UNITED STATES SECURITIES AND EXCHANGE COMMISSION |
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---------------------------------- FORM 10-Q ----------------------------------- |
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X |
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the quarter ended January 31, 2010 |
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__ |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the transition period from ____________ to _____________ |
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Commission File Number 0-1678 |
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Kansas |
41-0834293 |
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19920 West 161st Street, Olathe, Kansas 66062 |
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Registrant's telephone number, including area code: (913) 780-9595 |
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Former name, former address and former fiscal year if changed since last report: |
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes X No __ |
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files): Yes __ No __ |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.: Large accelerated filer Accelerated filer Non-accelerated filer X Smaller reporting company |
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): |
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The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, as of March 5, 2010 was 55,997,031 shares. |
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES |
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INDEX |
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Item 1 |
Financial Statements |
PAGE NO. |
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Condensed Consolidated Balance Sheets - January 31, 2010 and April 30, 2009 |
3 |
Condensed Consolidated Statements of Operations - Three Months ended January 31, 2010 and 2009 |
4 |
|
Condensed Consolidated Statements of Operations - Nine Months ended January 31, 2010 and 2009 |
5 |
|
|
Condensed Consolidated Statements of Cash Flows - Nine Months ended January 31, 2010 and 2009 |
6 |
|
Notes to Condensed Consolidated Financial Statements |
7-8 |
Item 2 |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
9-14 |
Item 3 |
Quantitative & Qualitative Disclosures about Market Risk |
14 |
Item 4 |
Controls and Procedures |
14-15 |
PART II. OTHER INFORMATION |
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Item 1 |
Legal Proceedings |
16 |
Item 1A |
Risk Factors |
16 |
Item 2 |
Unregistered Sales of Equity Securities and Use of Proceeds |
16 |
Item 3 |
Defaults Upon Senior Securities |
16 |
Item 4 |
(Removed and Reserved) |
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Item 5 |
Other Information |
16 |
Item 6 |
Exhibits |
16-17 |
Signature |
18 |
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Exhibit Index |
E-1 |
CONDENSED CONSOLIDATED BALANCE SHEETS |
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ASSETS |
01/31/10 |
4/30/09 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
01/31/10 |
4/30/09 |
|||||||||||||||||||
(unaudited) |
(audited) |
(unaudited) |
(audited) |
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CURRENT ASSETS: |
CURRENT LIABILITIES: |
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Cash |
$ |
5,872,793 |
$ |
1,978,038 |
Bank overdraft payable |
$ |
391,800 |
$ |
100,762 |
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Promissory notes payable |
216,695 |
684,608 |
||||||||||||||||||||||
Accounts receivable |
2,530,632 |
544,025 |
Current maturities of long-term debt and capital lease |
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(net of allowance for doubtful accounts of $111,840 |
obligations |
1,506,281 |
2,775,651 |
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at January 31, 2010 and at April 30, 2009) |
Accounts payable |
744,315 |
517,483 |
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Customer deposits |
807,403 |
1,119,958 |
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Deposits other |
1,717,759 |
- |
||||||||||||||||||||||
Kansas mandated payments |
1,266,357 |
- |
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Inventories - |
Accrued liabilities |
|||||||||||||||||||||||
Raw materials |
4,594,153 |
4,817,761 |
Compensation and compensated absences |
932,994 |
573,884 |
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Work in process |
951,273 |
1,765,423 |
Accrued income tax |
362,271 |
275,000 |
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Finished goods |
1,084,138 |
1,760,245 |
Other |
373,075 |
187,033 |
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Aircraft |
- |
4,819,740 |
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-------------- |
-------------- |
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-------------- |
-------------- |
Total current liabilities |
8,318,950 |
6,234,379 |
||||||||||||||||||||
6,629,564 |
13,163,169 |
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LONG-TERM DEBT AND CAPITAL LEASE, NET |
4,853,804 |
6,345,033 |
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Prepaid expenses and other current assets |
159,428 |
262,026 |
OF CURRENT MATURITIES |
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-------------- |
-------------- |
-------------- |
-------------- |
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Total current assets |
15,192,417 |
15,947,258 |
Total liabilities |
13,172,754 |
12,579,412 |
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PROPERTY, PLANT AND EQUIPMENT: |
COMMITMENTS AND CONTINGENCIES |
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Land and building |
3,057,144 |
4,119,441 |
STOCKHOLDERS' EQUITY: |
