BIG SKY TRANSPORTATION CO.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the period-ended March 31, 1996
Commission file number 0-9267
BIG SKY TRANSPORTATION CO.
(exact name of registrant as specified in its charter)
MONTANA 81-0387503
(state or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1601 Aviation Place
Billings Logan International Airport
Billings, Montana 59105
(406) 245-9449
(address of registrant's principal executive offices and telephone number)
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 12 months (or 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
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS: Common Stock, $.10 par value
SHARES OUTSTANDING at March 31, 1996: 5,307,314
BIG SKY TRANSPORTATION CO.
FORM 10-Q
For the Period-Ended March 31, 1996
CONTENTS
Part I.Financial Information
Item 1.Condensed Financial Statements:
Balance Sheets
As of March 31, 1996 (unaudited) and June 30, 1995 (audited). . 1
Statements of Operations
For the Three Months-Ended and the Nine Months-Ended
March 31, 1996 and 1995 (unaudited) . . . . . . . . . . . . . . 2
Statements of Cash Flows
For the Nine Months-Ended March 31, 1996 and 1995 (unaudited) . 3
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . 5
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . 6
Part I. Financial Information, Item 1.
BIG SKY TRANSPORTATION CO.
BALANCE SHEETS
MARCH 31,1996 JUNE 30,1995
(unaudited) (audited)
ASSETS
CURRENT ASSETS:
Cash $ 144,470 $ 408,457
Restricted cash 491,628 369,009
Accounts receivable, net 512,022 457,936
Expendable parts and supplies 254,326 241,944
Prepaid expenses 57,814 4,985
Total current assets 1,460,260 1,482,331
PROPERTY AND EQUIPMENT:
Flight equipment 606,000 601,867
Facility under capital lease 456,185 456,185
Other property and equipment 175,108 176,725
1,237,293 1,234,777
Accumulated depreciation and
amortization
Net property and equipment 828,163 895,361
EXCESS REORGANIZATION VALUE 10,108 10,108
OTHER ASSETS 26,758 26,758
$ 2,325,289 $ 2,414,558
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt 120,050 136,930
Current installments of capital lease
obligations 15,629 14,406
Accounts payable 143,600 80,247
Accrued expenses 598,377 562,483
Traffic balances payable and unused tickets 29,517 30,380
Total current liabilities 907,173 824,446
LONG TERM DEBT, excluding current
installments 423,312 518,901
CAPITAL LEASE, excluding current
installments 291,136 303,057
STOCKHOLDERS' EQUITY
Common stock of $.10 Par value;
authorized 20,000,000 shares;
5,307,314 shares outstanding 530,731 530,731
Paid-in capital greater (less)
than par value (51,770) (51,770)
Retained earnings 224,707 289,193
Stockholders' equity 703,668 768,154
$ 2,325,289 $ 2,414,558
See notes to financial statements
BIG SKY TRANSPORTATION CO.
STATEMENTS OF OPERATIONS
THREE MONTHS-ENDED NINE MONTHS-ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
(unaudited) (unaudited) (unaudited) (unaudited)
OPERATING REVENUES:
Passenger $ 428,891 $ 280,757 $ 1,281,115 $ 993,314
Charter 0 51,602 7,130 135,530
Cargo 26,677 20,660 81,462 69,992
Public Service 742,407 893,508 2,454,424 2,674,529
Other 7,495 2,330 21,854 8,331
Total operating revenues 1,205,470 1,248,857 3,845,985 3,881,696
OPERATING EXPENSES:
Flying operations 453,655 471,996 1,417,931 1,417,392
Maintenance 312,137 264,192 871,268 870,832
Passenger service 294,516 250,851 910,171 775,616
Depreciation and
amortization 21,600 70,250 64,186 121,990
Total operating expenses 1,280,143 1,225,991 3,871,555 3,724,969
OPERATING INCOME (LOSS) (74,673) 22,866 (25,570) 156,727
OTHER INCOME (EXPENSES):
Interest, net (13,556) (11,867) (38,747) (34,831)
Gain (loss) on equip.
