Butler National Corporation (BUKS) Q3 2019 Earnings Call Transcript
Published at 2019-03-19 00:00:00
Good morning, ladies and gentlemen. Today is Tuesday, March 19, and welcome to the Butler National Corporation Third Quarter Fiscal 2019 Financial Results 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 would now like to turn the call over to your host, David Drewitz. David, 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 are 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 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 on 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 statement completed, I'm going to turn the call over to Mr. Clark Stewart. Mr. Stewart, it's yours. Clark D. Stewart: Thank you, Mr. Drewitz. I appreciate your introduction -- concerns, let's say that. Welcome everyone to the call. We appreciate you taking your time to listen to us and talk to us about Butler National Corporation. We really thank you for that. As you should have received by now a press release dated March 15 and an SEC 10-Q form also dated March 15 for the period ended January 31, 2019, reflecting 3 month's and 9 month's worth of operations and comparative data to the previous periods. The press release, you should have received as a table of numbers. It has Paragraphs 1, 2, 4 on Page 2 to describe the overall operations. And then you have the segment highlights on Page 2 and on Page 3, the exciting part, the backlog. And with that, I will give you the highlights of what I observed in the report. Revenue is up 30% to $14.3 million for the quarter, up 27.1% to $43 million for the 9 months. And if you look at that, you realize that there's been years when we didn't have that much revenue total for the year. Income is up $1,320,000 for the quarter; and 3.2 -- $3,228,000 for the year-to-date, for the 9 months. Those are significant accomplishments, and we need to thank everyone for that. Now this quarter versus last quarter, we're down $1,005,000 approximately. As you recall, we had some sales tax collections in that last quarter that drove the revenue up some, so we want to let you know that, that did occur and that's down about 6.6%. Professional services revenue for the quarter, up 1%. Contribution is down, primarily because we -- casino operates in cycles. As you all know, the whole percentage is a little less than the average in this last quarter, and the weather gave us some problems. There's nothing wrong there, it's just a matter of that's kind of how the business goes. Aerospace is up 93%, $6.7 million, a change of $3 million. And the increases are split about evenly between or Avcon and the -- or between the avionics and the modifications, really. Contribution to profits for the quarter is $1.6 million. This is showing about 24%, 23.9% of sales going to the contribution line, which is good for the industry and good for us, considering that Aerospace has been often behind a little bit, year-to-date. We've invested about $1,233,000 in the year-to-date compared to $1,336,000 for the last year. We are in the process of investing considerably more in the R&D and we'll call that to your attention here in a few minutes. The exciting part of this is we have a backlog. We have a greater than 10 months' worth of current revenue, sitting at $16.7 million, up $2.9 million from the $13.8 million we had at the end of October. Now that increase is about 43% of the quarterly revenue, and that's distributed pretty much almost 50-50 between Tempe and the Kansas operations. The ADS-B, the only one that really defined by FAA date, accounts for only 5% of the backlog. So it's not a real show-stopper when that is finished, will there be 95% of the backlog has something else in it besides that. We are working on an ISR project. As you recall, intelligence surveillance and reconnaissance is underway. We talked about it last quarter. We have since worked that, we have purchased King Air 350, which is a relatively new airplane for completion of our STCs for stores and pods, and we have waiting customers to purchase that modified airplane. We expect this project to last somewhere a year to 1.5 years. We don't know exactly how long it's going to take, that's why we own the airplane instead of a customer, keeping the pressure off of us. And Aric, Aric Peters, our Vice President in charge of our marketing operations in the Aerospace segment is here with us. You might want to explain a little bit about that project, Aric, and what you see there. With the mic.
