THROUGHOUT THIS SECTION 2, ALL NON-TABLE FINANCIAL RESULTS ARE PRESENTED IN THOUSANDS OF
Forward-Looking Statements Statements made in this report, other reports and proxy statements filed with theSecurities and Exchange Commission , communications to stockholders, press releases, and oral statements made by representatives of the Company that are not historical in nature, or that state the Company or management intentions, hopes, beliefs, expectations or predictions of the future, may constitute "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements can often be identified by the use of forward-looking terminology, such as "could," "should," "will," "intended," "continue," "believe," "may," "expect," "hope," "anticipate," "goal," "forecast," "plan," "guidance" or "estimate" or the negative of these words, variations thereof or similar expressions. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties, and assumptions. It is important to note that any such performance and actual results, financial condition or business, could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1A (Risk Factors) of the Annual Report on Form 10-K for the fiscal year endedApril 30, 2021 , and elsewhere herein or in other reports filed with theSEC . Other unforeseen factors not identified herein could also have such an effect. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition or business over time. The forward-looking statements in this report are only predictions and actual events or results may differ materially. In evaluating such statements, a number of risks, uncertainties and other factors could cause actual results, performance, financial condition, cash flows, prospects and opportunities to differ materially from those expressed in, or implied by, the forward-looking statements. These risks, uncertainties and other factors include those set forth in Item 1A (Risk Factors) of the Annual Report on Form 10-K for the fiscal year endedApril 30, 2021 , including the following factors: ? the geographic location of our casino; ? customer concentration risk; ? executive officers are family members; ? industrial business cycles; ? fixed-price contracts; ? development, production, testing and marketing of new products; ? loss of key personnel; ? risks associated with international sales; ? future acquisitions and investments; ? change of control restrictions; ? cyber-security threats; ? extensive regulation across our industries; ? evolving government regulations and law; ? changes in regulations of financial reporting; ? the stability of credit markets; ? potential impairment losses; ? marketability restrictions of our common stock; ? the possibility of a reverse-stock split; ? stock dilution caused by the annual employer match to our 401(k) plan; ? market competition; ? acts of terrorism and war; ? inclement weather and natural disasters; ? pandemics or other national health crisis (including COVID-19); ? fluctuating fuel and energy costs; ? extensive taxation; Except as expressly required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this report. Results of operations in any past period should not be considered indicative of the results to be expected for future periods. Fluctuations in operating results may also result in fluctuations in the price of the Company's common stock. Investors should also be aware that while the Company, from time to time, communicates with securities analysts; it is against its policy to disclose any material non-public information or other confidential commercial information. Accordingly, shareholders should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, the Company has a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility ofButler National Corporation . 16
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Table of Contents Management Overview Management is focused on increasing long-term shareholder value from increased cash generation, earnings growth, and prudently managing capital expenditures. We plan to do this by continuing to drive increased revenue from product and service innovations, strategic acquisitions, and targeted marketing programs. We have two separate reporting segments: Aerospace Products and Professional Services. Aerospace Products and Professional Services do not share the same customers and suppliers and have substantially distinct businesses. The Aerospace Products operating segment provides products and services in the aerospace industry. Companies in Aerospace Products derive their revenue from system design, engineering, manufacturing, integration, installation, repairing, overhauling, servicing and distribution of aerostructures, avionics, aircraft components, accessories, subassemblies and systems. The Professional Services operating segment provides services in the gaming industry. Professional Services companies manage a gaming and entertainment facility and provide architectural and engineering services. These reporting segments operate through various subsidiaries and affiliates listed in the Company's fiscal year 2021 Annual Report on Form 10-K. Aerospace Products. The Aerospace Products segment includes the manufacture, sale and service of electronic equipment and systems and technologies to enhance and support products related to aircraft. Additionally, we also operate severalFederal Aviation Administration (the "FAA") Repair Stations. Companies in Aerospace Products concentrate onLearjet ,Beechcraft King Air , Cessna turbine engine, Cessna multi-engine piston and Dassault Falcon 20 aircraft. Specifically, the design, distribution and support for products for older aircraft, or "Classic" aircraft are areas of focus for companies in Aerospace Products.