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Aircraft |
4,619,740 |
- |
Preferred stock, par value $5: |
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Machinery and equipment |
2,312,382 |
2,312,383 |
Authorized 50,000,000 shares, all classes |
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Office furniture and fixtures |
823,493 |
818,278 |
Designated Classes A and B, 200,000 shares |
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Leasehold improvements |
4,249 |
4,249 |
$1,000 Class A, 9.8%, cumulative if earned |
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-------------- |
-------------- |
liquidation and redemption value $100, |
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|
10,817,008 |
7,254,351 |
no shares issued and outstanding |
- |
- |
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Accumulated depreciation |
(3,316,052) |
(2,635,360) |
$1,000 Class B, 6%, convertible cumulative, |
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-------------- |
-------------- |
liquidation and redemption value $1,000 |
||||||||||||||||||||||
7,500,956 |
4,618,991 |
no shares issued and outstanding |
- |
- |
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Common stock, par value $.01: |
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SUPPLEMENTAL TYPE CERTIFICATES |
1,797,272 |
1,872,121 |
Authorized 100,000,000 shares |
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issued and outstanding 55,997,031 shares at |
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at January 31, 2010 and at April 30, 2009 |
559,970 |
559,970 |
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ADVANCES FOR GAMING DEVELOPMENTS |
1,806,551 |
1,806,551 |
Common stock, owed but not issued 278,573 shares |
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(net of reserves of $3,346,623 at January 31, 2010 |
at January 31, 2010 and at April 30, 2009 |
2,786 |
2,786 |
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and at April 30, 2009) |
Capital contributed in excess of par |
11,266,482 |
11,266,482 |
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Treasury stock at cost (600,000 shares) |
(732,000) |
(732,000) |
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Minority interest |
1,360 |
- |
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Retained earnings |
3,500,339 |
2,121,507 |
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OTHER ASSETS |
1,474,495 |
1,553,236 |
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-------------- |
-------------- |
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(net of accumulated amortization of $183,729 at |
Total stockholders' equity |
14,598,937 |
13,218,745 |
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January 31, 2010 and $104,988 at April 30, 2009) |
-------------- |
-------------- |
-------------- |
-------------- |
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Total assets |
$ |
27,771,691 |
$ |
25,798,157 |
Total liabilities and stockholders' equity |
$ |
27,771,691 |
$ |
25,798,157 |
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======== |
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The accompanying notes are an integral part of these financial statements |
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES |
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(unaudited) |
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THREE MONTHS ENDED |
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January 31, |
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2010 |
2009 |
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REVENUES |
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Aircraft / Modifications |
$ |
3,616,441 |
$ |
3,009,718 |
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Avionics / Defense |
1,100,424 |
585,488 |
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Management / Professional Services |
1,295,536 |
950,346 |
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Gaming - Boot Hill |
2,911,662 |
- |
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-------------- |
-------------- |
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Net Revenue |
8,924,063 |
4,545,552 |
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COST OF SALES |
||||||
Aircraft / Modifications |
3,028,841 |
2,303,004 |
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Avionics / Defense |
529,739 |
229,120 |
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Management / Professional Services |
787,798 |
499,081 |
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Gaming - Boot Hill |
843,348 |
- |
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-------------- |
-------------- |
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Total Cost of Sales |
5,189,726 |
3,031,205 |
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-------------- |
-------------- |
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GROSS PROFIT |
3,734,337 |
1,514,347 |
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OPERATING EXPENSES MARKETING, GENERAL & ADMINISTRATIVE |
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Non-Gaming |
1,028,687 |
1,011,607 |
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Gaming - Boot Hill |
1,728,333 |
- |
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Gain on Sale of Land |
- |
- |
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-------------- |
-------------- |
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Total Operating Expenses |
2,757,020 |
1,011,607 |
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-------------- |
-------------- |
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OPERATING INCOME |
977,317 |
502,740 |
