-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QLllmi37uoatvtT1FwF63DB0ngddwsKhbdUs/WA8muVI/ShFKd3HmwNFgM0iXDVB S8nfXB3+xodmdo4zlkKtJA== 0000015847-01-500020.txt : 20020413 0000015847-01-500020.hdr.sgml : 20020413 ACCESSION NUMBER: 0000015847-01-500020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011031 FILED AS OF DATE: 20011217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BUTLER NATIONAL CORP CENTRAL INDEX KEY: 0000015847 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT [3721] IRS NUMBER: 410834293 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01678 FILM NUMBER: 1815057 BUSINESS ADDRESS: STREET 1: 19920 W 161ST ST CITY: OLATHE STATE: KS ZIP: 66062 BUSINESS PHONE: 8167809595 MAIL ADDRESS: STREET 1: 19920 W 161ST ST CITY: OLATHE STATE: KS ZIP: 66062 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL CONNECTOR CORP DATE OF NAME CHANGE: 19701009 10-Q 1 fy02q26.txt 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) Quarterly Report Pursuant to Section 13 or 15(d) of the X Securities Exchange Act of 1934 For the quarter ended October 31, 2001 Transition Report Pursuant to Section 13 or 15 (d) of the Security Exchange Act of 1934 For the quarter ended October 31, 2001 Commission File Number 0-1678 BUTLER NATIONAL CORPORATION (Exact name of Registrant as specified in its charter) Delaware 41-0834293 (State of Incorporation) (I.R.S. Employer Identification No.) 19920 West 161st Street, Olathe, Kansas 66062 (Address of Principal Executive Office) (Zip Code) Registrant's telephone number, including area code: (913) 780-9595 Former Name, former address and former fiscal year if changed since last report: Not Applicable 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 and (2) has been subject to such filing requirements for the past ninety days: Yes X No The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, as of October 31, 2001, was 37,283,278 shares. BUTLER NATIONAL CORPORATION AND SUBSIDIARIES INDEX PART I FINANCIAL INFORMATION: PAGE NO. Condensed Consolidated Balance Sheets - October 31, 2001 and April 30, 2001 3 Condensed Consolidated Statements of Income - - Three Months ended October 31, 2001 and 2000 4 Condensed Consolidated Statements of Income - - Six Months ended October 31, 2001 and 2000 5 Condensed Consolidated Statements of Cash Flows - Six Months ended October 31, 2001 and 2000 6 Notes to Condensed Consolidated Financial Statements 7-8 Management's Discussion and Analysis Financial Condition and Results of Operations 9-11 PART II. OTHER INFORMATION 12 SIGNATURES 13 BUTLER NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AT OCTOBER 31 AND APRIL 30, 2001 ASSETS 10/31/01 4/30/01 (unaudited) (audited) Current Assets: Cash $212,565 $108,071 Accounts receivable, net of allowance for 806,991 642,564 doubtful accounts of $11,703 at Oct. 31, and $25,600 at April 30, 2001 Note receivable from Indian Gaming development 647,285 647,285 Due from affiliate - 308,181 Contracts in process - - Inventories: Raw materials 1,595,805 1,639,080 Work in process 140,658 208,036 Finished goods 46,635 70,920 Aircraft 1,046,281 1,467,771 2,829,379 3,385,807 Prepaid expenses and other assets 5,176 9,730 Total current assets 4,501,396 4,793,457 Property, Plant and Equipment: Land & Building 948,089 948,089 Machinery and equipment 1,181,297 1,161,220 Office furniture and fixtures 607,736 607,736 Leasehold improvements 4,249 4,249 Total cost 2,741,371 2,721,294 Accumulated depreciation (1,672,150) (1,590,048) Net Property, Plant and equipment 1,069,221 1,131,246 Supplemental Type Certificates 1,348,892 1,338,372 Indian Gaming: Note receivable from Indian Gaming developments 918,677 1,285,326 Advances for Indian gaming developments (net of 1,866,225 1,861,376 reserves of $2,718,928 at Oct. 31 and April 30, 2001) Total Indian Gaming (Long Term) 2,784,902 3,146,702 Other assets 196,837 196,837 Total Other Assets 196,837 196,837 Total Assets $9,901,248 $10,606,614 LIABILITIES AND SHAREHOLDERS' EQUITY 10/31/01 4/30/01 (unaudited) (audited) Current Liabilities: Bank overdraft payable $ - $ 149,859 Promissory notes payable 326,773 348,590 Current maturities of long-term debt 838,542 1,321,030 Accounts Payable 518,075 807,114 Customer Deposits - 167,530 Accrued liabilities- Compensation and compensated absences 255,936 120,304 Other 192,310 118,837 Total current liabilities 2,131,636 3,033,264 Long-Term Debt, net of current maturities 2,324,997 3,253,612 Convertible debentures - 78,000 Total liabilities 4,456,633 6,364,876 Shareholders' equity: Preferred stock, par value $5: - - Authorized, 200,000 shares, all classes $1,000 Class B, 6%, convertible cumulative, liquidation and redemption value $1,000, issued and outstanding, zero shares at 10/31/01 & zero shares at 4/30/01 Common stock, par value $.01: 378,833 369,041 Authorized, 40,000,000 shares Issued and outstanding 37,883,278 Oct. 31, 2001 & 27,181,828 at April 31, 2001 Capital contributed in excess of par 9,958,476 9,890,268 Treasury stock, at cost (No preferred at 10/31 