Good morning, ladies and gentlemen. Today is Thursday, July 31, 2014, and welcome to the Butler National Corporation Reports Fourth Quarter and Fiscal Year-End Financial Results and Conference Call. [Operator Instructions] Your call leaders for today’s call are David Drewitz, Creative Options Communications; Clark Stewart, President and CEO; and Craig Stewart, President of Aerospace Group. I will now hand the call over to Mr. David Drewitz. Mr. Drewitz, you may begin.

Thank you, and good morning to 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 risk 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, 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 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. Thank you, everyone, for joining us this morning, taking your time to call in to this conference call. We appreciate your attention and concern for Butler National. Thank you very much. We are -- with me this morning, I have Craig Stewart, the President of Aerospace and Chief Financial Officer; and I have Ted McMahon [ph], our Chief Accountant. And so we are ready to talk about the press release that we sent out and the 10-K that we filed with the SEC on Tuesday. We are excited about what's happened in the last quarter, as we've discussed at the end of January. We talked about we might be able to recover the loss that we've had going forward, which is almost $850,000, which we were successful in doing that and made $965,000 after-taxes in the fourth quarter We had, of course, a major backlog at the Aerospace division -- segment and that backlog, of course, helped us to get started and get the revenue up and profit in the bank. We're really pleased with that. Of course, the casino operations during that same period of time were down roughly 13%, Aerospace up 19%, so revenue up 4%. We reduced our debt in excess of $3 million during the year 2013 to 2014, and we are pleased with that. Our bankers are happy and those are really requirement -- required reductions on long-term debt. If you look in the annual report under the debt schedules out into the future, you'll figure that -- you'll realize that we are going to be completely out of debt in another 5 years if we paid off our working capital line, which we probably will not do because we want to have that working capital line available to us. But the other requirements, primarily, are the casino financing that will be paid out unless we refinance, which we may do if we are successful with our partners in the acquisition of their interest in the casino. That stands just where it is. We've talked about that before, and we are trying to recover overall revenues and show profits and then we might be able to make that happen. So we'd look at the details of each of the segments. And, Craig, you want to address Aerospace first, up 19%, which is great. Want you to maintain that for the rest of the year. Craig D. Stewart: Our Aerospace segment had a very successful quarter. We've had 3 or 4 quarters leading up to that, that have been a struggle. I think the backlog that we had at the end of the third quarter, which was a little bit over $10 million, was an indication of what was to come. I think that maintaining that kind of backlog in Aerospace is going to be difficult unless we get a couple large, long-term projects. We have one of those in-house right now, which has contributed to some of that backlog that we're working right now. The goal is to move more towards that type of project, but we'll take all the 6- and 8-week projects we can get as well. Those are very profitable for us as well. I think the backlog that you're seeing right now, $4 million to $5 million, is a good indicator of good health for the Aerospace business. That's about a 3-month backlog. And if we can turn that kind of backlog every quarter, we'll be in pretty good shape. So I think going forward, looking at backlog numbers, that's pretty good indication of good health for the aerospace industry -- or Aerospace segment. We are very encouraged by the number of new orders we're getting, the number of activities -- or number of quotes that we're providing to customers right now. So I think the health of the Aerospace Products segment is very good here going forward. Clark D. Stewart: Thank you, Craig. I will address the casino revenue and the services revenue, where we're down about 13%. Basically, what is happening in that segment is that we have less disposable income at the customer level and at the gaming operations. And they don't spend quite as much or don't even visit the facilities. So we're experiencing that not only in our operations, but it seems to be pretty much industry wide as the disposable income goes down. And I'm sure you all realize when you go to the grocery store, the cost of food and all the other things that you buy are up 