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OTHER INCOME (EXPENSE) |
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Interest expense |
(110,347) |
(118,563) |
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Other |
983 |
3,441 |
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-------------- |
-------------- |
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Other income (expense) |
(109,364) |
(115,122) |
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INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES |
867,953 |
387,618 |
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PROVISION FOR INCOME TAXES |
(225,000) |
(110,000) |
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-------------- |
-------------- |
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NET INCOME BEFORE MINORITY INTEREST |
642,953 |
277,618 |
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MINORITY INTEREST GAMING - BOOT HILL |
(1,360) |
- |
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-------------- |
-------------- |
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NET INCOME |
$ |
641,593 |
$ |
277,618 |
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======== |
======== |
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BASIC EARNINGS PER COMMON SHARE |
$ |
.01 |
$ |
.01 |
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========= |
========= |
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Shares used in per share calculation |
55,675,604 |
54,769,682 |
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========= |
========== |
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DILUTED EARNINGS PER COMMON SHARE |
$ |
.01 |
$ |
.01 |
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========= |
========= |
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Shares used in per share calculation |
55,790,476 |
54,844,117 |
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========= |
========= |
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The accompanying notes are an integral part of these financial statements. |
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES |
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(unaudited) |
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NINE MONTHS ENDED |
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January 31, 2010 |
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2010 |
2009 |
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REVENUES |
|||||
Aircraft / Modifications |
$ |
8,281,825 |
$ |
8,707,767 |
|
Avionics / Defense |
4,542,809 |
1,891,454 |
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Management / Professional Services |
3,666,914 |
3,206,227 |
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Gaming - Boot Hill |
2,911,662 |
- |
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-------------- |
-------------- |
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Net Revenue |
19,403,210 |
13,805,448 |
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COST OF SALES |
|||||
Aircraft / Modifications |
6,928,137 |
6,765,333 |
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Avionics / Defense |
2,457,603 |
1,230,027 |
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Management / Professional Services |
1,875,610 |
1,649,737 |
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Gaming - Boot Hill |
843,348 |
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-------------- |
-------------- |
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Total Cost of Sales |
12,104,698 |
9,645,097 |
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-------------- |
-------------- |
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GROSS PROFIT |
7,298,512 |
4,160,351 |
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OPERATING EXPENSES MARKETING, GENERAL & ADMINISTRATIVE |
|||||
Non-Gaming |
3,778,904 |
3,006,539 |
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Gaming - Boot Hill |
1,728,333 |
- |
|||
Gain on Sale of Land |
(496,433) |
- |
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-------------- |
-------------- |
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Total Operating Expenses |
5,010,804 |
3,006,539 |
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-------------- |
-------------- |
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OPERATING INCOME |
2,287,708 |
1,153,812 |
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OTHER INCOME (EXPENSE) |
|||||
Interest expense |
(325,472) |
(390,822) |
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Other |
11,355 |
5,916 |
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-------------- |
-------------- |
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Other income (expense) |
(314,117) |
(384,906) |
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INCOME BEFORE PROVISION FOR INCOME TAXES |
1,973,591 |
768,906 |
|||
PROVISION FOR INCOME TAXES |
(593,400) |
(219,105) |
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-------------- |
-------------- |
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NET INCOME BEFORE MINORITY INTEREST |
1,380,191 |
549,801 |
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MINORITY INTEREST GAMING - BOOT HILL |
(1,360) |
- |
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-------------- |
-------------- |
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NET INCOME |
$ |
1,378,831 |
$ |
549,801 |
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======== |
======== |
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BASIC EARNINGS PER COMMON SHARE |
$ |
.02 |
$ |
.01 |
|
========= |
========= |
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Shares used in per share calculation |