Yes, so we got the King Air on site last week, it arrived at our facility. We are currently modifying the airplane and getting it ready for what we would call a stores project for stores under the wings of the aircraft. This is all in preparation to put on a sensor array underneath the wings of the aircraft that would look for things like disturbed earth. And most of the time, this disturbed earth would be IEDs and provides explosive devices or somebody digging tunnels, something like that. So it's a very exciting project for us. We think that we will sell a lot of these modifications soon -- fairly soon. We're probably like looking at getting rid of the aircraft in less than 18 months at this point. If it works out well, we'd buy another one and do it again. Clark D. Stewart: Thank you, Aric, we appreciate you adding a little detail that everyone would be interested in. Our staffing, we talked about last quarter as being hurting on staffing. Aerospace staffing has increased about 11 people since the quarter -- last telephone call. Services, we changed 1 person that -- in the service business, we've added 1 person. And I think that we're gradually solving the staffing problem, but as the backlog builds, as you can tell, it's going to be a continuous challenge to keep the skill staffing levels up. We're also experiencing considerable cost increases at the wage level for all of these technical services. They are going up in the magnitude, 20%, 30%, which is significant. It hurts the bottom-line a little bit. The other thing that probably we need to talk about a little bit is in Part 2 of your SEC 10-Q on Page 24. Part 2, Item 5, we talked about the overhang that we discussed last time. And our current plan is to move forward, to move that into alignment with the published survey data, which says we ought to be about 17% or less of the outstanding stock, and we are currently right around 20%. So we're trying to move that, and we plan to get that underway here, sometime in the Spring. Only 20 -- you got to remember this survey group that we're dealing with, only about 25% of those companies ever make any money. And so we are kind of a unique company, that we are in the penny stock range and roots, and we have significant profits. So I just point that out to you, I know there's questions on that and give you an update. Overall, with open items on the Services segment where the casino is, is usually where there's lots of questions, and I will try to address some of those. Last quarter, we talked about the bank and the funding status of the option to purchase land and a building. And the bank has concluded that they are not going to fund that loan without an extension of the contract. The Lottery has that question on their table, however, they're busy working on sports betting and our extension is waiting. We expect that the sports bidding will be done with the legislative process before anyone considers with our extension at all, so that's a ways in the future, and we don't know exactly when. They are also considering major projects at Boot Hill to update the electronic systems. The actual service, the electronic service, we've been experiencing some brownout situations and things like that, and we're going to have to beef up the electrical system, stop that and that's about a $1 million project. We're also going to have to do every 5 years or so, we'll do a replacement of this gaming software, and that's another $1-million-plus. And for some normal maintenance of the building to keep it looking new is another $0.5 million or so. So we're looking at $2.5 million to $3 million of pending expend -- capital expenditures that we're kind of holding based on what the extension status is. So those are our opportunities there. We have other opportunities that we need to address as time -- as they unfold. One is Shawnee. Shawnee, Guymon Oklahoma Casino that should open sometime this fall -- for summer or fall. And that could affect our revenue. We hope our marketing is strong enough to offset that, but we're looking at it. The other thing is the sports betting, which we don't know how that's all going to work out. But we do know that sports betting, whether it's done by anyone, the casino or anyone else, does not have the whole percentage that normal casino gaming holds. But what we're doing there is trading casino dollars for sports betting dollars and that could affect the contribution, either the whole line and the gaming terminology. That probably is not a big crisis, but it's one of those thing -- opportunity we have. So overall, I'm very positive about the -- our current situation. We have a lot of opportunities to address, and I want everyone to understand the concerns and the opportunities for doing much better and the opportunities that we could have challenges to the revenue. So I -- with that, I think we're finished. Craig, do you want to add anything? Craig D. Stewart: No, I think you've hit everything, all there it is and where Aerospace seems to be going strong right now. Arizona modification segment and avionics segment, I mean I think we should continue to see good progress there for the foreseeable future next 6 months at least. Clark D. Stewart: I agree. So David, I think we are ready for questions.
Well, great. Let's go ahead and open the call to questions.
[Operator Instructions] Our first question comes from [ Daniel Vest ].