disposal 289 (1,161) 731 (217)
(13,267) (13,028) (38,016) (35,048)
Income before income taxes
and extraordinary item (87,940) 9,838 (63,586) 121,679
INCOME TAX EXPENSE
Current (5,976) 680 0 10,378
Charge in lieu of taxes (26,996) 3,072 0 46,880
Income tax expense (32,972) 3,752 0 57,258
Income before extraordinary
item (54,968) 6,086 (63,586) 64,421
Extraordinary item-debt
extinguishment 0 (255) (899) 26,450
NET INCOME $ (54,968) $ 5,831 $ (64,485) $ 90,871
PER SHARE DATA:
Income (loss) per common
and common equivalent
share: $ -- $ -- $ -- $ .01
Income before extraordinary
item -- -- -- --
Net Income $ -- $ -- $ -- $ .01
Weighted average number of
common and common
equivalent shares
outstanding 5,307,314 5,307,314 5,307,314 5,307,314
See notes to financial statements.
BIG SKY TRANSPORTATION CO.
STATEMENTS OF CASH FLOWS
NINE MONTHS-ENDED
MARCH 31,
1996 1995
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (64,485) $ 90,871
Adjustment to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 69,714 121,990
Restructuring charges -- --
Gain on debt extinguishment 0 (26,450)
(Gain) loss on equipment disposal 731 217
Excess reorganization value amortization
and charge in lieu of taxes 0 45,146
Changes in operating assets and excess
liabilities:
Restricted cash (122,619) (30,655)
Accounts receivable (54,086) 25,980
Expendable parts and supplies (12,382) (36,794)
Prepaid expenses (52,829) (30,340)
Other assets -- 4,629
Accounts payable 63,353 12,704
Accrued expenses 35,894 (75,205)
Traffic balances payable and unused
tickets (863) 10,548
Net cash provided (used) by operating _________ ________
activities (137,572) 112,551
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from equipment disposals 3,565 2,501
Additions to property and equipment (6,813) (199,048)
Hangar and maintenance facility expenditures 0 (47,768)
Net cash provided (used) by investing ________ _________
activities (3,248) (244,315)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 0 60,050
Payments on long-term obligations (112,469) (109,901)
Payments on capital lease obligations (10,698) (2,508)
Net cash provided (used) by financing _________ _________
activities (123,167) (52,359)
Net increase (decrease) in cash and cash
equivalents (263,987) (184,123)
Cash and cash equivalents at beginning
of period 408,457 570,030
Cash and cash equivalents at end of period $ 144,470 $ 385,907
See notes to financial statements
BIG SKY TRANSPORTATION CO.
STATEMENTS OF CASH FLOWS
NINE MONTHS-ENDED
MARCH 31,
1996 1995
(unaudited) (unaudited)
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest $ 63,039 $ 76,362
Income Taxes 0 17,860
BIG SKY TRANSPORTATION CO.
NOTES TO FINANCIAL STATEMENTS
NOTE A. The accompanying unaudited condensed financial statements have been
prepared by the Company in accordance with the rules and regulations
of the Securities and Exchange Commission. These financial
statements reflect, in the opinion of management, all adjustments
(consisting only of recurring accruals) for fair presentation of the
results of operations for the interim periods presented. However,
these financial statements have been prepared in accordance with
instructions to Form 10-Q and therefore, do not include all
information and footnotes necessary for a fair presentation of
financial position, statements of operations and cash flows in
conformity with generally-accepted accounting principles. It is
recommended that these interim financial statements be read in
conjunction with the financial statements and notes thereto,
included in the Company's latest annual report on Form 10-K.
NOTE B. Earnings per share is based on the weighted average number of common
and common equivalent shares outstanding. The effect of common stock
equivalents is anti-dilative and therefore not presented.
