Good morning, ladies and gentlemen. Today is Monday, March 16, 2020, and welcome to the Butler National Corporation's Third Quarter Fiscal 2020 Financial Results 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'll now turn the call over to your host. Mr. Drewitz, you may begin. David Drewitz;Creative Options Communications: Thank you, and good morning, everyone. I hope everybody is safe and healthy. But 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 in 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 of the date of this call, and Butler National undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. The 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 turning the call over to Mr. Clark Stewart. Mr. Stewart, the call is yours. Clark D. Stewart: You bet. Good morning, ladies and gentlemen. Thank you for joining us to talk about Butler's financial situation and opportunities when we have significantly more important items and, I guess, the operation of this business to consider. But I welcome you to the call, and I would be glad to talk about whatever questions you might have. We had a good quarter. We -- revenue up 18%, as you can see, and the operating income up 59% for the quarter that -- over last year. We think that's a pretty good move. And year-to-date, we're sitting here at 24% over on the revenue and about 135% over on the operating income. You've got to remember, your statements are distorted by the fact that we have the accounting for the lease as the purchase has distorted the numbers, and it doesn't represent what it would look like if we refinance the lease necessarily. It just reflects the accounting handling of the AICPA, I guess, rules. The backlog seems to be holding up. We are up 6.28% over last year at $17.7 million versus $16.7 million a year ago at this time. And we've not seen a weakening in the backlog. It seems to be steady. Casino is holding at about a 3% year-to-date change. And of course, the airplane business is up about 50% -- 49%. So that is a good thing. We have adequate cash. We don't know the extent of the corona 19 virus as what that's going to do to us, but I'd be willing to talk about that if you have questions about that. Our obvious things that's causing us problems in the airplane side is our in-person visits are restricted now and a lot of the sales of the special mission equipment is dependent upon quite face-to-face communication and make sure everyone understands how a custom business works and that they understand between the customer and the supplier are very important. So that's one thing we're -- that we are dealing with. Having said that, I think we're having a great time. We're in good shape. And I'd just soon take questions rather than go through the 10-Q and discuss all that. I think it's time for questions. So David, let's do questions. David Drewitz;Creative Options Communications: All righty. Erica, can you turn it over to questions, please?

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

A couple of things. Your revenues were up 18.6%. I noticed, though, the net income was flat. How would -- what actually happened there? Clark D. Stewart: Well, that's dealing with the accounting for this trustee lease that's changing that. Tad, do you want to answer that? Go ahead.

Yes, it's coupled that, and it's also coupled with -- we had the refund of the sales and use tax, a onetime event. So for the 9 months ended last year, we had $2 million of refund and we had $400,385 to hit for the quarter. But the rest is outlined in footnote 11, shows the effect of the lease at $1.4 million on financials. Clark D. Stewart: Does that answer...

Looking at the lease, what is -- is there any update on the financing? We've gone through a long time period of trying to get this arranged. Is there any update on that? Clark D. Stewart: Well, I would have given you an answer a week ago that said it looks pretty good. I give you an answer now, we're dealing with the virus. And I don't know the answer to that question, because I think the banks are working from home today, as a matter of fact, if they're working at all. And I don't know where we are. I thought we were moving along pretty well. I did get a call Friday saying that we'd like to wait till we get through this virus situation until we move forward on the loan. So I think that's the best answer I can give it to him. I don't know any more information.

Do you still plan to separate the companies once the financing is done? It appeared, last phone conference, you weren't quite as certain on that. What's your attitude on that now? Clark D. Stewart: I guess it's down the list aways. I'm not against it. I'm just telling you that we've got to deal with the virus. We've got to see if we can get the loan closed. And we've got to see what happens to the economy in a couple of months from now when we're back on track. And I think any speculation in the interim was, Tim, an outright speculation. I don't have a good feeling.

Yes. Well, I'd tell you, our stock price, I think it caught the virus. It's certainly acting very poorly. And would the company possibly step in and support the price at these levels? It's $0.50 and under.

We've been supporting that at every level. We're supporting it at $0.70.

Well, as I say, you've indicated your financials are good. Is this not a good time to be buying some stock back also and supporting the stock? And it depends on your cash situation, I guess.