Very nice operating results, thank you. There's a couple items I didn't understand in the explanations. First is the dilution overhang issue. What is the bottom line there? The 17% to 20% is a little confusing. Can you tell us in layman's terms what that means? Clark D. Stewart: Well the study groups we've had said we shouldn't have more than 20% overhang. And so the 12.5 million, the shares that are authorized that we could issue as incentives is more -- is 20% of the outstanding shares. A study group says that, that should be for our type of business in our environment, should not be greater than about 17%. Now whether we have...
So is that going to decelerate the dilution or accelerate the dilution? Clark D. Stewart: Bring at this -- it would cause -- we would -- in theory, we would reduce the number of the overhang shares by about 3%, which would mean that we should issue 3% of that 12.5 million.
All right. Is that less or more than in the past? Are we going to see more shares outstanding and fully diluted in the future than we have in the past, trend-wise? Clark D. Stewart: Unless we can buy back more, we've been trying to buy them back, but we haven't. We haven't done that. We -- the group says we should issue the incentives, we're not -- we have not issued any in the last 3 years or 4 years, longer than that, but study was really 3 or 4 years' worth, and they said that we haven't done anything, you need to be doing some. So that's how we got to $12.5 million. We said "Well, we'll get that approved." Now they're coming back to us, said, "Well you ought to issue them. You haven't done anything." And so that was the upgrade for the study group. But that's where that is. Yes, that will increase the number of shares outstanding until we get them bought back up. That's it...
All right. So the 12.5 million shares, we got what? 20% are going to have to be issued in short order? Clark D. Stewart: 3% of the outstanding shares, yes, that would be a couple, 3 million. Yes, that's right.
So we're going to see 2 million or 3 million additional shares being issued? Clark D. Stewart: That would be the math, yes...
In the next year or two? Clark D. Stewart: Yes, that's correct.
And are you still Craig, finding opportunities to buy? Are there still blocks? Craig D. Stewart: We are. It's not as -- it kind of goes in waves and we're just getting into a period when we can buy again. We've got a couple of blocks that we're looking at, at this point to get bought here between now and the end of April. So I think we're actively looking as we get -- buying those blocks, we're going to buy them up rather than let them in the market.
All right, but we've seen the end of this favorable trend of less dilution getting the share count. So that's unfortunate, but I guess that is... Clark D. Stewart: Well it depends -- it depends on how many -- there are shares out there that could be bought. If we can get them found and bought. They're -- it's not like it's a guaranteed thing. It's one of these deals that all of a sudden some guy shows up, says yes, I'll sell you these.
What if we uplift or we change -- what if we change our listing or our status as a small cap? Will that change these silly study group recommendations and put us in a different category over time? Does that happen with the spin-off or anything of that nature? How do we stop it? Clark D. Stewart: I think at -- my feeling and it has no facts, I just -- as I look through all this stuff, my feeling it'd be a dramatic change, we'd have to be probably listed somewhere and be able to justify that to ever get out of this group. Is that a fair statement? Craig D. Stewart: And without -- and again, I'm not speaking from a position of real strong facts either, but my guess is if we were listed on NASDAQ or somewhere besides OTC, that we'd have a different situation. I mean, some of these groups -- some of these companies that are in the study group, from what I've seen, they are NASDAQ-type listed companies. They're looking at our peer group in the aerospace segment and the casino management segment. And I don't know how they came up with the group, but there's not a whole lot of them making a lot of money at this point.
Right. It sounds like total nonsense to me. We've got to find a route up away from this group and this egregious regulatory situation. And I don't understand it. I've never seen it. But that brings me my follow-up question, which is what other avenues are we pursuing to achieve the spin-off? We've come to a dead-end with the banks. We are at the dead-end with the legislators. Can you go to private equity? Can you pay more? Can you make a deal with the casino owners to give them equity in a spin-off? Are you not pursuing any of those options? Clark D. Stewart: Those options aren't going anywhere without the regulatory approval, no matter how much money you have. So that's the whole problem with the gaming side of it. Kansas laws are tough to deal with and that's the real situation.
