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 July 31, 2000
Transition Report Pursuant to Section 13 or 15 (d) of the
Security Exchange Act of 1934
For the quarter ended July 31, 2000
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:
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 July 31, 2000, was 27,806,828 shares.
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION:
Page No.
Consolidated Balance Sheets - July 31, 2000
and April 30, 2000............................................3
Consolidated Statements of Income - Three
Months ended July 31, 2000 and 1999...........................4
Consolidated Statements of Cash Flows - Three
Months ended July 31, 2000 and 1999...........................5
Notes to Consolidated Financial Statements.......................6
Management's Discussion and Analysis
Financial Condition and Results of Operations.................8
PART II.
OTHER INFORMATION...............................................13
SIGNATURES......................................................14
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS 7/31/00 4/30/00
(unaudited) (audited)
Current Assets:
Cash $ 95,309 $ 160,090
Accounts receivable, net of allowance for
doubtful accounts of $18,227 at July 31, 255,327 237,018
and $25,600 at April 30, 2000
Note receivable from Indian Gaming development 347,285 347,285
Due from affiliate 163,245 308,181
Contracts in process 59,250 385,500
Inventories:
Raw materials 1,460,647 1,524,391
Work in process 327,104 132,699
Finished goods 77,876 86,428
Aircraft 1,455,666 1,455,666
----------- ----------
3,321,293 3,199,184
Prepaid expenses and other assets 5,536 6,184
----------- ----------
Total current assets 4,247,245 4,643,442
Property, Plant and Equipment:
Land & Building 948,089 948,089
Machinery and equipment 1,159,154 1,159,154
Office furniture and fixtures 607,736 607,736
Leasehold improvements 4,249 4,249
------------ ----------
Total cost 2,719,228 2,719,228
Accumulated depreciation (1,452,959) (1,401,922)
----------- -----------
Net Property, Plant 1,266,269 1,317,306
and equipment
Supplemental Type Certificates 1,381,160 1,397,967
Indian Gaming:
Note receivable from Indian Gaming
developments 868,448 936,340
Advances for Indian gaming developments
(net of reserves of $2,718,928 at July
31 and April 30, 2000 1,805,887 1,780,094
Total Indian Gaming (Long Term) 2,674,335 2,716,434
Other Assets
Other assets 193,819 196,837
----------- ----------
Total Other Assets 193,819 196,837
Total assets $ 9,762,828 $10,271,986
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY 7/31/00 4/30/00
(unaudited) (audited)
Current Liabilities:
Bank overdraft payable $ 74,188 $ 76,234
Promissory notes payable 438,902 615,174
Current maturities of long-term debt 547,162 375,480
Accounts payable 689,802 735,237
Customer Deposits 539,445 620,673
Accrued liabilities -
Compensation and compensated absences 107,853 137,496
Other 196,937 91,481
----------- -----------
Total current liabilities 2,594,289 2,651,775
Long-Term Debt, net of current maturities 2,873,087 2,939,821
Convertible debentures 208,000 273,000
--------- ---------
Total liabilities 5,675,376 5,864,596
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, 283.5 shares at
7/31/00 & 283.5 shares at 4/30/00 112,136 112,136
Common stock, par value $.01:
Authorized, 40,000,000 shares
Issued and outstanding 27,806,828 July 31,
2000 & 27,181,828 at April 31, 2000, 278,068 271,818
Capital contributed in excess of par 9,617,299 9,558,549
Treasury stock, at cost (No preferred at
7/31 & no preferred at 4/30 (732,000) (732,000)
and common 600,000 at 7/31 & 600,000
at 4/30)
Retained deficit (5,188,051) (4,803,113)
(deficit of $11,938,813 eliminated
October 31, 1992)
----------- -----------
Total shareholders' equity 4,087,452 4,407,390
----------- -----------
Total liabilities and shareholders'
equity $ 9,762,828 $10,271,986
=========== ===========
The accompanying notes are an integral part of these balance sheets.
