the Legacy business, that we can always sustain a breakeven with those products. And then we make money on the special mission. That's going to take us another year to get there.

Okay. Well, that's people have time. So look, we appreciate your efforts. We know that you guys have worked hard this year in trying to keep things together and reduce costs. It's always a difficult process. I'm not going to harp on the share buyback that everyone else has. It seems like it's -- point's been made. And one thing I would say with price at this level, in terms of incenting people, let's try and be careful to not dilute at this price because too much share incentive at $0.10, $0.11, $0.12 could become very dilutive very quickly with the market cap as it is. Craig D. Stewart: Right. We haven't been doing that.

No, I know.

[Operator Instructions] Gentlemen, at this time, I have no further questions. Clark D. Stewart: David, it sounds like that we have run out of questions. So I will thank everybody for their contribution this morning. It's been very helpful to us. I appreciate the questions and appreciate the thoughts from outside. I'm trying to keep the doors open and the lights on. So I think that's a great thing to have and this is a very beneficial discussion. And we will see if we can implement some of the suggestions so we appreciate all your support and all your concern for the business and your assistance and ideas of what we should do. So thank you very much. Does anybody else have any observations or questions among our group? We have none, David, so I think we are finished.

Very good. Thank you, everyone. Make it a great day. Clark D. Stewart: Merry Christmas. Craig D. Stewart: Thank you, bye.

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