Okay, so with -- so there's -- so that's on a permanent hold? Or 2 or 3-year hold now? Clark D. Stewart: I think that part will move somewhere in the next 6 months without any problem. But I think we've got to get through the legislative session, we've got to get through what the sports betting effect is and all the casinos in Kansas have the same sports betting challenge. We have and we're not at all, unique. Matter of fact, we all are talking to each other, trying to figure out how to move this thing forward. So it's not like we're not doing anything. We just have an armload. Kansas is the only state in the United States that deals with gaming like it does. And as long as that's...
So nothing happens until you get an extension. Clark D. Stewart: That's right. And the state gets done messing with sports betting. Now that all...
Well, we don't know if that's 6 months. Why do you say 6 months? It sounds like it could be 2 to 3 years. Clark D. Stewart: I doubt that.
Why would they deal with you before the end of your contract at all? Clark D. Stewart: They will. They'll deal with it. The question is what's the direction of the Lottery. It's not a -- it's not our -- it's not that question. It's what's the direction Lottery is going there, with the sports betting.
And at that point in time, if and when that ever occurs, are you still planning on pursuing the spin-off? Clark D. Stewart: We haven't changed our plan one bit. That's correct. There is no doubt. We just hit a few rocks in the meantime. And we are lucky that we're making good money while we're hitting the rocks. So I think...
Do you expect to keep making cash as we proceed here with the strong backlog? Craig D. Stewart: I've never seen the backlog bigger than it is right now. I think this is the first time I can remember, where typically in the past that the modification segment was going real strong, avionics segment was really weak or vice versa. This is the first time I can remember in a long time that we've had both of them going with strong backlog and strong delivery and some -- going strong at the same time. So I think looking out, what we can see, at least from a modification segment, which goes out about 6 months, that's going to be pretty strong for the next 6 months at least. The avionics side of it is going to remain strong as well for at least that long.
Now what about longer term? And I know there's no promises and no true visibility, but with the new STCs, what are the life cycles of those, and the new hires, I assume they are permanents. And the new international opportunities, does this lead you to believe that over time, Aerospace can grow from where it is today? Or is this simply an upswing in the cycles? Craig D. Stewart: I think it's a little bit of an upswing in the cycles. But I do think what you're seeing is we continue to develop new STCs that will keep us out front of competition in terms of the ISR world and the modifications that keep that revenue going and allow us to grow that as we go forward. I am very positive that we can grow -- with the new STCs that we're working, that we'll continue to grow that business. Clark D. Stewart: I have to agree with that. We're one of the -- we're one of 1 or 2 of the real providers that the market segment was dealing with on the ISR business. So there's not a lot of others out there, and we are the one that's the innovator of the various techniques, if you will. And I think that, that's going to get more and more significant as the world changes.
Does that make you a saleable entity? And is that something you would consider? Or is this something you'd like to grow yourselves for the next several years? Or either? Clark D. Stewart: We need to grow that ourselves for the most -- for all practical purposes because the collection of people that we have working on all this stuff is really a unique group to some extent. It's not your typical airplane worker or your typical sheet metal mechanic or your typical anything in the aviation industry. It's a unique group and when we start varying outside of that, we run into all kinds of problems. And that's why it's -- almost has to be. It's not a big company atmosphere we're dealing with. Got to be small company, work ethics and everything else.
And a larger company might not be interested in maintaining that culture if they bought you? They wouldn't want to buy you. Clark D. Stewart: They probably wouldn't want to buy us because they don't want to maintain that culture. And the culture is not what you see when you start getting into the big company. Because we do with that rate for a reason and we get the creative thought we get, without a whole lot of hassle. So that's probably all I'll say about that. That's how that works.
Our next question comes from [ Sam Ribowsky ].
I missed most of the call for the first 15 minutes. Is it recorded? Or is it going to be in Seeking Alpha or on your website? Craig D. Stewart: We will get it posted to our website as soon as we get it, which is either later today or early tomorrow. But as soon as we get a copy or the file with the recording, we will post it to our website.