Some products. The products that companies in this group design, develop, manufacture, integrate, install, repair and maintain include:
? Aerial surveillance products ? GARMIN GTN Global Position
System
Navigator with Communication
Transceiver
? Aerodynamic improvement products? JET Autopilot Products
? Airspeed and altimeter systems ? Electrical systems and switching
equipment
? Avcon Fins ? Noise suppression systems
? ADS-B (transponder) systems ? Rate gyroscopes
? Conversion of passenger ? Replacement vertical accelerometers
configurations to cargo
? Cargo/sensor carrying pods ? Provisions for external stores
? Electronic navigational instruments, ? Attitude heading reference systems
radios and transponders
Modifications. The companies in Aerospace Products have authority pursuant to
Federal Aviation Administration Supplemental Type Certificates ("STCs") and
Parts Manufacturer Approval ("PMA"), to build required parts and subassemblies
and to make applicable installations. Companies in Aerospace Products perform
modifications in the aviation industry including:
? Aerial photography capabilities? Extended tip fuel tanks
? Aerodynamic improvements ? Radar systems
? Avionics systems ? ISR - Intelligence Surveillance
Reconnaissance
? Cargo doors ? Special mission modifications
? Conversion from passenger to ? Stability enhancements
freighter configuration
? Extended doors ? Traffic collision avoidance systems
Special Mission Electronics . We supply defense-related, commercial off-the-shelf
products to various commercial entities and government agencies and
subcontractors in order to update or extend the useful life of aircraft with
older components and technology. These products include:
? Cabling ? HangFire Override Modules
? Electronic control systems ? Test equipment
? Gun Control Units for Apache and ? Land and Sea Gun Control Units
Blackhawk helicopters based military vehicles Professional Services. The Professional Services segment includes the management of a gaming facility and related dining and entertainment facilities inDodge City, Kansas .Boot Hill Casino and Resort features approximately 645 slot machines and 20 table games. Due to COVID-19,Boot Hill Casino and Resort currently operates 520 slot machines and 16 table games. Companies in Professional Services also provide licensed architectural services, including commercial and industrial building design, and engineering services. Boot Hill.Butler National Service Corporation ("BNSC"), viaBHCMC, LLC ("BHCMC"), a company in Professional Services, has managedThe Boot Hill Casino and Resort inDodge City, Kansas ("Boot Hill") since 2009 pursuant to the Lottery Gaming Facility Management Contract, by and among BNSC, BHCMC and theKansas Lottery , originally datedDecember 8, 2009 , as subsequently amended ("Boot Hill Agreement"). As required byKansas law, all games, gaming equipment and gaming operations at Boot Hill are owned and operated by theKansas Lottery .
Architectural and engineering services. Professional services firms provide licensed architectural services, including commercial and industrial building design, and engineering services.
17
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Table of Contents COVID-19 Overview The pandemic caused by the disease COVID-19 was first reported inWuhan, China inDecember 2019 and has since spread throughout the world. Financial markets have been volatile due to uncertainty with respect to the severity and duration of the pandemic. The pandemic resulted in federal, state and local governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, "shelter in place" and "stay at home" orders, travel restrictions or bans, business curtailments, school closures, and other protective measures. Our aerospace segment qualified as "essential" under applicable federal guidance and state orders. The facilities have continued operations. We are enforcing social distancing and enhanced health, safety and sanitization measures in accordance with guidelines from theCenter for Disease Control (the "CDC"). Our professional services operations at theBoot Hill Casino & Resort was forced to close fromMarch 18, 2020 thruMay 21, 2020 . The casino reopened to the public onMay 22, 2020 with reduced hours to allow for extra time for cleaning and sanitizing in accordance withCDC guidelines and limited number of games and food offerings. We are also continuing to enforce social distancing measures throughout the casino and are subject to state mandated restrictions. Since reopening theBoot Hill Casino & Resort we have experienced lower customer headcount, which has been off-set by a larger net revenue per customer. The COVID-19 pandemic impacted our business operations and financial results beginning in the fourth quarter of fiscal 2020 and continues to impact us. We face numerous uncertainties in estimating the direct and indirect effects on our present and future business operations, financial condition, results of operations, and liquidity. Due to several rapidly changing variables related to the COVID-19 pandemic, we cannot reasonably estimate future economic trends and the timing of when stability will return. As schools, businesses and the economy in general have slowly reopened, and vaccinations rates in our operating territory improve and new infections decline, we have continued to see improvements in customer headcount. However, the unpredictable nature of the pandemic could again lead to closures, decreased traffic and demand, and increased COVID-19- related operating expenses, for the foreseeable future. While COVID-19 has resulted in, and will continue to bring, significant challenges and uncertainty to our operating environment, we believe that our resilient business model and the strength of our brand and balance sheet position us well to emerge from the pandemic. Results Overview The nine months endedJanuary 31, 2022 revenue increased 27% to$55.4 million compared to$43.6 million in the nine months endedJanuary 31, 2021 . In the nine months endedJanuary 31, 2022 the professional services revenue was$28.8 million compared to$20.9 million in the nine months endedJanuary 31, 2021 , an increase of 38%. In the nine months endedJanuary 31, 2022 the Aerospace Products revenue was$26.6 million compared to$22.7 million in the nine months endedJanuary 31, 2021 , an increase of 17%.