55,675,604 |
54,769,682 |
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========= |
========== |
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DILUTED EARNINGS PER COMMON SHARE |
$ |
.02 |
$ |
.01 |
|
========= |
========= |
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Shares used in per share calculation |
55,790,476 |
54,844,117 |
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========= |
========= |
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The accompanying notes are an integral part of these financial statements. |
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES |
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(unaudited) |
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NINE MONTHS ENDED |
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January 31, |
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2010 |
2009 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income |
$ |
1,380,191 |
$ |
549,801 |
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Adjustments to reconcile net income (loss) to net cash provided by |
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(used in) operations - |
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Depreciation and amortization |
759,433 |
124,447 |
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Amortization (Supplemental Type Certificates) |
74,849 |
133,764 |
|||||
Gain on sale of land |
(496,433) |
- |
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Changes in assets and liabilities - |
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Accounts receivable |
(1,986,607) |
242,195 |
|||||
Inventories |
1,913,865 |
(223,049) |
|||||
Prepaid expenses and other current assets |
102,598 |
(306,750) |
|||||
Accounts payable |
517,870 |
297,231 |
|||||
Customer deposits |
(312,554) |
(671,509) |
|||||
Deposits other |
1,717,759 |
- |
|||||
Accrued liabilities |
446,381 |
(98,813) |
|||||
Kansas mandated payments |
1,266,357 |
- |
|||||
Other liabilities |
186,042 |
- |
|||||
-------------- |
-------------- |
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Cash provided by (used in) operating activities |
5,569,751 |
52,317 |
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-------------- |
-------------- |
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CASH FLOWS FROM INVESTING ACTIVITIES |
|||||||
Capital expenditures |
(446,485) |
(693,057) |
|||||
Proceeds from sale of land |
2,000,000 |
- |
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-------------- |
------------- |
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Cash provided by (used in) investing activities |
1,553,515 |
(693,057) |
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CASH FLOWS FROM FINANCING ACTIVITIES |
|||||||
Borrowings under promissory notes, net |
(467,913) |
172,523 |
|||||
Borrowings of long-term debt and capital lease obligations |
375,000 |
5,681,021 |
|||||
Repayments of long-term debt and capital lease obligations |
(3,135,598) |
(7,052,304) |
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-------------- |
-------------- |
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Cash provided by (used in) financing activities |
(3,228,511) |
(1,198,760) |
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-------------- |
-------------- |
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NET INCREASE (DECREASE) IN CASH |
3,894,755 |
(1,839,500) |
|||||
CASH, beginning of period |
1,978,038 |
2,969,715 |
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-------------- |
-------------- |
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CASH, end of period |
$ |
5,872,793 |
$ |
1,130,215 |
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======== |
======== |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
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Interest paid |
$ |
330,535 |
$ |
370,934 |
|||
Income taxes paid |
505,418 |
284,748 |
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The accompanying notes are an integral part of these financial statements. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(unaudited) |
1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of Regulation S-X and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the annual report on Form 10-K dated April 30, 2009. In our opinion, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the nine months ended January 31, 2010 are not indicative of the results of operations that may be expected for the year ending April 30, 2010. |
2. Accounting Standards Codification: In June 2009, the Financial Accounting Standards Board ("FASB") issued an accounting pronouncement establishing the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities. This pronouncement was effective for financial statements issued for interim and annual periods ending after September 15, 2009, for most entities. On the effective date, all non-SEC accounting and reporting standards will be superceded. The Company adopted this new accounting pronouncement for the quarterly period ended October 31, 2009, as required, and adoption did not have a material impact on the Company's financial statements taken as a whole. |