Okay. If I -- hopefully I'm not repeating this, but relative to increasing the size of the Aerospace, what do you need to do? Do you need more offices? I mean, more locations? Do you just need to bid on more contracts with the same people you're working on? What do you need to grow this section? As the previous caller indicated, that would be a good idea. Craig D. Stewart: It's really workforce constrained, why you're seeing us out. I don't -- I'm actually kind of surprised we got Aric to sit down on this call because he's probably getting behind on doing quotes. I think it is -- it's very much a workforce constrained type deal with Aerospace. Hiring good people right now. Most people in Aerospace are hiring, so it is a competitive market for good employees. And so we're constantly looking for those so that we can increase capacity, but that's really where it is. Clark D. Stewart: Let me ask Aric questions since he's here. I appreciate your questions, Sam, thank you very much, because what we are dealing with here -- as Aric, how long have you worked for us.
20 years. Clark D. Stewart: 20 years. And out of that 20 years, he probably spent the first 8 or 10 years of that 20 figuring out what this business really is. And that's not only at Aric's level, it's at the mechanic level working on the floor doing this stuff. And there you almost need, your -- for a lack of a better, the MacGyver type [ farmer ] working on this thing.
Extremely technical. Clark D. Stewart: Extremely technical.
It's been that way every day. Clark D. Stewart: And so your engineering staff is a unique group. The workers that actually do the work is unique because none of this stuff is repetitive. And then you've got somebody to figure out how it really works and how we can do this, and that is the marketing and sales organization. So we have 3 different factors in place that work together and otherwise, we -- our experience tells us, when one of those falls apart, your business is that -- just stops.
Well, in essence, you need to train new staff, basically. I mean, where a potential employee on-the-job training, is that -- am I reading that correctly? Or... Clark D. Stewart: You are correct. Craig D. Stewart: We are constantly trying to keep the big manufacturers from stealing our employees, our good ones.
Okay. Now the use of smaller planes, which is what you're working on compared to the Boeing, with the Boeing problems, do you think there will be increased use of smaller planes? Clark D. Stewart: I don't know. I don't know how we -- I don't know that we can evaluate that at this point. Craig D. Stewart: I think you've kind of -- I mean the Boeing issues, with the 737, which are passenger configurations, we don't really deal with anything which is passenger configuration.
No, but what I would think is to the extent that people wanted you -- or the problem, people are maybe afraid to fly in a larger plane, there might be more utilization of smaller planes. Clark D. Stewart: That's hard to say.
Okay, okay. Now let me ask you, you spent $2.9 million for a new aircraft. Did this replace a craft that you had? And to sort of -- let's revisit the purpose of this $2.9 million plane, what is this supposed to do for us? Craig D. Stewart: We are -- we did sell an airplane, but this is a different -- this is a King Air Model 350 that we purchased, which is one of the most popular special mission platforms. And the purpose of buying it rather than an FAA project to get an STC can take 1 year to 2 years of time. You don't have a lot of customers that are willing to loan you an airplane to do that work. And it also has to be -- and registered -- a U.S. registered airplane.
So you use that not for transport, but to learn what you're doing? How is this plane utilized? Clark D. Stewart: We will modify this airplane with new Supplemental Type Certificates that are special mission related. And so that process of getting those Supplemental Type Certificates will take anywhere between 1 year, 18 months, 2 years. Once we've got the STCs from FAA, now we can do those on the other airplanes, on customer airplanes a lot easier, and we didn't tie up a customer airplane in the process. And in addition, we've got a number of customers that we think we can -- once this airplane is modified and STCs are complete, that we can turn around and sell this airplane -- in its modified form to one of our customers.