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
July 31,
2000 1999
(unaudited) (unaudited)
Net sales $ 982,586 $1,479,780
Cost of sales 837,423 971,009
---------------- -------------
145,163 508,771
Selling, general and
administrative expenses 484,921 286,345
---------------- -------------
Operating income (loss) (339,758) 222,426
Other income (expense):
Interest expense (83,545) (34,491)
Interest revenue 36,360 44,163
Other 2,005 2,181
---------------- --------------
Other expense (45,180) 11,853
---------------- -------------
Income (loss)
from continuing operations before
taxes (384,938) 234,279
Provision for income taxes from
continuing operations - -
------------ ------------
Income (loss) from
continuing operations $ (384,938) $ 234,279
------------ -----------
Net income (loss) $ (384,938) $ 234,279
=========== ==========
Basic earnings (loss) per common share:
Continuing operations (.02) (.02)
---------- ----------
$(.02) $(.02)
Shares used in per share calculation 21,438,725 12,960,519
Diluted earnings (loss) per common share
Continuing operations (.02) (.02)
---- ----
$(.02) $(.02)
Shares used in per share calculation 21,438,725 12,960,519
The accompanying notes are an integral part of these statements.
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended July 31,
2000 1999
(unaudited) (unaudited)
Cash flows from operating
activities:
Net income (loss) $ (384,938) $ 234,279
Income (loss) from discontinued operations - -
Income from continuing operations (384,938) 234,279
Adjustments to reconcile net income
(loss) to net cash (used in) operations:
Depreciation 51,037 54,461
Amortization 16,808 37,247
Other noncash expenses - 2,401
Changes in assets and liabilities:
Accounts receivable 126,627 (54,469)
Contracts in process 326,250 405,937
Inventories (122,109) (2,858)
Prepaid expenses and other current assets 648 52,076
Other assets and other 3,018 23,269
Accounts payable 37,195 (167,760)
Customer deposits (81,228) (353,860)
Accrued liabilities (19,239) (122,711)
----------- -----------
Cash provided by (used in) operations (45,931) 106,012
----------- -----------
Cash flows from investing activities:
Capital expenditures, net - (21,778)
Indian Gaming Developments 42,099 14,080
------------ ----------
Cash used in investing activities 42,099 (7,698)
----------- ----------
Cash flows from financing activities:
Net borrowings under promissory note 23,727 (70,841)
Repayments of long-term debt and lease
obligations (84,676) (64,605)
------------ ---------
Cash provided by
financing activities (60,949) (135,446)
------------ ----------
Net increase (decrease) in cash (64,781) (37,132)
Cash, beginning of period 160,090 161,808
------------- -----------
Cash, end of period $ 95,309 $ 124,676
Supplemental disclosures of cash flow
information:
Interest paid $ 83,545 $ 35,764
Income taxes paid - -
The accompanying notes are an integral part of these statements.
BUTLER NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited 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 ended July 31, 2000 are not
indicative of the results of operations that may be expected for the year
ending April 30, 2001.
Certain reclassifications within the 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 $1,866,322 and $1,840,529 at July
31, 2000 and April 30, 2000 respectively, related to the development of
Indian gaming facilities. These amounts are net of reserves of $2,718,928
in fiscal year 2000 and 1999, 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 2001 - $347,285;
2002 - $382,800; 2003 - $428,000 and 2004 - $125,540.
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 2000 and 1999
because they are anti-dilutive.
6. Dividend of Subsidiary Stock to Shareholders: On May 4, 1999 the
Company announced it would distribute to its shareholders the stock in the
subsidiary Butler National Service Corporation (BNSC). The assets of the
subsidiary totalled approximately $1,623,000 and liabilities totalled
approximately $1,620,000. The distribution will be made when the filings
are approved by the Security and Exchange Commission. BNSC holds a contract
to manage an Indian Gaming facility (The Stables) and will manage all Indian
Gaming facilities when there is a contract between the Tribe and BNSC.