Advances for Gaming Developments: We are advancing funds for the establishment of gaming. These funds have been capitalized based on the costs associated with the acquisition, development, and construction of real estate and real estate-related projects to be capitalized as part of those projects. Our advances represent costs to be reimbursed upon approval of gaming in several locations. We have agreements in place which require payments to be made to us for the respective projects upon opening of Indian gaming facilities. Once gaming facilities have gained proper approvals, we plan to enter into a note receivable arrangement with the Tribe to secure reimbursement of advanced funds for that particular project. We have advanced and invested a total of $5,153,174 at January 31, 2010 and $5,153,174 at April 30, 2009 in gaming developments. We have reserves of $3,346,623, at January 31, 2010 and at April 30, 2009. We believe it is necessary to establish reserves against the advances because all of the proposed casinos involve legal and government approvals. The reserve amount is an estimate of the value we would receive if a casino was not opened and we were forced to liquidate the assets that we have acquired with our advances. These assets were intended to be used with casinos and consist of the purchase of land and land improvements related to the development of gaming facilities. We believe that these tracts could be developed and sold for residential and commercial use to recover our advances if the gaming enterprises do not open. |
4. Gaming - Boot Hill: In June 2009 we sold 104 acres of the 389 acres purchased in November 2007 to BHC Development LC for $2,000,000. The 104 acres were developed for the purpose of the Boot Hill Casino and Resort. Since the acquisition in 2007 we have been developing land for the purpose of the casino. The remaining unsold acres consist of a farm house and undeveloped farm land with the appraised value of $415,453. |
5. Earnings Per Share: Earnings per common share are based on the weighted average number of common shares outstanding during the year. Stock options have been considered in the dilutive earnings per share calculation. |
6. Research and Development: We invested in research and development activities. The amount invested in the nine months ended January 31, 2010 and 2009 was approximately $1,346,293 and $2,501,742 respectively. |
7. Borrowings: At January 31, 2010, the Company had one line of credit totaling $1,000,000. The unused line at January 31, 2010 was $783,305. During the current year these funds were primarily used for the purchase of inventory for the modifications and avionics operations. One note with a balance of $960,280 is collateralized by the first and second position on all assets of the company. This was used as capital for our daily business operations in 2006. There are several other notes collateralized by automobiles and equipment totaling an additional $168,313. |
9. Asset Allocation: During the quarter ending October 31, 2009 the aircraft inventory was reallocated as a long term asset. In review of the current economic conditions and its relationship to the current retail and wholesale aircraft markets we have reallocated our aircraft inventory as long term assets beginning August 1, 2009. Depreciation is calculated over the life of five years. |
The rest of this page is intentionally left blank.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
REFERENCE TO EXHIBIT 99 OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K |
RESULTS OF OPERATIONS |
YEAR TO DATE JANUARY 31, 2010 COMPARED TO YEAR TO DATE JANUARY 31, 2009 Our revenue for the nine months ended January 31, 2010 was $19,403,210, an increase of 40.5% from the nine months ended January 31, 2009 with revenue of $13,805,448. Our operating profit for the nine months ended January 31, 2010 was $2,287,708, compared to $1,153,812 for the nine months ended January 31, 2009, an increase of 98.2%. Approximately $496,000 of the operating profit can be attributed to the sale of land in Dodge City, Kansas. Discussion of the specific changes by operation at each business segment follows (the results of operations are based on pre-corporate allocations): Aircraft Modifications: Revenue from Aircraft Modifications segment for the nine months ending January 31, 2010, was $8,281,825, a decrease of 4.9% from the nine months ending January 31, 2009 with revenue of $8,707,767, and an increase of 28.3% from the nine months ending January 31, 2008 with revenue of $6,453,348. The modifications segment had an operating profit of $578,491 in the nine months ended January 31, 2010, an operating profit of $1,295,495 in the nine months ending January 31, 2009, and $743,070 in the nine months ending January 31, 2008. The reallocation of aircraft to a long term asset resulted in additional depreciation expense of approximately $462,000, reducing our operating profit for the nine months ending January 31, 2010. During the past few years we have seen a significant increase in aircraft camera modification. Several custom engineering projects were completed in fiscal 2009 which accounted for our change in revenue. As the economy grows aircraft owners may elect to update, modify, and purchase business aircraft. A shift to business aircraft ownership positively impacts our aircraft modification revenues. Although we cannot anticipate the future we must always consider the negative impact of items such as the September 11, 2001 event, increases in fuel prices, and general economic downturns. Aircraft Acquisitions and Sales: There was no activity in the nine months ended January 31, 2009 and January 31, 2010. During the quarter ending October 31, 2009 the aircraft inventory was reallocated as a long term asset. In review of the current economic conditions and its relationship to the current retail and wholesale aircraft markets we have reallocated our aircraft inventory as long term assets beginning August 1, 2009. Depreciation is calculated over the useful life of five years. Management expects this business segment to have limited activity until more favorable economic conditions exist. FAA required modifications to the business aircraft fleet may increase customer demand for company owned aircraft.