Okay. Well, the big picture here with the earnings that you -- for those -- for this quarter and for the first 6 months -- 9 months is phenomenal. And Clark, and this sure would give you a chance to have some higher valuation. And I guess it's just a question of potential investors to getting to know who you are and what you have. And I don't know if they need to wait to the end of the year. Presumably the fourth quarter, your backlog is as good it was at the end of the previous quarter? Clark D. Stewart: Yes, it's much stronger than it was.
It's much stronger. So to the extent -- yes. Clark D. Stewart: Yes, just a minute, let me give you the real numbers. The backlog is sitting at $16.7 million. At 3 months ago, it was sitting at $13.8 million. So we've increased the backlog. $2.9 million in the last quarter, which tells you that [Audio Gap] -- and the thing is that you touched on something when -- as you stated, what should we do? We have as much trouble explaining to the marketplace what we do as we have training employees and management people to run this thing. And so we -- you understand a little bit. The purchase of the airplane is an R&D, research-and-development-type project because these modifications we make, I mean, we cut holes in the thing, we put additional structure or members with the -- inside the airplane surfaces. We have things hanging off of the airplane that affect all of these things, affect the aerodynamics. So you've got to prove to the FAA and prove to ourselves that this airplane is safe to fly. And so all of that process goes through a great deal of high-tech analysis and real test flights with data collection equipment on there to know exactly what's happening. And so that goes through that 1 year to 1.5 years before we get approved that says, "Yes, okay, you guys can go ahead and do this, it's safe." And so that's what the business we are in there, and that's sometimes hard for anybody that's not out there with their hands on this stuff. I have a good feeling. I can tell you that all day, but what's that really mean? And -- so that's part of our challenge to educate the market about the value of the company and...
So it appears, Craig, that you should do more than the $6.7 million in revenue in Aerospace in this current quarter based on the increased backlog. And what would you say this $16.7 million backlog, what is the timeframe to complete this business? Is it 6 months? 10, 9 months? 12 months? Or what is the time-frame we expect to complete that? Craig D. Stewart: I would say some of it's between the next 6 months and the next 2 to 3 years. Avionics backlog goes out as long as 3 years.
Okay. And as far as what we're currently bidding on, do we have a number, -- a dollar number on what we're bidding on? And if we're -- are we sort of most of the time, there's not too many people that we're bidding to get the job, and if we put a bid in, we're more prone to get the job. Is there some way of understanding your success rate? Clark D. Stewart: Let me give you a description of my own experience here. I came here and went to would to see what was going on in about 1989. And there was -- yes, a fellow sitting behind the desk running the Avcon where these modifications were made. His name was Jack Graham, he was Bill Lear's personal pilot, and had a lot to do with the certification of Lear Jets. And he said Clark, let me show you this book. And he got out a book about 5 or 6 inches thick, very old notebook. He said then "Here's all the backlog of orders that we have quoted." And he said "I'll tell you these orders, lots of orders here. Lots of quotes have been made." And he said, "I couldn't tell you which one of them is going to come in over the next 5 years, at which -- what date, but I can tell you that all of them are going to show up in the next 5 years." That is the thing we're dealing with. All these things have funding, they're major projects and all of a sudden -- yes, we've got lots of [Technical Difficulty] they are going to show up. So not on the airplane -- the money shows up today and the airplane shows up tomorrow. The airplane shows up and then the money shows up and you thought it was coming a year from your view.
Well, look, it sounds you're on the right track and it seems very positive. And it's understandable you'd like to buy as much stock as you can at these levels. I mean your last purchase at $0.34, and hopefully, you'll succeed in adding more at these levels. And the possibility of the gaming eventually something happening, you've got a lot of gems in there. And hopefully somebody could get to know who you are. Sounds good. It seems much better than last quarter and you seem to be doing what you should be doing. And good luck and hopefully, continue the uptrend. Clark D. Stewart: Thanks. We appreciate your time. Do we have any more questions? Are we done then?
We do have a question from [ Timothy McMillan ].