15% to 25% on a regular basis. And those -- since we are pure retail discretionary spending in the gaming business, that makes it a little tough. So that business is down. The visitors are down about 10,000 a month, I guess, I would say, overall between us, the 2 casinos we manage. So you'll see the numbers in the annual report. The revenue went down. We sold off the BNSI, which was about $1.3 million. Casino is down about $2.6 million, which adds up to $3.9 million. And so other stuff is down about $600,000. We -- one of the architects we had, we had 2, one of them left. We have one architect. We have got a professional -- 2 professional drafting people involved. So our business is good. Our backlog seems to be close to $0.5 million there and so we're favorable on that segment, should make money with it. But we just don't have the people in there. Our cost reduction program. As you can see, we reduced the costs about 5%. Our overall margin is up basically 1% of the revenue, which is the total of the casino revenue plus the Aerospace revenue. So our margin's up. We cut costs in Aerospace from 84% of sales to 74% of sales. And our expenses went up about 10%. In dollars and cents, that means about a $300,000 increase in expenses and about a $1.5 million reduction in costs. So we're pleased with that operation, much more efficient. We had to become much more efficient because, as you know, I reduced my salary substantially. Our Chairman, Warren, decided it was time for him to retire and that helped us with the expense. And so we cut our management costs substantially in the year ended 2014. Our R&D level and marketing expenses, we try to maintain those even in the downtime, which I think is our lifeblood. So we held that at about $1.8 million for the year in research and development and new product development. Marketing is about 9% of revenue, about 4 -- between $4 million and $5 million a year we're spending on marketing. So that's a substantial number, but I think it's necessary if we're going to compete in the retail markets that we're in. Like we said, our backlog is down to about $5 million now, which is about what we should be operating at to maintain $20 million a year. The key is can we keep refilling it at a $5 million level. Now the distortions we will have is, as Craig mentioned, as we get $5 million contracts with a lot of equipment sales mixed with our modification work and the fee for the STC, we're going to have bigger numbers, but not necessarily any more profit per order. But the numbers will be bigger. So don't get fooled by the size of the backlog. The backlog, we should run about $5 million worth for the profitable sales of about $20 million a year, and if we can maintain that, we will be great. Regarding the earnings per share. We, as you know, showed $0.02 a share for the quarter. We were down about $0.01 a share, so that's a $0.03 a share swing. And as you know, the stock price is about the same as it was all along. So it didn't change much. Casino service -- casinos in the services segment are down about 9.4%. The casino itself was 7.3% and the cost down 11%. So the casino managers have definitely reduced the cost and adjusted to the lower revenue. I will address the questions. We had a communication from a shareholder that was concerned about the drop in the backlog. We've kind of tried to address that. He is also concerned about the shareholder valuation and about $8 million to $9 million market cap. Then he is saying, "Well, you've got $6 million in cash flow." That's true, we do have $6 million in cash flow and we've got a lot of cash in the back it appears. But you understand, in the casino business, we're going to have to operate with at least $3 million of that committed all the time to the casino operation. So we don't have an awful lot of cash sitting around. His concern there is that the market cap is too low and we paid down the debt, he is saying, about $4.5 million, which is correct. And he wants to do an AMEX listing and do a reverse split, try to get the market cap to $25 million to $35 million. So I believe that I agree with all the things he'd like to have done. We have a little different plan, as you know. We're going to try to buy out our partners. We've got to make it a profitable business to get that accomplished. We get that accomplished, then, of course, the division of the segment might be in order and that might accomplish even more than what he's talking about. So we will address those -- we will answer his questions after the call and communicate with him. But as far as overall addressing other questions, we've had no other questions. And so we'd welcome your questions at this time, and we thank you for joining us on the call. David, I think, I'm done at that point. Are you, Craig? Craig D. Stewart: Yes. Clark D. Stewart: Ted?