and (732,000) (732,000) no preferred at 4/30 and common 600,000 at 10/31 and 600,000 at 4/30) Retained deficit (deficit of $11,938,813 eliminated October 31, 1992) (4,160,694) (5,285,571) Total shareholders' equity 5,444,615 4,241,738 Total liabilities and shareholders' equity $9,901,248 $10,606,614 The accompanying notes are an integral part of these condensed consolidated balance sheets. BUTLER NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED October 31, 2001 2000 (unaudited) (unaudited) Net sales $2,665,724 $1,323,693 Cost of sales 1,198,088 1,137,161 1,467,636 186,532 Selling, general and administrative expenses 832,775 547,689 Operating income (loss) 634,861 (361,157) Other income (expense) Interest expense (90,991) (85,196) Interest revenue 34,746 33,708 Other 13,944 175 Other expense (42,301) (51,313) Income (loss) before taxes 592,560 (412,470) Provision for income taxes 5,000 - Net income (loss) $ 587,560 $ (412,470) Basic earnings (loss) per common share: $ 0.02 $ (0.02) Shares used in per share calculation 32,899,346 24,247,257 Diluted earnings (loss) per common share $ 0.02 $ (0.02) Shares used in per share Calculation 32,899,346 24,247,257 The accompanying notes are an integral part of these condensed consolidated statements. BUTLER NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED October 31, 2001 2000 (unaudited) (unaudited) Net sales $5,920,714 $2,306,279 Cost of sales 3,390,650 2,027,761 2,530,064 278,518 Selling, general and administrative expenses 1,319,304 979,434 Operating income (loss) 1,210,760 (700,916) Other income (expense) Interest expense (180,966) (168,740) Interest revenue 77,704 70,068 Other 17,379 2,180 Other expense (85,883) (96,492) Income (loss) before taxes 1,124,877 (797,408) Provision for income taxes 10,000 - Net income (loss) $1,114,877 $ (797,408) Basic earnings (loss) per common share: $ 0.03 $ (0.03) Shares used in per share Calculation 32,899,346 24,247,257 Diluted earnings (loss) per common share $ 0.03 $ (0.03) Shares used in per share Calculation 32,899,346 24,247,257 The accompanying notes are an integral part of these condensed consolidated statements. BUTLER NATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED October 31, 2001 2000 (unaudited) (unaudited) Cash flows from operating activities: Net income (loss) $1,114,876 $ (797,408) Adjustments to reconcile net income (loss) to net cash provided by (used in) operations: Depreciation 82,102 101,876 Amortization - 31,070 Other 10,000 - Changes in assets and liabilities: Accounts receivable (164,427) 280,492 Contracts in process - 385,500 Inventories 556,428 76,599 Prepaid expenses and other current assets 4,554 (753) Other assets and other - 3,018 Accounts payable (438,898) 172,015 Customer deposits (167,530) (452,923) Accrued liabilities 209,106 22,586 Cash provided by (used in) operations 1,206,212 (177,928) Cash flows from investing activities: Capital expenditures, net (20,07 - Indian Gaming Developments 361,799 105,650 Supplemental Type Certificates (10,520) - Cash used in investing activities 331,202 $105,650 Cash flows from financing activities: Net borrowings under promissory note (21,817) 17,662 Proceeds from long-term debt 751,000 123,088 Repayments of long-term debt and lease obligations (2,162,103) (189,961) Cash provided by financing activities (1,432,920) (46,211) Net increase (decrease) in cash 104,494 (118,489) Cash, beginning of period 108,071 160,090 Cash, end of period $ 212,565 $ 41,601 Supplemental disclosures of cash flow information Interest paid $ 180,966 $ 89,975 Income taxes paid - - The accompanying notes are an integral part of these condensed consolidated statements. BUTLER NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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. In the opinion of the management of the Company, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the three months and six months ended October 31, 2001 are not indicative of the results of operations that may be expected for the year ending April 30, 2002. Certain reclassifications within the condensed financial statement captions have been made to maintain consistency in presentation between years. 2. Indian Gaming: The Company is advancing funds for the establishment of Indian gaming. These funds have been capitalized in accordance with Statements of Financial Accounting Standards (SFAS) 67 "Accounting for Costs and Initial Rental Operations of Real Estate Projects." Such standard requires costs associated with the acquisition, development, and construction of real estate and real estate-related projects to be capitalized as part of that project. The realization of these advances is predicated on the ability of the Company and their Indian gaming clients to successfully open and operate the proposed casinos. There is no assurance that the Company will be successful. The inability of the Company to recover these advances could have a material adverse effect on the Company's financial position and results of operations. Advances