The nine months ended
compared to a net income of
the
nine months endedJanuary 31, 2022 , operating income increased to$13.2 million from an operating income of$3.7 million in the nine months endedJanuary 31, 2021 . RESULTS OF OPERATIONS NINE MONTHS ENDEDJANUARY 31, 2022 COMPARED TO NINE MONTHS ENDEDJANUARY 31, 2021 Nine Months Nine Months Ended January Percent of
End of January Percentage change (thousands of dollars)
31, 2022 Total Revenue 31, 2021 Total Revenue 2021-2022 Revenue: Professional Services$ 28,817 52 %$ 20,901 48 % 38 % Aerospace Products 26,552 48 % 22,671 52 % 17 % Total revenue 55,369 100 % 43,572 100 % 27 % Costs and expenses: Costs of Professional Services 11,377 20 % 10,313 24 % 10 % Cost of Aerospace Products 17,186 31 % 16,504 38 % 4 % Marketing and advertising 3,809 7 % 2,723 6 % 40 % Employee benefits 1,686 3 % 1,696 4 % -1 % Depreciation and amortization 2,106 4 % 2,858 7 % -26 % General, administrative and other 6,038 11 % 5,795 13 % 4 % Total costs and expenses 42,202 76 % 39,889 92 % 6 % Operating income$ 13,167 24 %$ 3,683 8 % 258 % 18
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Table of Contents Revenue: Revenue increased 27% to$55.4 million in the nine months endedJanuary 31, 2022 , compared to$43.6 million in the nine months endedJanuary 31, 2021 . See "Operations by Segment" below for a discussion of the primary reasons for the increase in revenue.
? Professional services derive their revenue from (a) professional management
services in the gaming industry through
(“BNSC”) and
engineering and management support services. Professional income
Services increased by 38% for the nine months to
2022 compared to$20.9 million atJanuary 31, 2021 . ? Aerospace Products derives its revenue by designing, engineering,
manufacture, installation, maintenance and repair of conventional products and
current production aircraft. Aerospace product sales increased 17% to
nine months for
January 31, 2021 . Costs and expenses: Costs and expenses related to Professional Services and Aerospace Products include the cost of engineering, labor, materials, equipment utilization, control systems, security and occupancy. Costs and expenses increased 6% in the nine months endedJanuary 31, 2022 to$42.2 million compared to$39.9 million in the nine months endedJanuary 31, 2021 . Costs and expenses were 76% of total revenue in the nine months endedJanuary 31, 2022 , as compared to 92% of total revenue in the nine months endedJanuary 31, 2021 . Costs of Professional Services increased 10% in the nine months endedJanuary 31, 2022 to$11.4 million compared to$10.3 million in the nine months endedJanuary 31, 2021 . Costs were 20% of total revenue in the nine months endedJanuary 31, 2022 , as compared to 24% of total revenue in the nine months endedJanuary 31, 2021 . Costs of Aerospace Products increased 4% in the nine months endedJanuary 31, 2022 to$17.2 million compared to$16.5 million for the nine months endedJanuary 31, 2021 . Costs were 31% of total revenue in the nine months endedJanuary 31, 2022 , as compared to 38% of total revenue in the nine months endedJanuary 31, 2021 . Marketing and advertising expenses increased 40% in the nine months endedJanuary 31, 2022 , to$3.8 million compared to$2.7 million in the nine months endedJanuary 31, 2021 . Expenses were 7% of total revenue in the nine months endedJanuary 31, 2022 , as compared to 6% of total revenue in the nine months endedJanuary 31, 2021 . Marketing and advertising expenses include advertising, sales and marketing labor, gaming development costs, and casino and product promotions. Employee benefits expenses as a percent of total revenue was 3% in the nine months endedJanuary 31, 2022 , compared to 4% in the nine months endedJanuary 31, 2021 . These expenses decreased 1% to$1.7 million in the nine months endedJanuary 31, 2022 , from$1.7 million in the nine months endedJanuary 31, 2021 . These expenses include the employers' share