On this IRS project that's -- you think will last 12 to 18 months, can you give us a minimum expected revenue from this situation and maybe a maximum of what the potentials are? I mean, you didn't really lay out any numbers, but do you have an idea of what a minimum and maximum might be? Craig D. Stewart: I think the minimum is we'll get the airplane modded and we'll sell the airplane, at least make the money back that we've put into the airplane. Clark D. Stewart: That's minimum. Craig D. Stewart: And I think there's possibilities of -- 10 to 15 customers probably at a minimum putting this kind of stuff on their airplanes. And I don't know what the rate [indiscernible]. That's probably $200,000 to $300,000 per copy in terms of each time we install it. So I think that's on the low-end, but that's being fairly conservative. Our payback on it, at least will be a couple 2 to 3x of what we're spending on this airplane.
Okay. All right. And then just back on the options to [indiscernible] are you saying there is a possibility you're going to issue 2 million to 3 million shares this next fiscal year? And perhaps you would do that at that rate for the next several years? Is that what you're thinking about doing? Clark D. Stewart: Something like that is what's being recommended, yes.
Right. So the idea of investors worried about all of them getting issued at once, can you categorically say that would not happen? Craig D. Stewart: I don't think that would happen, but I guess it could happen, Tim but that isn't what were planned.
It's mainly as you indicated when this was done, it was for current employees and future employees. So... Craig D. Stewart: That's right.
And you would just -- it just seems normal you'd want to stretch this out over several years because you don't know when you're going to have another future employer -- employee that you might want to issue some of these options to. Clark D. Stewart: That's correct. Yes, that's planned. That's what we told you originally. And I'd have to change that. Craig D. Stewart: Tim, I think you're making a safe assumption.
Yes. Well, because I think -- gentlemen, I strongly feel why this stock is selling here is because of that option overhang and the uncertainty that it produces. And I think the more clarity we can get, the better chance we're going to see a breakthrough for the year. Clark D. Stewart: The study groups are telling us the same thing, Tim, that we need to get the overhang down.
Well I can see I rehearsed them well. Clark D. Stewart: You did a good job. Thank you for your question, by the way. Appreciate it, thank you for your time.
Our final question come from [ Tony Scata ].
Just a quick question from about 30,000 feet here. I'm looking at the 2 semi-disparate divisions we have here, the Professional Services, mainly the Casino and then Aerospace. It appears that the professional services, the Casino, is a very limited growth opportunity. But let's call it 1% to 3%, 3.5% a year and yet that is the division that appears to have the most headwinds as far as the headaches with the Kansas State Lottery Commission, the other headaches with too numerous to mention. You've got to come up with another $2.5 million to upgrade certain functions and so forth and so on. And you're putting this money and this effort into a very, very slow but steady grower. Has any thought been given to maybe divesting yourself of the Casino? And since you're giving up the stable situation in Oklahoma, maybe just divorce yourself from the gaming business and take those assets and put them into the Aerospace division, which clearly appears to be the growing element of Butler National Corporation. Have you all given that any thought at all? Clark D. Stewart: The answer is yes, we have. And the answer is we have planned to spin that thing out and give it to the shareholders, separate from beyond -- or from the Aerospace side. We haven't got to that point because we need to have these...
Right, you got to have everything cleaned up by then with the partner and so forth and so on. But what I'm saying is, is the Casino, now that's -- let's just say, The Casino or that division, is that a saleable division to a Penn National or some other large regional casino operator out there that can just buy the casino outright from your interest in the Casino for a major infusion of cash that you could then invest in the Aerospace industry? And get down to a situation -- well, let me put it this way. I talk to a lot of analysts and I talk to a lot of hedge funds and everybody is very interested in Butler National, but they say we can't wrap our arms around a company that runs a casino and does state-of-the-art Aerospace business. I mean, they'd almost have to have 2 or 3 different analysts looking into the company. And I think that, that's part of the reason why the company is selling at such a very, very moderate [ DE ] level right now because nobody is willing to follow it, if they have to have a casino guy come in there and if they have to have an Aerospace guy come in there to analyze the company. Craig D. Stewart: Tony, I think you are exactly right. I mean the -- when I was out doing all the roadshows 5, 6 years ago, whatever that was...