NOTE C. Results of operations for the three months-ended and nine months-
ended March 31, 1996 and 1995 are not necessarily indicative of the
results to be expected for the full year.
NOTE D. The Company filed its Chapter 11 Reorganization Petition March 14,
1989 in United States Bankruptcy Court for the District of Montana.
The Plan of Reorganization was confirmed by order issued July 16,
1991.
NOTE E. In the September 1991 quarter, the Company adopted AICPA Statement of
Position 90-7, financial reporting by entities in reorganization
under the bankruptcy code. Based on specific elements of the plan,
the SOP required that the financial statements be prepared on the
basis that a new reporting entity was created and that assets and
liabilities be recorded at their fair values. This reporting is
referred to as "Fresh-Start" reporting.
Part I. Financial Information, Item 2.
BIG SKY TRANSPORTATION CO.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Summary of Airline Operating Statistics
THREE MONTHS-ENDED MARCH 31, NINE MONTHS-ENDED MARCH 31,
1996 1995 %CHANGE 1996 1995 %CHANGE
+/(-) +/(-)
Passengers carried 6,954 4,535 53.3 21,640 15,490 39.7
Average passenger trip
(miles) 195 206 (5.3) 187 202 (7.4)
Revenue passenger
miles 1,354,426 934,246 44.9 4,248,586 3,127,773 35.8
Available seat miles
(scheduled service) 3,995,697 4,039,192 (1.1) 13,294,997 12,254,113 8.5
Available seat miles
(charter service) 0 313,839 (100.) 0 736,914 (100.)
Total available seat
miles 3,995,697 4,353,031 (8.2) 13,294,997 12,991,027 2.3
Passenger load factor% 33.90 23.13 46.6 31.96 25.52 25.2
Aircraft miles flown 275,519 272,373 1.2 906,320 825,332 9.8
Operating breakeven
load factor (%) 36.00 22.71 58.5 32.17 24.49 31.4
Yield per revenue
passenger mile (cents) 31.67 30.05 5.4 30.15 31.76 (5.1)
Operating cost per
available seat mile
(cents) 30.17 28.16 7.1 28.93 28.67 .9
Air freight pounds
enplaned 29,830 16,404 81.9 78,045 49,588 57.4
BIG SKY TRANSPORTATION CO.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Analysis of Results for the three months-ended March 31, 1996 and 1995:
Total operating revenues in the third quarter of fiscal year 1996 were $1.2
million, compared with $1.25 million in the same quarter last year. Passenger
revenues increased $148,134 or 52.8% to total $428,891 while public service
revenues decreased $151,101 or 17% to total $742,407. Available seat miles for
scheduled service decreased 1.1 to total $3,995,697 and revenue passenger miles
increased 44.9 percent to total 1,354,426, resulting in a 46.6 percent load
factor increase, from 23.13% to 33.90%. Total available seat miles, including
charter operations decreased 8.2%. Yield per passenger mile increased 5.4
percent to total 31.67 cents for the March 1996 quarter.
Total operating expenses increased $54,148 or 4.4% for the three months-ended
March 31, 1996 as compared to the three months-ended March 31, 1995. Operating
cost per available seat mile (ASM) for the same period increased 7.1% form
28.16 cents to 30.17 cents.
The following table summarizes and compares major components of cost per ASM:
For Three Months-Ended
March 31,
1996 1995
Payroll-related costs $ .1132 $ .1060
Other .0814 .0594
Maintenance1 .0546 .0425
Fuel and oil .0329 .0267
Aircraft ownership/lease costs2 .0382 .0469
$ .3203 $ .2815
Payroll-related expenses decreased $9,200 or 2.0% for the March 1996 quarter,
as compared to the March 1995 quarter. The average full-time equivalent
employees (FTE) for the three months-ended March 31, 1996 and 1995 were 67 and
66 respectively.