of all federal, state and local taxes, paid time off for vacation, holidays and illness, employee health and life insurance programs and employer matching contributions to retirement plans. Depreciation and amortization expenses as a percent of total revenue was 4% in the nine months endedJanuary 31, 2022 , compared to 7% in the nine months endedJanuary 31, 2021 . These expenses decreased 26% to$2.1 million in the nine months endedJanuary 31, 2022 from$2.9 million in the nine months endedJanuary 31, 2021 . These expenses include depreciation related to owned assets being depreciated over various useful lives and amortization of intangible items including theKansas privilege fee related to theBoot Hill Casino being expensed over the initial term of the gaming contract with theState of Kansas .BHCMC, LLC depreciation and amortization expense for the nine months endedJanuary 31, 2022 was$1.7 million compared to$2.5 million in the nine months endedJanuary 31, 2021 . General, administrative and other expenses as a percent of total revenue was 11% in the nine months endedJanuary 31, 2022 , compared to 13% in the nine months endedJanuary 31, 2021 . These expenses increased 4% to$6.0 million in the nine months endedJanuary 31, 2022 , from$5.8 million in the nine months endedJanuary 31, 2021 . Other expense: Interest expense was$2.0 million in the nine months endedJanuary 31, 2022 , compared with interest expense of$2.4 million in the nine months endedJanuary 31, 2021 . Interest related to obligations ofBHCMC, LLC was$1.8 million in the nine months endedJanuary 31, 2022 compared to$2.2 million in the nine months endedJanuary 31, 2021 . 19
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Table of Contents Operations by Segment We have two operating segments, Professional Services and Aerospace Products. The Professional Services segment includes revenue contributions and expenditures associated with casino management services and professional architectural, engineering and management support services. Aerospace Products derives its revenue by designing, engineering, manufacturing, installing, servicing and repairing products for classic and current production aircraft.
The following table presents a summary of our operating segment information for the nine months ended
Nine Months Nine Months
Ended January Percent of Ended January Percent of Percent Change
(dollars in thousands) 31, 2022 Total Revenue 31, 2021 Total Revenue 2021-2022
Professional Services
Revenue
Boot Hill Casino $ 28,551 99 % $ 20,706 99 % 38 %
Management/Professional
Services 266 1 % 195 1 % 36 % Revenue 28,817 100 % 20,901 100 % 38 % Costs of Professional Services 11,377 40 % 10,313 49 % 10 % Expenses 9,852 34 % 8,138 39 % 21 % Total costs and expenses 21,229 74 % 18,451 88 % 15 % Professional Services operating income before former noncontrolling interest in BHCMC, LLC$ 7,588 26 %$ 2,450 12 % 210 % Nine Months Nine Months Ended January Percent of Ended January Percent of Percent Change (dollars in thousands) 31, 2022 Total Revenue 31, 2021 Total Revenue 2021-2022 Aerospace Products Revenue$ 26,552 100 %$ 22,671 100 % 17 % Costs of Aerospace Products 17,186 65 % 16,504 73 % 4 % Expenses 3,787 14 % 4,934 22 % -23 % Total costs and expenses 20,973 79 % 21,438 95 % -2 % Aerospace Products operating income$ 5,579 21 %$ 1,233 5 % 352 % Professional Services
? Professional services revenue increased 38% for the nine months ended
nine months ended
In the nine months ended
received for the
for the nine months ended
distributions reduced gross receipts by
income from
to a reduction in gross receipts of
of
income to
ended
January 31, 2021 . The remaining management and Professional Services revenue includes professional management services in the gaming industry, and licensed
architectural services. Professional services revenue excluding Boot Hill
Casino increased by 36% for
compared to$195 for the nine months endedJanuary 31, 2021 .