to the tribes and for gaming developments are capitalized and recorded as receivables from the tribes. These receivables, shown as Advances for Indian Gaming Development on the balance sheet, represent costs to be reimbursed to the Company pending approval of Indian gaming in several locations. The Company has agreements in place which require payments to be made to the Company for the respective projects upon opening of Indian gaming facilities. Once gaming facilities have gained proper approvals, the Company will enter into note receivable arrangements with the tribe to secure reimbursement of advanced funds to the Company for the particular project. The Company currently has one note receivable shown as Note Receivable From Indian Gaming Development on the balance sheet. Reserves are recorded for Indian Gaming Development costs that cannot be determined whether reimbursement from the Tribes will occur. We have agreements with the Tribes to be reimbursed for all costs incurred by us to develop gaming when the facilities are constructed and opened. Because the Stables represents the only operations opened, there is uncertainty as to whether reimbursement on all remaining costs that have been reserved will occur. It is our policy therefore, to reduce the respective reserves as reimbursement from the Tribes is collected. The Company has capitalized approximately $1,866,225 and $1,861,376 at October 31, 2001 and April 30, 2001 respectively, related to the development of Indian gaming facilities. These amounts are net of reserves of $2,718,928 in fiscal year 2001 and 2000, which were established to reserve for potentially unreimburseable costs. In the opinion of management, the net advances will be recoverable through the gaming activities. Current economic projections for the gaming activities indicate adequate future cash flows to recover the advances. In the event the Company and its Indian clients are unsuccessful in establishing such operations, these net recorded advances will be recovered through the liquidation of the associated assets. The Company has title to land purchased for Indian gaming. These tracts, currently owned by the Company, could be sold to recover costs in the projects. As a part of a Management Contract approved by the National Indian Gaming Commission (NIGC) on January 14, 1997, between the Company's (then) wholly owned subsidiary, Butler National Service Corporation, and the Miami Tribe of Oklahoma and the Modoc Tribe of Oklahoma (the Tribes), the Company agreed to convert their current unsecured receivable from the Tribes to a secured note receivable with the Tribes of $3,500,000 at 2 percent over prime, to be repaid over five years, for the construction of the Stables gaming establishment and reimbursement for previously advanced funds. Security under the contract includes the Tribes' profits from all tribal gaming enterprises and all assets of the Stables except the land and building. In conjunction with the dividend of Butler National Services Corporation (BNSC) shares to Company shareholders in May, 1999 $1,607,642 of the note was an asset of BNSC and $1,770,351 was an asset of the Company. The Company is currently receiving payments on the note on the Stables' operation. Amounts to be received on the notes are 2002 - $468,137; 2003 - $647,285 and 2004 - $638,041. 3. Quasi Reorganization: After completing a three-year program of restructuring the Company's operation, on October 31, 1992, the Company adjusted the accumulated deficit (earned surplus benefit) to a zero balance thereby affording the Company a "fresh start." No assets or liabilities required adjustment in this process as they had been recorded at fair value. The amount of accumulated deficit eliminated as of October 31, 1992, was $11,938,813. Upon consummation of the reorganization, all deficits in the surplus accounts were eliminated against paid-in capital. 4. New Accounting Standards: The American Institute of Certified Public Accountants has issued SOP 98-5, "Reporting on the costs of start-up activities." This standard provides a change in the capitalization policy for start up costs. The standard is required for the Company's fiscal year-end 1999. The Company has evaluated this standard and concluded its adoption will have no material effect to the financial statements. 5. Earnings Per Share: Earnings per common share is based on the weighted average number of common shares outstanding during the year. Stock options, convertible preferred, and convertible debentures have been considered in the dilutive earnings per share calculation, but not used in 2001 and 2000 because they are anti-dilutive. 6. Research and Development: The Company charges to operations research and development costs. The amount charged in the quarter ended October 31, 2001 was approximately $150,000 and for the six months was approximately $358,000. The rest of this page intentionally left blank. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS First half fiscal 2002 compared to first half fiscal 2001 Overview: Consolidated sales were $5,920,714 for the six months ended October 31, 2001, compared to $2,472,315 for the six months ended October 31, 2000, an increase of 140%. Sales for the second fiscal quarter were $2,665,724 compared to $1,406,333 for the quarter ended October 31, 2000. Sales for the six month period increased in the Avionics segment 1,306%, increased in the Aircraft Modifications segment 85%, and decreased in the Monitoring Services segment (10%). The Company recorded a net income from continuing operations of $1,114,877 for the first half of fiscal 2002 compared to a net loss from continuing operations of $797,408 in the same period of fiscal 2001. Selling, General and Administrative expenses were $1,319,304 for the six months, an increase of $339,870 from the prior year. Discussion of the specific changes by operation at each business segment follows: Aircraft Modifications: Sales from the Aircraft Modifications business segment increased $1,226,674 (85%) from $1,449,326 in the first half of the prior fiscal year to $2,676,000 in the first half of fiscal 2002. Modified aircraft sales were $1,425,000 in the first fiscal quarter. Gross profit increased from $71,298 in the six months ending October 31, 2000 to $365,021 in the six months ending October 31, 2001. Second quarter fiscal 2002 sales were $479,432 compared to $883,846 in fiscal 2001. Second quarter gross profit was a loss of $46,550 and a profit of $114,332, respectively. Sales and the related gross profit were lower in fiscal year 2002 than the previous year because of depressed economic conditions in this segment. Avionics: Avionics unit sales were $2,298,621 for the six months ended October 31, 2001 compared to $163,538 in the comparable period of the preceding year, an increase of 1,306%. Operating profits for the six months ended October 31, 2001, were $1,460,480 compared to $(139,000) for the six months ended October 31, 2000. The Company believes the sales volume will remain relatively stable with growth from new projects for the next few years. As reported on October 12, 2000, Avionics added the Transient Suppression Device (TSD) to its line of Classic Aviation Products. Avionics expects to equip approximately 100 Boeing 747 aircraft with the Butler National TSD during fiscal years 2001 and 2002. Currently, the TSD order backlog is approximately $1,000,000 including some unsigned orders in the final closing phases. Avionics expects to ship the current backlog by April 30, 2002. Avionics may need additional working capital to finance the increased level of business. There can be no assurance that the additional financing will be available or that all the pending orders will be completed. SCADA Systems and Monitoring Services: Sales for the six months ended October 31, 2001 were $575,650 compared to sales of $642,138 for the comparable period of the prior year a decrease of 10%. Operating profit for the six months was $145,639 compared to $105,044 for the six months ended October 31, 2000. Fluctuations above the basic service business revenues are expected from quarter to quarter and year to year. Temporary Services: This segment did not recognize any revenue in the first half of fiscal 2002 and fiscal 2001. Management Services: -General- Indian Gaming Management (a division of Butler National Corporation): This segment earned net management fees and interest income of $93,993 during the quarter and $172,885 for the first six months and incurred no expenses during the current quarter. In the first half of fiscal 2002, $4,218 was expensed for general and administrative expenses associated with its continued efforts to explore service opportunities related to the Indian Gaming Act of 1988. COSTS AND EXPENSES Operating expenses (selling, general and administrative): Expenses in the six months ended October 31, 2001, were $1,319,304 or 22% of sales compared to $979,434 or 43% of sales for the six months ended October 31, 2000, an increase of $339,871 or 34%. This increase was related to additional research and development costs of approximately $358,000. Interest expense for the six months ended October 31, 2001, increased $12,263 from $168,740 in the first half of the prior year to $180,966. The Company continues to use its line of credit to maintain operations. The Company acquired a Lear 25 during fiscal 2000, for debt on an inventory floor plan of $1,400,000, the majority of the increase in interest expense relates to this acquisition and the related debt and the increased borrowing on the credit line. The Company sold the Lear acquired in fiscal 2000 in June 2001. The Company intends to sell the second Learjet 25 after completion and certification of the RX modification STC. Other income (expense) is income of $17,379 in the quarter ended October 31, 2001, versus income of $2,180 in the quarter ended October 31, 2000. The Company employed 55 at October 31, 2001, and 63 at October 31, 2000. EARNINGS The Company recorded a profit of $1,124,876 in the six months ended October 31, 2001. This is comparable to a loss of $797,408 in the six months ended October 31, 2000. Earnings per share is a profit of $.04 and a loss of $.03 for the six months ending October 31, 2001, and October 31, 2000, respectively. LIQUIDITY AND CAPITAL RESOURCES Borrowed funds have been used primarily for working capital. Bank (Industrial State Bank) debt related to the Company's operating line was $362,773 at October 31, 2001, and was $432,835 at October 31, 2000. The Company's unused line of credit was approximately $137,227 as of October 31, 2001 and approximately $67,165 as of October 31, 2000. The interest rate on the Company's line of credit is prime plus two, as of December 14, 2001, the interest rate is 7.0%. The Company plans to continue using the promissory notes to fund working capital. The Company believes the extensions will continue and does not anticipate the repayment of these notes in fiscal 2002. The extensions of the promissory notes payable is consistent with prior years. If the Bank were to demand repayment of the notes payable the Company currently does not have enough cash to pay off the notes without materially adversely affecting the financial condition of the Company. The Company does not, as of October 31, 2001, have any material commitments for other capital expenditures other than the Management Services segment's requirements under the terms of the Indian gaming Management Agreements. These requirements are further described in this section. Depending upon the development schedules, the Company, through Management Services, will need additional funds to complete its currently planned Indian gaming opportunities through its affiliate, Butler National Service Corporation. The Company will use current cash available, and additional funds, for the start up and construction of gaming facilities. The Company anticipates initially obtaining these funds from: internally generated working capital and borrowings. After a few gaming facilities become operational, gaming operations will generate additional working capital for the start up and construction of other gaming facilities. The Company expects that its start up and construction financing of gaming facilities will be replaced by other financial lenders, long term financing through debt issue, or equity issues. Avionics and Modifications continue to add new product lines to its Classic Aviation Products group. Avionics may need additional working capital to finance the expected increased level of business. There can be no assurance that the additional financing will be available or that all the pending orders will be completed. The Company was initially listed in the National Over-the-Counter market in 1969, under the symbol "BUTL". Effective June 8, 1992, the symbol was changed to "BLNL". On February 24, 1994, it was listed on the small cap market under the symbol "BUKS". The Company's common stock was delisted from the small cap category effective January 1, 1999, and is now listed in the over-the-counter (OTCBB) category. The rest of this page intentionally left blank. FORWARD LOOKING INFORMATION The information set forth below includes "forward- looking" information as outlined in the Private Securities Litigation Reform Act of 1995. The Cautionary Statements, filed by the Company as Exhibit 99 to the April 30, 2001 Form 10-K, are incorporated herein by reference and you are specifically referred to such Cautionary Statements for a discussion of factors which could affect the Company's operations and forward-looking statements contained herein. PART II. OTHER INFORMATION Responses to items 1, 3, and 5 are omitted since these items are either inapplicable or the response thereto would be negative. Item 2. Changes in Securities None Item 4 Submission of Matters to Vote of Security Holders None Item 6. Exhibits and reports on Form 8-K. (A) Exhibits. 3.1 Articles of Incorporation, as amended are incorporated by reference to Exhibit 3.1 of the Company's Form 10-K for the year ended April 30, 1988 3.2 Bylaws, as amended, are incorporated by reference to Exhibit 3.2 of the Company's Form 10-K for the Statement dated August 16, 1996. 99 Exhibit Number 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, 2001. 27.1 Financial Data Schedule (EDGAR version only). Filed herewith. The Company agrees to file with the Commission any agreement or instrument not filed as an exhibit upon the request of the Commission. (B) Reports on Form 8-K. The Company filed a Form 8-K dated September 25, 2001, reporting under Item 5, the issue of a press release related to the Company's filing of it's first quarter Form 10-Q for fiscal year 2002. SIGNATURES 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. BUTLER NATIONAL CORPORATION (Registrant) December 14, 2001 /S/ Clark D. Stewart Date Clark D. Stewart President and Chief Executive Officer) December 14, 2001 /S/ Angela Seba Date Angela Seba (Chief Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----