Yes.

Operator, let's turn it over to questions, please.

[Operator Instructions] Our first question comes from Timothy McMillan [ph].

I'd like to delay my question. You've answered a couple of things. I may come back. But let me delay my question and I'll come back to you. Okay? Clark D. Stewart: All right, Tim.

Our next question comes from David Elfenbein.

Question actually kind of twofold, one relating to Aerospace, which is, as you look forward, Clark, you mentioned the $5 million backlog should help maintain or help have a revenue up -- or of about $20 million. Is that what you're targeting? Clark D. Stewart: That's what we're targeting. Craig D. Stewart: If we can -- I think when we've been going good in Aerospace segment, we've been somewhere in the $14 million to $16 million range in revenue. So $20 million is aggressive. But that's the area we're shooting for as to continue to grow it. And if we can turn that backlog every quarter, which I don't think is too far off, we could be somewhere in that $20 million range. Yes, I think $16 million to $20 million is kind of -- is a good number right now for the Aerospace, and it'd be a very profitable number for Aerospace.

So shifting gears to Dodge City. We all understand, I think, why we've seen some deterioration there from where we were and from expectations between the drought, between -- I think there was a plant that closed out there. There were some layoffs, but you also got, I know, the busing back online. Have you guys seen a stabilization at least yet of the revenue and EBITDA numbers? Or are we still seeing some continued weakness there? Clark D. Stewart: We've -- I guess that -- David, thank you for asking the questions. Tim, we're looking forward to yours. David, on the busing, it's back online and really a start-up phase. So far we haven't really had very much overnight because we don't have the hotel capacity to deal with it. We are trying to get that remedied and we'll see how that works as we go into the fall. Stabilized revenue, yes, we've stabilized it. The problem is, is we probably have it stabilized lower than we'd like to have it, of course, and we believe we can raise that some if we get to the overnight busing and the cross-country tourist busing. So far, the busing is localized within the 300-mile market area, which doesn't do us as much good as if we could get the tour buses stopping on a regular basis. We kind of feel like we need overnight for that. We have done a great deal of visiting of the marketplace, the marketing outpost, if you will, or going out into the communities like Oklahoma City, Amarillo, and so on, Colorado Springs and places like that to visit with our customers and have face-to-face contact. That's all worked very well. We've built some loyal customers and, of course, the multiplier effect of those visits are significant. We have then extended to some of the communities the busing program, as long as you're within the day's -- go out in the morning, come back in evening-type situation, we're able to make that work pretty well and that's stabilized us during the middle of the week. So we're there. We would like to recover at least 10% of the revenue, but I don't know whether that will happen until the economy changes some. And like I say, it starts raining and all that other good things that have to happen that we really don't have that much control over. But the answer to the question is, yes, the busing is working. And yes, we're working to increase that relationship. We realize, though, we can't get all the revenue increase out of the local community. That's just not going to work. And it doesn't work anywhere. All the casinos experience the same thing.

So where is the EBITDA number currently for the casino? Have you broken that out? I didn't look through. Clark D. Stewart: No, it's going to be around $10 million.

Okay. But that's a stable number at this point? Clark D. Stewart: That's a pretty stable number, yes. We're trying to hold that stable. And it is staying -- yes, it's staying pretty stable at $10 million. Wouldn't you say, Craig? I think we may be a little over. I don't know that we've been under it.

So all that said, I mean, it looks like the $0.15, $0.016 that you had in Q4, is that a number that you guys feel comfortable as a quarterly number going forward, at least respectively for the year given that you think Aerospace will run at the same level or higher than we're at and the casino stable? Clark D. Stewart: I don't know. I'd like to see us stay at a $0.01 level. I'm not sure we'd -- how the quarter that we're currently in is going to look. The casino revenue in this last quarter has been -- it's been around $3 million to $3.5 million a month, which is -- that's the total gaming revenue, which is the key driver to it. And if we can keep that all together, then we're looking at $0.01. But if we can't keep that revenue together, then that's a problem. But I think we will make money, that's for sure. Craig D. Stewart: David, I think if we can maintain where we're at in Aerospace and get the casino operations going where we think they ought to be, I think -- I don't think $0.02 a share is out of line at all per quarter.

Okay. And you think that can happen as a continuous basis tracking this year? Clark D. Stewart: I don't know. Fall is the weak time in the casino market. And that's where we've really got to make sure the buses are there. And I'm not yet comfortable that they're there to be able to do $0.02 a quarter. So that's why I'm saying I'm hedging that bet.

Okay. But you're comfortable with $0.01 as a base? Clark D. Stewart: Probably, $0.01 is a safe bet. Craig D. Stewart: You're trying to get us to give guidance, aren't you? Clark D. Stewart: Yes, we are trying to give guidance.

Our next question comes from Kalle Ahl.

You guys executed very well. Saw your cash flow generation, paying down debt, doing all the right things. So that's my first comment. You guys actually addressed my main question, which was a drop-off in backlogs. I really don't need to address that issue, but I wanted to get a little bit more clarity on -- you had mentioned the potential acquisition of the minority stake and I know we've talked about it before. I believe you mentioned it could be a precursor to a division of the 2 businesses, if I heard you correctly. Could you elaborate on that, please, a little bit? Clark D. Stewart: Not really anymore than we've put it in the 10-K. Basically, that would be a logical extension. That's really all -- we haven't -- whether it'll really work or not, we don't know. But we got to get to the point where we have at least control, full control, of that segment before we try to do something like that. Craig D. Stewart: Yes, the one thing with that is that our goal is to get both segments fairly valued in the marketplace. And we're working hard to make sure that there is a fair valuation of both the business segments and that we're not taking a hit because we're in 2 different business segments.

All right, perfect. Perfect response. That's what I like to hear. So... Clark D. Stewart: I think that's what's happening and so we're trying to fix it. But got to have a lot of ducks lined up before we can get it fixed.

Yes, I was trying to get my hands around sort of doing some of the parts analysis of your company and what would you say pro forma is just sort of like the trailing run rate of EBITDA at the casino level? Not the professional services segment, but at the casino level for that particular casino. Can you give any color on that, so I can get a sense for what... Clark D. Stewart: It's about the $10 million. You could calculate that on your own if you want to do from what we...