? Professional services costs increased 10% in the nine months ended January
31, 2022 to
ended
nine months endedJanuary 31, 2021 . ? Expenses increased 21% in the nine months endedJanuary 31, 2022 to
2021. Expenses represented 34% of total segment revenue in the nine months ended
January 31, 2022 , as compared to 39% of segment total revenue in the nine months endedJanuary 31, 2021 . Aerospace Products
? Turnover increased by 17% to reach
2022, compared to
the increase in income is mainly due to an increase in special missions
electronics company
business of$1.9 million .
? Aerospace product costs increased 4% in the nine months ended
2022 to
ended
nine months endedJanuary 31, 2021 . ? Expenses decreased 23% in the nine months endedJanuary 31, 2022 to
2021. Expenses represented 14% of total segment revenue in the nine months ended
January 31, 2022 , as compared to 22% of segment total revenue in the nine months endedJanuary 31, 2021 . 20
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THIRD QUARTER FISCAL 2022 COMPARED TO THIRD QUARTER 2021
Three Months Three Months
Ended January Percent of Ended January Percent of Percent Change
(dollars in thousands) 31, 2022 Total Revenue 31, 2021 Total Revenue 2021-2022
Revenue:
Professional Services $ 9,416 52 % $ 7,901 54 % 19 %
Aerospace Products 8,716 48 % 6,711 46 % 30 %
Total revenue 18,132 100 % 14,612 100 % 24 %
Costs and expenses:
Costs of Professional
Services 3,799 21 % 3,485 24 % 9 %
Cost of Aerospace Products 5,247 29 % 4,717 32 % 11 %
Marketing and advertising 1,338 7 % 877 6 % 53 %
Employee benefits 565 3 % 546 4 % 3 %
Depreciation and
amortization 699 4 % 740 5 % -6 %
General, administrative and
other 2,082 12 % 2,379 16 % -12 %
Total costs and expenses 13,730 76 % 12,744 87 % 8 %
Operating income $ 4,402 24 % $ 1,868 13 % 136 %
Revenue:
Revenue increased 24% to $18.1 million in the three months ended January 31,
2022 , compared to $14.6 million in the three months ended January 31, 2021 . See
"Operations by Segment" below for a discussion of the primary reasons for the
increase in revenue.
? Professional services derive their revenue from (a) professional management
services in the gaming industry through
(“BNSC”) and
engineering and management support services. Professional income
Services increased by 19% for the three months to
2022 compared to$7.9 million atJanuary 31, 2021 . ? Aerospace Products derives its revenue by designing, engineering,
manufacture, installation, maintenance and repair of conventional products and
current production aircraft. Sales of aerospace products increased by 30% for
three months for
January 31, 2021 . Costs and expenses: Costs and expenses related to Professional Services and Aerospace Products include the cost of engineering, labor, materials, equipment utilization, control systems, security and occupancy. Costs and expenses increased 8% in the three months endedJanuary 31, 2022 to$13.7 million compared to$12.7 million in the three months endedJanuary 31, 2021 . Costs and expenses were 76% of total revenue in the three months endedJanuary 31, 2022 , as compared to 87% of total revenue in the three months endedJanuary 31, 2021 . Costs of Professional Services increased 9% in the three months endedJanuary 31, 2022 to$3.8 million compared to$3.5 million in the three months endedJanuary 31, 2021 . Costs were 21% of total revenue in the three months endedJanuary 31, 2022 , as compared to 24% of total revenue in the three months endedJanuary 31, 2021 . Costs of Aerospace Products increased 11% in the three months endedJanuary 31, 2022 to$5.2 million compared to$4.7 million for the three months endedJanuary 31, 2021 . Costs were 29% of total revenue in the three months endedJanuary 31, 2022 , as compared to 32% of total revenue in the three months endedJanuary 31, 2021 . Marketing and advertising expenses increased 53% in the three months endedJanuary 31, 2022 , to$1.3 million compared to$877 in the three months endedJanuary 31, 2021 . Expenses were 7% of total revenue in the three months endedJanuary 31, 2022 , as compared to 6% of total revenue in the three months endedJanuary 31, 2021 . Marketing and advertising expenses include advertising, sales and marketing labor, gaming development costs, and casino and product promotions. Employee benefits expenses as a percent of total revenue was 3% in the three months endedJanuary 31, 2022 , compared to 4% in the three months endedJanuary 31, 2021 . These expenses increased 3% to$565 in the three months endedJanuary 31, 2022 , from$546 in the three months endedJanuary 31, 2021 . These expenses include the employers' share of all federal, state and local taxes, paid time off for vacation, holidays and illness, employee health and life insurance programs and employer matching contributions to retirement plans. 21