Like I said, we've been -- when we get opportunities to buy stock back, we do, and that hasn't changed. We will continue to look at it as to see what happens with the economy and with our cash situation as we go forward. But we've been supporting it all the way along. Clark D. Stewart: I guess, Tim, the best answer I'd give you on that is, one of my friends is -- was a director of one of the big companies here in town and he said, "You know, I only as a Board member and as an executive officer, I have 44 days a year that I can do a stock transaction." And I guess, we're in the same situation.

I see. Clark D. Stewart: There's not a whole lot of days that we can do anything, right? Now we're in a quiet period. So you're looking at -- we're out.

We're out today as of... Clark D. Stewart: We're out now. We're out this morning.

It's 45 days. Clark D. Stewart: Yes, we've got a few days between now and April 30, and then we'll be back under the rug for a long time.

Are you mainly just buying the stock when people approach you? Or do you actually go into the market waiting for sellers?

We've done both.

Okay. And just on another thing, I noticed you signed the top 4, there are signed extensions on your management agreement -- on your contracts. What was the thinking there going out 5 years? Clark D. Stewart: We didn't -- they're actually 3 years, but yes, they are 3-year evergreens, I guess, [ pretty decent ]. I don't know. The Board decided, I guess, that we needed to have some contracts updated, and then we got with the attorneys and the Compensation Committee and decided that's what we're going to do. So that's how that happened.

Well, I commend you, Clark, for having a real solid last 12 to 18 months. I clearly want to see at some point at time the stock represent that and -- I mean 8, 10, 12x earnings, and I hope we can get to that point soon, especially after the virus is over.

We were at 8x earnings here just recently before this virus thing happened, for the record.

Well, I agree, but that's a bare minimum. Before the virus, I think stocks were averaging 15x earnings, and clearly, this has been a growth situation lately. And I remember, John and Lou said, you should probably sell at 1x sales. And that would look like to me, we ought to be at about $1. Now I realize we've had a market calamity lately. But I would hope we get near $1 with these sales and earnings at some point in time. Clark D. Stewart: Tim, that's way outside of my scope of financial expertise. So I'm worrying about the virus today and tomorrow at the casino and here and everywhere else. So I couldn't tell you -- I don't think I have a good answer for that.

Okay. Well, it's just -- we all have to have hope, Clark. So that's my hope right there. Clark D. Stewart: That's right.

Our next question comes from [ Tony Pisciotta ].

Just 2 questions. They've both been touched on, but maybe you could give us a little more color. As far as the COVID-19 virus is concerned, have you noticed any dramatic foot traffic differential in the casino itself? Clark D. Stewart: We're trying to figure that out, Tony. Thank you very much for the question. We're looking at it. And if you go through Friday over -- this year, over last year, for the month, for the beginning part of March, the first 14 days of March, we got a 5% difference in the visitor count. Now yesterday, which should be the 15th, we had a significantly lower count, but we had significantly worse weather. So I guess, the answer that I would give is that, yes, there's probably a deterioration in the visitor count, but I don't know how much of it's weather and how much is virus. But I think there's got to be a part of it that's virus. We -- there's no question about it. And we're working on things we can do to make us -- we're complying with all the health care organizations.

Had there been -- has there been any chatter in Kansas that the state itself may mandate that certain venues like casinos or racetracks or whatever cease operations for a period of 8 weeks, 10 weeks, whatever? Have you heard anything along those lines? Clark D. Stewart: There hasn't been any yet, let's say that. I don't know whether it's coming or not, I have no -- I now have no insight into that. But I know that there hadn't been anything yet.

Okay. Now my second question is probably best directed to Craig, but I'll ask both of you, pursuant to what Tim just asked about the buyback. It does seem that since the stock has been trading, had a decent trading range, let's say, between $0.70 and $0.75. Now we're in the $0.40s. Did the same rules apply as to your window of opportunity to buy stock as would apply for a tender offer? In other words, we're way behind as far as being able to reconcile and balance out where the extra stock is being issued for the 401(k). So would it be possible that during one of these green areas where you can buy stock for the company to announce that they're putting forth a tender offer for, let's say, 1 million shares at $0.45? That's just hypothetical. But can you do something like that rather than actually physically going into the market, nibble 5,000 here and 10,000 there? Craig D. Stewart: That's -- we'd have to check with our SEC guys to find out what the process is and how that would be done, but that is something that I'll ask the question on. Clark D. Stewart: Tony, I've asked that question a few times in the past, and I've never got a good answer. So I don't know -- I don't know that, that really will work, but I have -- I haven't -- I've had that. But I've asked the question, I haven't asked it recently in...