So it's $10 million EBITDA, and I guess 40% of it is the minority... Clark D. Stewart: Of the revenue, yes, that's correct. Craig D. Stewart: Of the profit. Clark D. Stewart: Of the profit, I'm sorry. Yes.

Of the profit. So we can just the basic math there in terms of trying to back into potential multiple thing and you guys are, I guess, in discussions at this point in time. But you're obviously -- are you looking at other options? Are there -- is there any way to ultimately divide the 2 businesses without purchasing the minority stake? Or do you see that as sort of a necessary first step? Clark D. Stewart: We see it as a necessary first step. And we consider -- if you figure all these out, you tell us and we'll be glad to talk about it. But I think we kind of see that as the necessary first step. Really, the first step is we've got the company profitable, which we think we've gotten to that point. We can't have these aberrations like we had with the Beechcraft bankruptcy, all of the oil and the war over and war on and the war off. We're in a better shape now with the war off, if you will, because the spies are more active during the non-boots on the -- if there's no boots on the ground, you've got to have surveillance. If there are boots on the ground, your intelligence is going much better. So you understand what I'm saying, if I'm saying it correctly. So that kind of -- those kind of things affect that Aerospace segment big time. And so we have got to keep that stable if we can. Then we can work the casino and keep the profitability. We'll be able to get to the point where we can move forward on the plan.

Yes, yes, Okay. Well, one last comment then I'll let you go. I'll turn over to other callers. But I would say, from a capital allocation perspective, that would be, in my view, the best place to put your money right now is your own shares. And I know there may be issues in terms of buying back stocks, but, man, what an opportunity. I mean, that would be the first place I'd allocate a little cash at this point in time if you want to get a return on investment. Butler National seems to be -- itself, the shares seems to be the best place to put your money to work, maybe a little anyways. So...

Our next question comes from Tony Pesoto [ph].

Let's get back to one of my old bugaboo questions that I ask every conference call. And I think it's very germane given what Kalle just asked and also what that other shareholder who had contacted you prior to the call was asking. And that's -- it's really the disconnect between the fundamentals of the company and how that's being reflected in the investment community in the share price. I think that the share price is very important for 2 reasons: number one, with the shares in the $0.15-ish range, it enhances the dilution of the current shareholders because of the 401(k) program obligations. The lower the price of the stock, obviously, the more shares have to be issued by the company to fund the 401(k). Now this year, alone, over 1.8 million shares were created by the company to satisfy these needs and that diluted the current shareholders by approximately 3%. Now the dilution, obviously, would be far less dramatic if the price of the stock of the -- that's being issued at the 401(k) was more accurately reflecting its current book value. I would propose that the board looks into changing the terms of the 401(k) to award stock to participants at the stock current book value rather than the market value on an arbitrary day. The stock just doesn't trade heavily enough for that price fix to be accurate, okay? Secondly, as the company grows and wants to expand and does these financing deals and some financial engineering, there are probably going to be situations where some element of any future financing would necessitate some sort of an equity financing. With the price of the stock selling at 1/3 of book value, when the company uses its stock as currency, current shareholders are going to want to reflect a reasonable reflection of its true worth and it's not happening. Now my question. We've discussed this before on these conference calls. What is taking place as far as insiders, executives, members of the board, every member of the board, to purchase stock in the open market, thereby sending a critical message to Wall Street that at least the insiders of the company are willing to commit their own funds to the situation. Craig D. Stewart: Tony, I'll address that one. I think there has been a lot of discussion. We are hearing the comments from shareholders and on the company buying back shares. The one hesitation we've got on doing that is coming out of the period we are in, where the cash was -- cash flow was difficult. We don't want to -- one thing we don't want to do is put too much cash back into the stock and buying back stock to where we're short on cash. But as things continue to get better and the cash flows there, that is definitely an option that we'll look at from an individual insider buying. That's something we've discussed. We've discussed it with our SEC attorneys. You'll have to tell us. The 10b-5, is that the way the...

Yes, the 10b5-1 program. Craig D. Stewart: 10b5. I think from what our SEC guys told us, that, that's probably the safest way for that to happen.

Right, right. It doesn't cause any raised eyebrows regardless of short-term events or anything like that. Craig D. Stewart: Right. And with the absence of insider buying that we've had over the last number of years, what our SEC guys told us is that if all of a sudden that started happening and then there was a series of events that led to the stock price going up, that we could very easily be under investigation there. So probably the 10b5-1 plan is the right way to go if -- to get some insider buying going. I don't know that any of us are opposed to that. We just need to need to look at it and see what we can do to get it set up.

