David Drewitz - Creative Options Communication Clark Stewart - President and CEO Craig Stewart - President of Aerospace Group Chris Reedy - VP, Secretary

Timothy McMillan - Private Investor

Good morning ladies and gentlemen. Today is Monday, March 21, 2016, and welcome to the National Corporation Third Quarter Fiscal 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. [Operator Instructions] Your call leaders for today’s call are David Drewitz, Creative Options Communication; Clark Stewart, President and CEO; Craig Stewart, President of Aerospace Group. I’d now like to turn 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 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 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 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. Well, 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, we appreciate your taking your time this morning to join us on this quarterly call. We think we had a good quarter this time. We made some money. Sales were up in the modification business, and down in the services business; the aerospace up 27% and services down 12%. Overall, for the nine months we’re down 6.7% from 2015, we’re little better off than we thought we were going to be three months ago. Net income improved from '14 to '15 to '16, the nine months is down from '15, but were up from '14, and the possibility does exit that we may be able to recover this loss before the end of the year. So, we have strong business in both segments. Our debt is down from '14 and '15 as you'll see in the table, and we’re happy with that interest cost of course followed. Equity is up from '14 and '15, R&D is down this quarter year-to-date it's up from 2015, but down from two years ago. New items coming on in the R&D department is the ADS-B which is transmission from the airplanes in all groups back and forth to the ground stations by 2020. Where that gets pushed back or not, we don’t know but there are thousands of airplanes out there. Chris how many do you think we have, what’s our market? 10,000 something like that...

I mean it's all Learjets...

It's a huge number. We also have on the horizon some interest in some more Transient Suppression Devices from the bigger airplanes and we hope that'll develop -- there is a market there for 200 or 300 units. For 200 or 300 units and those are profitable products. Our backlog stands at $8.9 million. It was $10.3 million at the end of October '15 and about $10 million at year ago. So we’re thinking where backlog is holding up, but sales are coming on, orders are coming in about the same rate, we’re shipping at this point. Our cost marketing and advertising is up, depreciation is down because we write basically most of these STCs and the other assets off over a five year period. And G&A is up about 8%. We spent more money in legal fees and things like that here in the last nine months, that’s over the nine months. I’d like to say, interest is down some 60% primarily due to the refinancing in the Casino debt where we picked up about 10 points on the rate. I do have some interesting information on the Casino share of the market. In July first, we were 11.2% of the market. Hollywood was at 38.9 and Kansas Star which is South Central Kansas was 49.9. At the end of February, the 10.7 was our number, let me make sure I’ve got the right -- got this on the right sequence so just a second. This is for the eight months. We were 10.7% of the market. Hollywood was 39.3% and Kansas Star was 50%. Now in this last month, we’ve had an improvement of that our share of the market significantly. We went from 10.3% to 11%. Hollywood went down from 39.5% to 39.1% and Kansas Star down from 50.1% to 49.8%. Now that’s all wonderful stuff. But what I am telling you is our Casino business in November and December was horrible and apparently the rest of the industry was the same. Our recovery in February and appears to be carry in through March has been much better than we expected. We’re within record months for February and we’ll see how March comes out a bit. I think we’ve had a change in the marketplace somehow. We still have a relatively depressed market in Western Kansas for capital expenditures for roads, oil wells and all that, that’s on the news today. The spendable income is down, sales tax collections for the retail sales out there is down 30%, 40% from a year ago. So, we’re doing amazing job out there and marketing people and the whole group. They even keep us in the game. So, I thought it’d be interesting information to think about. I don’t have -- I guess we’re all optimistic here. We think we’re in good shape to try to make a profit for the year. So, I don’t have any other comments. So anyone else have any comments?

I would say that on the -- this is Craig on the Aerospace side, we’re very encouraged that we’re seeing that business turn around. We’ve seen the backlog grow and the recent quarter is waiting on the deliveries with that 10p divisions. Delivering on its larger contract now on a month-to-month basis, and aerospace, the number of quotes and orders that we’re continuing to see are significant. Our guys are awful busy just with quotes alone. So we’re encouraged that that business will stay strong here for the next few quarters at least.

And with that David, I don’t have anything else, so see if we have questions.

Yes, of course turn it up to the group to questions.

Ladies and gentlemen, at this time, we will conduct the question-and-answer session [Operator Instructions]. Our first question comes from Timothy McMillan. Please state your question.

Anything new you can add on our refinancing on the casino? And I know you’ve been kind of having a dead area lately, but anything you can add to what’s been going on or confirm what’s going on?

Well, that’s a good question Tim. I don’t know for sure. We think we’re moving forward. We probably won’t know anything for another week or two as to how far we’ve moved forward. But we’re moving -- we believe we’re making some progress. It's slow going but we’ll get there.

Do you mind reiterating Clark the savings again to the Company if you can get this done just for everybody?

What’s that now?

Importance of this refinancing to the Company, the importance of it and so forth...

In simple terms, it's this. We are currently running the facility, land building, most of the equipment all that stuff is under a rent agreement. We’re changing that to an ownership agreement. So if you figured, that’s $40 million, $50 million worth of stuff, $40 million about, you can do the math on that and you’ll find out that the net income will improve if we do that. And that’s really what we’re seeing.

Let's say $4.8 million or something like that around at this point, and the financing, that’s annually, and the financing cost would be about half of that over 12 month period.

But you are somewhat hopeful that moving forward, this will get done is what you’re thinking at this point in time?

Yes, one way or the other, we’re going to get this done. But I don’t know exactly how it's going to work out.

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

Okay, great. Clark, any closing statements...

Yes, thank you Mr. Drewitz. We appreciate your time again, taking your Monday morning after a great weekend of basketball to listen to Butler National’s explanation of what’s happening. Thank you for that and we appreciate all your support and I'm finished with the discussion. Thank you, Mr. Drewitz. Thank you, Craig. Thank you, Mr. Reedy.

Well, thank you to everyone. Have a great week.

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