I do think it's worth pursuing, because I think that when you have a situation where a stock has dropped, let's say, 40% as is the case here, if there is no action by management to go in and not bolster the price of the stock, but just fulfill the objective of the buyback in balancing out the number of shares outstanding because of the [ 401(k) ] that... Clark D. Stewart: I understand what you're saying, Tony. I think that Craig needs to call, and we'll see what -- see if we can do something like that. Because I understand what we'd like to do. I just -- it seems like every time we try to do it, we run into some technical reason we can't do something.

Yes. It's just that... Clark D. Stewart: So I'm as frustrated as you are. So...

It's not that I'm frustrated. It's just that oftentimes, when management of a company does -- fails to take action in a case like this, that sends another message to the Street that, gee whiz, their stock is down 40%, but they still don't like it well enough to buy it. That's the message oftentimes that's sent to the Street, just so you're aware of that.

Our next question comes from [ Sam Ribowsky ].

It's a difficult time, and you seem to be weathering it pretty well at the moment. And recently, I don't know if you saw The Bowser Report had written up that Butler, I don't know if you had seen the recommendation, as a #1 stock recently trading under $3.

We have not seen that. Clark D. Stewart: We have not seen that.

All right. We'll see if we could sort of find that out for you. Now as far as the aerospace is concerned, are we bidding on more -- how much business can we do in a quarter? Can we do $15 million, $20 million in a quarter in the aerospace? Clark D. Stewart: I don't know. Craig, you can answer that. Craig D. Stewart: I don't know that we can get to $15 million to $20 million a quarter in terms of both the production in Arizona and at Newton. I think the capacity would probably limit that. I know we're on -- we've done $29 million in 3 quarters. So that says that we're doing that smooth, we can easily do about $10 million a quarter.

Yes. I mean, we may be able to get up $12 million to $13 million a quarter if everything worked out right. I think that's going to be a challenge right now to get there with the COVID-19 stuff that's going on makes the -- especially with the special mission mods, every conference in the world has been canceled, it seems like, for the last 1.5 months, which does limit our ability to go out and meet face-to-face with customers. Hopefully, a lot of that can be done via video conferencing and phone calls, but it's -- there's nothing that takes the place of being with a customer and talking face-to-face with a customer. So we don't know what the effects of all the cancellations are going to be right now. There's still a strong demand, and we're still getting the phone calls. And the near-term backlog looks great. Clark D. Stewart: Yes, we haven't had any cancellations or anything like that. So...

But it's the stuff 1.5 years from now that would be started right now that is more of a concern.

And you're able to get all your workers in and perform the work that you need?

Yes. As of today, yes. Clark D. Stewart: We've had -- here's the situation. We've had some layoffs by the other manufacturing companies in Wichita, and we seem to be picking up enough staff at Newton to support this level of work without too much trouble. So that's a good thing. Textron laid off a bunch, Spirit laid off a bunch. So we're able to get the technical people we need, and it seems to be working okay.

Well, that sounds very good. That sounds very good. Well, keep up the good work and the stock should move up again with your -- of course, with your earnings so far -- the earnings so far and the -- by the time April comes around, you should have -- do you expect to have a record-breaking year for this year in earnings? Clark D. Stewart: I don't know. We're looking at it as -- hopefully, we can do as well as we did last year.

Well, that's good. All right. Keep up the good work and, hopefully, we succeed. Clark D. Stewart: All right. Thank you, [ Sam ].

Thank you.

[Operator Instructions] Clark D. Stewart: David, it sounds like we don't have any more questions. Is that right? David Drewitz;Creative Options Communications: That is correct. Why don't you -- do you have any closing statements? Clark D. Stewart: Sure do. I want to thank everybody for joining us, and we hope we answered the questions that have pressure on your mind. And we hope this COVID-19 virus doesn't make the situation any worse than it is right now. So I think that, that's -- we've got to have our hope and prayers behind the resolution of that crisis and we all deal with it for the best of everyone. So thank you for your time.

Everybody, stay health. Clark D. Stewart: That's right. Everybody's got to stay healthy. Thank you very much. I'm done, David. David Drewitz;Creative Options Communications: Thank you, everybody, and be well.

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