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Depreciation and amortization expenses as a percent of total revenue was 4% in the three months endedJanuary 31, 2022 , compared to 5% in the three months endedJanuary 31, 2021 . These expenses decreased 6% to$699 in the three months endedJanuary 31, 2022 from$740 in the three months endedJanuary 31, 2021 . These expenses include depreciation related to owned assets being depreciated over various useful lives and amortization of intangible items including theKansas privilege fee related to theBoot Hill Casino being expensed over the initial term of the gaming contract with theState of Kansas .BHCMC, LLC depreciation and amortization expense for the three months endedJanuary 31, 2022 was$561 compared to$615 in the three months endedJanuary 31, 2021 . General, administrative and other expenses as a percent of total revenue was 12% in the three months endedJanuary 31, 2022 , compared to 16% in the three months endedJanuary 31, 2021 . These expenses decreased 12% to$2.1 million in the three months endedJanuary 31, 2022 , from$2.4 million in the three months endedJanuary 31, 2021 . Other expense: Interest expense was$725 in the three months endedJanuary 31, 2022 , compared with interest expense of$758 in the three months endedJanuary 31, 2021 . Interest related to obligations ofBHCMC, LLC was$665 in the three months endedJanuary 31, 2022 compared to$679 in the three months endedJanuary 31, 2021 . Operations by Segment We have two operating segments, Professional Services and Aerospace Products. The Professional Services segment includes revenue contributions and expenditures associated with casino management services and professional architectural, engineering and management support services. Aerospace Products derives its revenue by designing, engineering, manufacturing, installing, servicing and repairing products for classic and current production aircraft.
The following table presents a summary of our operating segment information for the three months ended
Three Months Three Months
Ended January Percent of
End of January Percentage change (thousands of dollars)
31, 2022 Total Revenue 31, 2021 Total Revenue 2021-2022
Professional Services
Revenue
Boot Hill Casino $ 9,314 99 % $ 7,843 99 % 19 %
Management/Professional
Services 102 1 % 58 1 % 76 %
Revenue 9,416 100 % 7,901 100 % 19 %
Costs of Professional
Services 3,799 40 % 3,485 44 % 9 %
Expenses 3,388 36 % 2,692 34 % 26 %
Total costs and expenses 7,187 76 % 6,177 78 % 16 %
Professional Services
operating income before
former noncontrolling
interest in BHCMC, LLC $ 2,229 24 % $ 1,724 22 % 29 %
Three Months Three Months
Ended January Percent of
End of January Percentage change (thousands of dollars)
31, 2022 Total Revenue 31, 2021 Total Revenue 2021-2022
Aerospace Products
Revenue $ 8,716 100 % $ 6,711 100 % 30 %
Costs of Aerospace Products 5,247 60 % 4,717 70 % 11 %
Expenses 1,296 15 % 1,850 28 % -30 %
Total costs and expenses 6,543 75 % 6,567 98 % 0 %
Aerospace Products
operating income $ 2,173 25 % $ 144 2 % 1409 %
22
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Table of Contents Professional Services
? Professional services revenue increased 19% for the three months ended
ended
Within three months
received for the
for the three months ended
distributions reduced gross receipts by
income from
to a reduction in gross receipts of
of
income to
ended
31, 2021.
The remaining management and Professional Services revenue includes
professional management services in the gaming industry, and licensed
architectural services. Professional services revenue excluding Boot Hill
Casino increased by 76% for
compared to$58 for the three months endedJanuary 31, 2021 .