1 Includes direct maintenance, maintenance burden and maintenance-related
depreciation. Excludes payroll-related costs.
2 Includes aircraft rentals, flight-related depreciation, hull insurance and
property taxes.
BIG SKY TRANSPORTATION CO.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Analysis of Results (continued)
Other expenses increased $66,461 or 25.7% in the quarter-ended March 31, 1996,
as compared to the same quarter for the prior year. Ground handling cost rose
dramatically this quarter in comparison to 1995 as a result of Great Falls
service started in May 1995. Legal expenses also increased because of
appeals regarding the reduction of the current DOT order which reduced the
essential air service compensation.
Maintenance, including depreciation, increased $33,156 or 17.9% Increases were
seen in maintenance materials, outside purchases and outside services. The
installation of the federally mandated Traffic Collision Awareness System
(TCAS) created higher costs in the maintenance area.
Fuel and oil costs have increased $15,399 or 13.3% during the March 1996
quarter. The Metro usage declined by 131 hours while the Cessna increased 95
hours, this is due to the fleet reduction of one metro aircraft and the
increased utilization of the Cessna during the TCAS installation in the metro
aircrafts.
Aircraft ownership/lease costs (aircraft rentals, depreciation, hull insurance
and property taxes) decreased $51,667 or 25.3%. The fleet operated during the
March 1996 quarter consisted of one Cessna 402C (owned) and four Metroliner
II's (leased). In comparison to the same quarter in 1995 with one Cessna
402C (owned) and five Metroliner II's (leased).
Net nonoperating results were $19,705 (income) for the March 1996 quarter and
$17,035 (income) for the March 1995 quarter. Pursuant to Chapter 11
Reorganization "Fresh-Starting" reporting, no charges in lieu of taxes
(non-cash) were recorded in the March 1996 and $3,072 in March 1995 quarter.
In the March 1996 quarter an income tax provision entry was adjusted to
properly reflect the income tax expense.
The March 1996 quarter generated operating loss of $74,673 and net loss of
$54,968. By comparison, the March 1995 quarter produced $22,866 in operating
income and net income of $5,831, also including "Fresh-Start" charges.
BIG SKY TRANSPORTATION CO.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Analysis of Results (continued)
For the nine months-ended March 31, 1996 and 1995:
Total operating revenue decreased $35,711 or 1.0% from $3.88 million for the
nine months-ended March 31, 1995 to $3.85 million for nine months-ended
March 31, 1996. Passenger revenues increased $287,801 or 28.9% from $993,314
to $1.28 million. Public service revenues decreased $220,105 or 8.2%, from
$2.67 million to $2.45 million. Available seats miles increased 8.5% and
revenue passenger miles increased 35.8%, resulting in a 25.2% load factor
increase. Yield per passenger mile decreased 5.1 percent.
Operating costs per ASM increased .9% from 28.67 cents to 28.93 cents. Total
operating expenses for the nine months-ended March 31, 1996 were $3.87
million compared to $3.72 million for the same period one year earlier; an
increase of $146,586 or 3.9%.
The following table summarizes and compares major components of cost per ASM:
For Nine Months-Ended
March 31,
1996 1995
Payroll-related costs .1038 .1058
Other .0738 .0631
Maintenance3 .0465 .0477
Fuel and oil .0310 .0276
Aircraft ownership/lease4 .0362 .0426
$.2913 $.2868
Payroll-related expenses increased $5,866 or .43% for the nine months-ended
March 31, 1996, as compared to the same period one year earlier.
Other expenses increased $160,633 or 19.6% for the nine months-ended March 31,
1996. Increases were experienced in ground costs, legal, airport security,
interrupted trip expense, membership and subscriptions, and property taxes
compared to the same nine months-ended March 31, 1995.
3 Includes direct maintenance, maintenance burden and maintenance-related
depreciation. Excludes payroll-related costs.
4 Includes aircraft rentals, flight-related depreciation, hull insurance and
property taxes.