7. Research and Development: The Company charges to operations research and
devlopment costs. The amount charged in the quarter ended July 31, 2000 was
approximately $381,828.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
First quarter fiscal 2001 compared to restated first quarter fiscal 2000
Overview: Consolidated sales were $982,586 for the three months ended July
31, 2000, compared to $1,479,780 for the three months ended July 31, 1999, a
decrease of (33.5%). Sales increased in the Avionics segment (6.1%),
increased in the Aircraft Modifications segment (44%), and decreased in the
Monitoring Services segment (27.5%).
The Company recorded a net loss from continuing operations of $384,937 in
the current quarter compared to a $234,279 net gain in the comparable period
of fiscal 2000.
Selling, General and Administrative expenses were $484,921 for the current
quarter, an increase of $198,576 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 decreased $443,984 (44%) from $1,009,463 in the first quarter of the
prior fiscal year to $565,479 in the current first quarter of fiscal 2001.
First quarter operating profit was $(195,915) in fiscal 2001 and $211,594
in fiscal 2000. Additional emphasis is being placed on the purchase, modify
and resale product line to increase market share of all modification products.
Avionics: Avionics unit sales were $124,301 for the three months ended July
31, 2000 compared to $116,672 in the comparable period of the preceding year,
an increase of (6.1%). The decrease resulted from reduced sales to Douglas
Aircraft. Operating profits for the three months ended July 31, 2000, were
$(8,480) compared to $51,354 for the three months ended July 31, 1999. The
Company believes the sales volume will remain relatively stable with growth
from new projects for the next few years.
SCADA Systems and Monitoring Services: Sales for the three months ended July
31, 2000 were $266,237 compared to sales of $367,181 for the comparable period
of the prior year a decrease of 27.5%. Operating profit for the three months
was $45,567 compared to $85,080 for the three months ended July 31, 1999.
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
quarter of fiscal 2001 and fiscal 2000.
Management Services:
-General-
Indian Gaming Management(a division of Butler National Corporation): This
segment received $36,334 in interest income and incurred no expenses during
the current quarter.
COSTS AND EXPENSES
Operating expenses (selling, general and administrative): Expenses in the
three months ended July 31, 2000, were $484,921 or 49% of sales compared to
$286,345 or 19% of sales for the three months ended July 31, 1999, an
increase of $198,576 or 69%.
Interest expense for the three months ended July 31, 2000, increased $49,054
from $34,491 in the first quarter of the prior year to $83,545. The Company
continues to use its line of credit to maintain operations.
Other income(expense) is income of $2,005 in the quarter ended July 31, 2000,
versus income of $2,181 in the quarter ended July 31, 1999.
The Company employed 69 at July 31, 2000, and 63 at July 31, 1999.
EARNINGS
The Company recorded a loss of $384,937 in the three months ended July 31,
2000. This is comparable to a profit of $234,279 (see note 2) in the three
months ended July 31, 1999. Income per share is $(.02) and income per share is
$(.02) for the three months ending July 31, 2000, and July 31, 1999,
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 $438,902 at July
31, 2000, and was $400,733 at July 31, 1999.
The Company's unused line of credit was approximately $61,098 as of July 31,
2000 and approximately $99,267 as of July 31, 1999. The interest rate on the
Company's line of credit is prime plus two, as of September 15, 2000, the
interest rate is 11.5%.
The Company plans to continue using the promissory notes payable to fund
working capital. The Company believes the extensions will continue and does
not anticipate the repayment of these notes in fiscal 2001. 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 July 31, 1998, 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. 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.
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.
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 this 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
The Company issued 625,000 shares of common stock related to the
convertible debenture.
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 theStatement 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, 1998.
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 June 27, 2000, reporting
under Item 4, the dismissal of the registrant's certifying
accountant.
The Company filed a Form 8-K dated June 30, 2000 reporting
under Item 4, the Securities and Exchange Commissions auditor
required response relating to the dismissal of the registrant's
certifying accountant.
The Company filed a Form 8-K dated July 11, 2000, reporting
under Item 4, the engagement of the registrant's certifying
accountant.
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)
September 19, 2000 /S/ Clark D. Stewart
Date Clark D. Stewart,
(President and Chief Executive Officer)
September 19, 2000 /S/ Robert E. Leisure
Date Robert E. Leisure
Chief Financial Officer)