Right, with John and Luke. Yes. Craig D. Stewart: That was exactly the message I got from a lot of them was this is a great story, but I can't explain it to anybody.
Exactly. Craig D. Stewart: And I think that's where the idea of spinning it out came from.
Spinning it out is fine, but you still have to have somebody operating it. You still have to -- I'm sure would still, in some respects, you'd have a minority interest in the Butler National umbrella. I'm just talking about selling the darn thing. Selling it, bringing in the cash and reinvest and investing that cash in the growth area of the business and getting rid of all the headaches. Clark D. Stewart: Well now I would agree. I agree with your theory. The deal is we just happen to be lucky on the headache side of the FAA, if you will. We have managed to accumulate over the last 20 years, some pretty skilled people that deal with the FAA challenges. And I guarantee you, some of those are bigger than the challenges that we have with the friendly casino.
Right. But sometimes better the devil you know and have some control over than the Kansas State Lottery Commission. Clark D. Stewart: But that's what we're dealing with. And you're right, we understand that and I think we need to move toward resolving it in the future here. And we think about that all the time. So yes, the answer is yes. We are thinking about it. Craig D. Stewart: Tony, you're exactly right. To truly unlock the value for the shareholders, it's either going to be separate or it's going to be one focus, yes. And there's no question about that. Because like you're saying, there's a lot of people that deal with casinos, there's a lot of people that deal with airplanes, but most of them don't deal with both.
Right, especially on a small micro cap company like Butler. They're not going to devote two analysts to following it. Craig D. Stewart: Right, exactly. Clark D. Stewart: David, do we have any -- another questions?
We do have follow-up question from Sam Ribowsky.
Along the lines of the previous caller, do we -- as an investment banker, give us an opinion on the value of the casino on a sales basis or on a merger basis? Firstly, it would be worth less without the finality and the licenses that you need. And so the question would be what would it be worth if you got all the financing and everything with the real estate, et cetera? And what it would be worth today and what it would be worth -- and would any potential merger partner give you a realistic value, whether -- if you needed more money to run the Aerospace. I mean, have you looked at those type of transactions and so that you can make a judgment to get bigger or what you might do and then more ability to work on Aerospace? Clark D. Stewart: I guess the answer to that question Sam, is that we haven't looked at that value in the last 5 years. Every time we looked at it in the first 5 years, the value calculated and the value that somebody was willing to pay was only the magnitude of 4 or 5x different. So that -- and the reason is this is an isolated location. It was, at that time, a green space situation. But still that's to some extent, that it's 200 miles from anything else that purrs. And so yes, we're in a unique situation there that valuation is not right straight out of the textbook guidance.
Or the valuation to the extent you produce profits, that's significant. I mean, the profit stream is one thing and the value of the land, if there's any other things that could be done with the land. Is there room on the land that you have the ability to own, to expand it or put a -- I don't know what the location could bring, but is there a theme park or somehow doing something more if somebody had the funds to want to do something like that? Craig D. Stewart: Sam, you've got to remember now, the population within the county that this is located in is 28,000 people. The population of the Southwest corner of Kansas is probably 300,000 or 400,000 people.
Yes, bring Matt Dillon in. Clark D. Stewart: What?
Bring Matt Dillon in, Gunsmoke. Clark D. Stewart: Well, we've had him, we might be able, he keeps coming by, but he keeps shooting people.
All right. I just want to some -- just -- I basically covered it all. I just wanted to see what your reaction is right now with this situation. Hopefully, something could come, bear fruit sooner than later. Clark D. Stewart: We've had some people want to look at it, but they don't have any money. So that's like Matt Dillon. He only works a lot.
At this time, there are no further questions. Clark D. Stewart: Good. Thank you, everyone, for spending your time with us this morning. And we appreciate all your interest in Butler National Corporation. Have a great day.