Other Income (Expense): Interest expense decreased from $390,822 in the nine months ended January 31, 2009 to $325,472 for the nine months ended January 31, 2010. |
THIRD QUARTER FISCAL 2010 COMPARED TO THIRD QUARTER FISCAL 2009 Our revenue for the three months ended January 31, 2010 was $8,924,063, an increase of 96.3% from the three months ended January 31, 2009 with revenue of $4,545,552. Our operating profit for the three months ended January 31, 2010 was $977,317, compared to $502,740 for the three months ended January 31, 2009, an increase of $474,577. Discussion of the specific changes by operation at each business segment follows: Aircraft Modifications: Revenue from Aircraft Modifications segment for the three months ending January 31, 2010, was $3,616,441, an increase of 20.2% from the three months ending January 31, 2009 with revenue of $3,009,718, and an increase of 76% from the three months ending January 31, 2008 with revenue of $2,054,134. The modifications segment had an operating profit of $543,854 in the three months ended January 31, 2010, an operating profit of $505,423 in the three months ending January 31, 2009, and $314,205 in the three months ending January 31, 2008. Avionics: Revenue from Avionics for the three months ending January 31, 2010, was $1,100,424, an increase of 88% from the three months ending January 31, 2009 with revenue of $585,488, and a decrease of 6% from the three months ending January 31, 2008 with revenue of $1,173,411. The avionics segment had an operating profit of $393,512 in the three months ending January 31, 2010, compared to $139,201 in the three months ending January 31, 2009, and $237,889 in the three months ending January 31, 2008. Services - SCADA Systems and Monitoring Services: Revenue decreased from $436,902 for the three months ended January 31, 2009 to $432,262 for the three months ended January 31, 2010. During the three months ended January 31, 2010, we maintained a relatively level volume of long-term contracts with municipalities. We anticipate increases in revenue from additional lift station rehabilitations over the next three to four years. Revenue fluctuates due to the introduction of new products and services and the related installations of these types of products. Our contracts with our two largest customers have been renewed through fiscal 2010. An operating profit of $107,035 in Monitoring Services was recorded for the three months ended January 31, 2010, compared to a profit of $64,371 for the three months ended January 31, 2009, an increase of 66%. We believe the service business has had revenue stability over the past few years and we expect this to continue. Corporate / Professional Services: Services in this segment include the architectural services of BCS Design, Inc., activities related to gaming and other real estate development, on site contract management of gaming establishments, and engineering consulting services. During the quarter ended January 31, 2010 and 2009 revenues consisting of architectural services and revenues related to completed construction projects were $623,107 for the quarter ended January 31, 2010 and $249,694 for the quarter ended January 31, 2009, $421,400 of the additional revenue is attributed to the sale of three homes in Junction City, Kansas. Operating loss related to architectural and construction projects decreased $21,801 to a loss of $39,901 at January 31, 2010 from an operating loss of $61,702 for the quarter ending January 31, 2009. Revenues related to gaming and other real estate development, on site contract management of gaming establishments for the quarter ended January 31, 2010 was $240,167 compared to $263,751 for the quarter ended January 31, 2009, a decrease of 8.9%. Operating profits from management services related to gaming decreased $132,160 from $242,256 for the quarter ended January 31, 2009, to $110,096 for the quarter ended January 31, 2010. We incurred additional expenses of approximately $110,000 towards consulting and management services during the quarter ended January 31, 2010. Gaming - Boot Hill: Boot Hill opened for business on December 15, 2009. In the 48 days since opening we had gross revenues of $5,616,836. Kansas mandated taxes and distributions of 52.8% reduced our gross revenue by $2,705,174 leaving a net revenue of $2,911,662. Profits for the 48 days were $339,981. Selling, General and Administrative: Expenses were $2,757,020 or 31% of revenue for the quarter ended January 31, 2010 compared to $1,011,607 or 22% of revenue for the quarter ended January 31, 2009. Selling, General and Administrative costs increased by $1,745,413 for the quarter ended January 31, 2010 compared to the quarter ended January 31, 2009, $1,728,333 of the additional costs were directly related to Boot Hill. Other Income (Expense): Interest expense decreased from $118,563 in the three months ended January 31, 2009 to $110,347 for the three months ended January 31, 2010. Earnings: Our operating profit for the three months ended January 31, 2010 was $977,317, compared to a profit of $502,740 for the three months ended January 31, 2009, an increase of 94.4% of which 72% of this increase in operating profits for the quarter can be attributed to casino operations. Consolidated Net Income: As a result of the factors described above, our net income for the three months ended January 31, 2010 was $742,953 compared to $277,618 for the three months ended January 31, 2009, an increase of $463,335 or 168%. The increase of net income before taxes was $480,335 of which $339,981 can be attributed to casino operations. |
LIQUIDITY AND CAPITAL RESOURCES We believe that our current banks will provide the necessary capital for our business operations. However, we continue to maintain contact with other banks that have an interest in funding our working capital needs to continue our growth in operations in 2010 and beyond.
The terms of the agreement between the Kansas Lottery and BNSC/BHCMC require the completion of an addition to the Boot Hill Casino and Resort to open in late 2013. Funding for this expansion is expected to come from operations and additional debt secured by the Boot Hill Casino and Resort.