? Professional services costs increased 9% in the three months ended January
31, 2022 to
ended
three months endedJanuary 31, 2021 . ? Expenses increased 26% in the three months endedJanuary 31, 2022 to
2021. Expenses represented 36% of total segment revenue in the three months ended
months endedJanuary 31, 2021 . Aerospace Products
? Revenues increased by 30% to reach
2022, compared to
the increase in income is mainly due to an increase in special missions
electronics company
buisiness of$922 .
? Aerospace product costs rose 11% in the three months ended January
31, 2022 to
ended
three months endedJanuary 31, 2021 . ? Expenses decreased 30% in the three months endedJanuary 31, 2022 to
2021. Expenses represented 15% of total segment revenue in the three months ended
months endedJanuary 31, 2021 . Employees Other than persons employed by our gaming subsidiaries there were 110 full time and 6 part time employees onJanuary 31, 2022 , compared to 115 full time and 5 part time employees onJanuary 31, 2021 . As ofMarch 11, 2022 , staffing is 110 full time and 6 part time employees. Our staffing atBoot Hill Casino & Resort onJanuary 31, 2022 was 165 full time and 54 part time employees compared to 172 full time and 54 part time employees onJanuary 31, 2021 . AtMarch 11, 2022 there are 172 full time and 54 part time employees. None of the employees are subject to any collective bargaining agreements. 23
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Contents
Cash 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 fiscal 2022 and beyond.
Cash flow analysis and discussion
During the nine months endedJanuary 31, 2022 our cash position decreased by$7.5 million . Net income was$10.6 million for the nine months endedJanuary 31, 2022 . Cash flows provided by operating activities was$8.6 million for the nine months endedJanuary 31, 2022 . Non-cash activities consisting of depreciation and amortization provided$3.9 million , while deferred compensation provided$456 , gain on the sale of an airplane used$75 , deferred income tax expense provided$234 , and forgiveness of debt used$2.0 million . Contract assets decreased our cash position by$1.2 million . Contract liability decreased our cash position by$4.7 million . Inventories decreased our cash position by$81 . Accounts receivable decreased our cash position by$211 . Gaming facility mandated payments decreased our cash position by$117 . Prepaid expenses and other assets increased our cash by$208 . An increase in accounts payable, a decrease in accrued liabilities, and an increase in other current liabilities increased our cash by$502 . Income tax payable increased our cash position by$1.2 million . Cash used in investing activities was$5.2 million for the nine months endedJanuary 31, 2022 . We invested$827 towards STCs, and$1.1 million on equipment and furnishings and$3.4 million on the construction of new hangers. We received$75 in proceeds from the sale of an airplane. Cash used by financing activities was$10.9 million for the nine months endedJanuary 31, 2022 . We made repayments on our debt of$3.1 million . We used$7.7 million to purchase the noncontrolling interest ofBHCMC, LLC . We reduced our lease liability by$82 . We purchased company stock of$4 . The stock acquired was placed in treasury.
Significant Accounting Policies and Estimates
We believe that there are several accounting policies that are critical to understanding our historical and future performance, as these policies affect the reported amount of revenue and other significant areas involving management judgments and estimates. These significant accounting policies relate to revenue recognition, the use of estimates, long-lived assets, and Supplemental Type Certificates. These policies and our procedures related to these policies are described in detail below and under specific areas within this "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Revenue recognition: See footnote 3 of the condensed consolidated financial statements.
Right of use lease: See Note 13 to the condensed consolidated financial statements.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Future events and their effects cannot be determined with certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and any such differences may be material to our financial statements. Significant estimates include assumptions about percentage-of-completion, collection of accounts receivable, inventory obsolescence, the valuation of long-lived assets, including the STC's, valuation for deferred tax assets and useful life of fixed and other long-term assets. Long-lived Assets: The Company accounts for its long-lived assets in accordance with ASC Topic 360-10, "Accounting for the Impairment or Disposal of Long-Lived Assets." ASC Topic 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value or disposable value.
Supplemental Type Certificates: Supplemental Type Certificates (STCs) are authorizations granted by
Changing Prices and Inflation
We have experienced upward pressure from inflation in fiscal year 2022. From
fiscal year 2021 to fiscal year 2022 most of the increases we experienced were
in material costs. This additional cost may not be transferable to our customers
resulting in lower income in the future. We anticipate fuel costs and possibly
interest rates to rise in fiscal 2022 and 2023.
24
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Off-balance sheet arrangements
We have no off-balance sheet arrangements.
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