Okay. That sounds great, but I would like to remind you, we've had this conversation over the last 9 months to a year. And we were going to look into it. Clark D. Stewart: The question is, Tony, is when we had it in January, after the January quarter, we went to our attorneys and they said, "What's your third quarter -- or fourth quarter going look like?" And I said. "It's going to look real good" and I even told you that on the call, as I recall. And so he said, "Well, you better not screw with it now." So we'll go back to it now and see whether we could set up the 10b5-1 and see if that make sense to it. Because I'll be honest with you, Tony, I wouldn't be opposed to buying it at $0.145 right now myself. But the other key is, is when we do that, the bankers that we're trying to do the other project with are saying, "What are you guys doing spending cash that we want...?"

No, I'm not talking about that corporate cash in this instance. Because you've got to have a fortress balance sheet when you're involved in these negotiations. I'm talking about a commitment by the executive board and by the Board of Directors. Craig D. Stewart: Yes, I understand.

They step in for themselves. That would send the message to Wall Street that Wall Street wants to hear. They're not going to go in. They, Wall Street, are not going to step in and make a major commitment to a very illiquid situation unless, at least, the insiders are willing to do the same. Craig D. Stewart: Tony, a quick question for you on that. In terms of the number of shares, what's something -- what's enough shares that from an insider-buying standpoint that sends a good message to Wall Street that...

Just as an example, Craig. And this just a hypothetical example. How many members of the board you all have? What are there, 5? Craig D. Stewart: Yes.

Five, okay. If each one of them on the same day made the announcement that over the next 12 months at regular intervals each one of those members of the board will buy 100,000 shares, okay. It's not a lot of stock. It's 500,000 shares. It's not going to affect the price of the stock from a supply-demand perspective. But I think it will send the message. And you could do it 8,000 shares a month for the next 12 months, whatever, okay, per person. It's no money at all, but it sends the message. Craig D. Stewart: Okay. That's kind of the -- that was what I was wanting to get from you, of what kind of volume you thought it needed to be to send that message.

Yes, I think, given the fact that there has never been insider buying in this stock for at least the last 8 or 10 or 12 years that I've been involved in it, just something like that is it's going to make an eyebrow cock up. And they're going to say, hey, maybe there's something going on here. Let's go in and play a little bit. Craig D. Stewart: Yes. Well, we -- Tony, we appreciate your assistance and your interest. We always value your opinion on this stuff.

I'm sure that your personal financial adviser is very, very well versed in this and he can give you better information than I. Craig D. Stewart: I hope he can.

Our next question comes from Anthony Antigua [ph].

Firstly, I would like to preface my remarks by commending Craig for his fine job in the Aviation segment, very nice. And I also commend my predecessor speaker for asking questions which I would have asked myself. So we're on a parallel thinking scale there. So I again reiterate his comments to a degree that you contemplate a buyback in stages. It doesn't have to be one huge purchase, but it can be contemplated in stages on a scale that you feel comfortable with. And I will leave it at that. Craig D. Stewart: Thank you, Anthony. We appreciate your interest in the company.

Our next question comes from Timothy McMillan [ph].

A couple of more things, just again on this 401(k) plan, just to you give an idea on the numbers on that. I looked at the 2011 annual report and we had 56 million shares outstanding. And we currently have roughly 61 million. Seems to me there's almost a dilution in 3 years of almost 10% and so that's why there's a concern on this 401(k). And we think you need to maybe address that and see what could be done differently. And that's pretty good dilution in 3 years just on a 401(k) plan. Second thing, Clark, a little history. Tomorrow will be the 25th anniversary of you joining Butler, I believe. Clark D. Stewart: Is that right?

Well, I think it was August 1, 1989. Clark D. Stewart: I think it's actually September 1, but that's okay.

It's getting pretty close. Friends don't argue over 30 days. That -- no, but I think things here -- I am hearing things that are good here. The thing is, you can have these kind of reports and there's always a debate on when you hire some professional management to come in on promotion, but the least expensive thing you can do is what Tony suggested and get some eyes on this thing and then kind of work with -- this stock shouldn't be selling at 1/3 of book value. And it's an embarrassment to everybody associated with it and should be. So I just can't strongly encourage enough not -- to do more than just think about it, but get something implemented. And next time we talk, which will be in September, it'd be nice to be on a road to doing something.

[Operator Instructions] At this time, we have no further questions. Clark D. Stewart: David, I think we're finished. We'll thank everyone for attending this conference. 45 minutes, that's a long time here this morning. So thank you very much, and we appreciate all your comments and we will definitely move on some of these. Craig, do you have any comments. Craig D. Stewart: No. We appreciate everybody calling in and asking the good questions. Clark D. Stewart: Thank you. David, I guess...

Thank you, everyone.

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