The net revenue from Gaming - Boot Hill is the net management fee revenue after State mandated payments. Off-Balance Sheet Arrangements Evaluation of disclosure controls and procedures: Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. In connection with the preparation of this Form 10-Q, our Chief Executive Officer and our Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of January 31, 2010. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of January 31, 2010. Limitations on Controls Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Changes in Internal Control Over Financial Reporting: In our opinion there were no material changes in the Company internal controls over financial reporting as of January 31, 2010 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting. |
PART II. |
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Item 1. |
LEGAL PROCEEDINGS. A lawsuit was filed in the United States District Court for the District of Kansas by the State of Kansas against us, the United States, the Business Committee members of the Miami Tribe and others on October 14, 1999, challenging the determination by the National Indian Gaming Commission ("NIGC") and the United States District Court for the District of Kansas that the Miami Princess Maria Reserve No. 35 is Indian land for the purposes of gaming under the Indian Gaming Regulatory Act. The State of Kansas requested an order by the Court preventing further development of gaming on the Indian land. The question in the case has been remanded to the NIGC for further review. The Bureau of Indian Affairs ("BIA") has issued a negative opinion concerning jurisdiction over the land. An interim lawsuit was filed to protect rights related to the opinion and the federal court of appeals dismissed the lawsuit as premature. The NIGC has not made a further determination on the question. The Miami Tribe expects to eventually receive a favorable determination. We cannot reliably predict the outcome of the case. Butler National filed a lawsuit in the United States District Court for the Eastern District of Texas against General Electric in May 2008 and others related to the overhaul of two CJ-610 aircraft jet engines. We are seeking in excess of a million dollars. We are aggressively pursuing the case. We cannot reliably predict the outcome of this litigation at this time. Our subsidiary, Butler National Service Corporation, filed a lawsuit against Navegante Group, Inc., a company that provides casino-related consulting services, and one of its principals, in the United States District Court for the District of Kansas in September, 2009. Navegante filed a separate lawsuit in the same United States District Court against Butler National Service Corporation in October 2009. Both suits arise from alleged agreements and fees related to the management of the lottery gaming facility in Dodge City, Kansas. The Navegante complaint alleges damages in excess of $75,000. The Butler National Service Corporation claims seek damages in excess of $75,000 for breaches of contract and requests declaratory relief that Navegante has no interests or rights in any of the business aspects of the lottery gaming facility in Dodge City. We are aggressively pursuing our claims and vigorously defending against the Navegante allegations. We cannot reliably predict the outcome of this litigation at this time. As of January 31, 2010, there are no other significant known legal proceedings pending against us. We consider all such unknown proceedings, if any, to be ordinary litigation incident to the character of the business. We believe that the resolution of any claims will not, individually or in the aggregate, have a material adverse effect on the financial position, results of operations, or liquidity of the Company. |
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Item 1A . |
RISK FACTORS. There are no material changes to the risk factors disclosed under Item 1A of our Form 10-K for year ended April 30, 2009. |
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Item 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. None. |
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Item 3. |
DEFAULTS UPON SENIOR SECURITIES. None. |
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Item 4. |
(REMOVED AND RESERVED) |
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Item 5. |
OTHER INFORMATION. None. |
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Item 6. |
EXHIBITS. |
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3.1 |
Articles of Incorporation, as amended and restated are incorporated by reference to Exhibit 3.1 of our Form DEF 14A filed on December 26, 2001. |
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3.2 |
Bylaws, as amended, are incorporated by reference to Exhibit 3.2 of our Form DEF 14A filed on December 15, 2003. |
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31.1 |
Certificate of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a). |
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31.2 |
Certificate of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a). |
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32.1 |
Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2 |
Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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99 |
Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995, are incorporated by reference to Exhibit 99 of the Form 10-K for the fiscal year ended April 30, 2009. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. |
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BUTLER NATIONAL CORPORATION |
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March 16, 2010 |
/s/ Clark D. Stewart Clark D. Stewart (President and Chief Executive Officer) |
March 16, 2010 |
/s/ Angela D. Shinabargar Angela D. Shinabargar (Chief Financial Officer) |
Exhibit Index |
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Exhibit Number |
Description of Exhibit |
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3.1 |
Articles of Incorporation, as amended and restated are incorporated by reference to Exhibit 3.1 of our Form DEF 14A filed on December 26, 2001. |
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3.2 |
Bylaws, as amended, are incorporated by reference to Exhibit 3.2 of our Form DEF 14A filed on December 15, 2003. |
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31.1 |
Certificate of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a). |
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31.2 |
Certificate of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a). |
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32.1 |
Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2 |
Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted to |
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99 |
Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995, are incorporated by reference to Exhibit 99 of the Form 10-K for the fiscal year ended April 30, 2009. |