BIG SKY TRANSPORTATION CO.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Analysis of Results (continued)
Maintenance costs decreased $767 or .1%. A decrease was experienced in
maintenance materials, while an increase in outside maintenance repairs.
Fuel and oil costs increased $53,453 or 14.9% in the nine months-ended March
31, 1996, as compared to the same period one year earlier. This increase
over last year includes the federal 4.3 cents per gallon tax imposed October
1995.
Aircraft ownership/lease costs decreased $72,601 or 13.1%. In September 1994,
the Company acquired an additional Metro aircraft to perform charter services
which was returned to the lessor on March 15, 1995. The nine months-ended
March 31, 1996 had a fleet of one Cessna 402C and four Metro aircraft.
Net nonoperating results were $38,915 expense and $65,855 income for the nine
months-ended March 31, 1996 and 1995, respectively. Pursuant to Chapter 11
reorganization "Fresh-Start" reporting, no charge in lieu of taxes (non-cash)
for the nine months-ended March 31, 1996 was recorded while $37,517 was
recorded for the same nine months period in 1995. These charges in lieu of
taxes are a result of "Fresh-Start" accounting, and is amortization of excess
reorganizational value for taxes that would have been incurred if the Company
did not have the use of net operating tax loss carryforwards.
The first nine months of fiscal year 1996 produced operating loss of $25,570
and net loss of $64,485 whereas the same period earlier generated operating
income of $156,727 and net income of $90,871.
BIG SKY TRANSPORTATION CO.
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At March 31, 1996, the Company showed a current ratio of 1.61 and positive
working capital of $553,087, compared to a current ratio of 1.8 and positive
working capital of $657,885 at June 30, 1995. Total long-term debt
(including current installments) at March 31, 1996 was $850,127 (including
capital lease obligations) compared to $973,294 at June 30, 1995. The Company
is current on all of its debt service obligations. Stockholders' equity was
$703,668 at March 31, 1996, compared to 768,154 at June 30, 1995.
The quarter's results were primarily impacted by the reduction of essential air
service compensation, along with the installation costs associated with the
special flight equipment required by the Federal Aviation Administration (FAA).
The U.S. House/Senate Conference Committee approved funding for the national
Essential Air Service program in fiscal year 1996 of $22.6 million, a
one-third reduction from fiscal year 1995. Reductions were mandated in three
areas as follows: 1) elimination of all services to second designated hubs,
2) elimination of all services in excess of basic minimum of two round-trips
per day and 3) elimination of some weekend services. At the Eastern and
Central Montana Communities, two weekly round trip flights at each city were
eliminated causing an 18 percent reduction in capacity.
Big Sky currently is operating under DOT Order 95-11-28 at an annual
compensation rate of $3.02 million, under a contract extending through
November 10, 1996. The Company appealed this emergency reduction in
compensation effective November 27, 1995, resulting from the decrease in
overall funding by Congress, but in February its appeal was denied. The
Company continued its appeal via direct talks with the DOT, obtaining the
ability to make further service and adjustments without a reduction in
compensation, effective April 14, 1996. The Company's operations became
unprofitable after the new rate was effective, which decreased its annual
compensation by approximately $500,000.
The Company continues to investigate available business opportunities in
order to reduce dependence upon the Federal Government Essential Air Service
Program. There is uncertainty about the future funding of this program. As
part of these efforts, a non-subsidized route linking Billings and Great
Falls, Montana was implemented May 15, 1995.
The Company has completed a formal operating line of credit, with First
Interstate Bank, collateralized by an aircraft. The line of credit is
available on a "sweep" basis, as needed.
The Company has initiated a limited stock re-purchase program, subject to all
applicitable regulations. The board's commitment at this point is to acquire
up to 200,000 shares on the open market. A public release has been made and
a Form 8-K was filed.
On February 9, 1996, the Company filed its draft Notice of Annual Meeting and
Proxy Statement for review by the SEC. Following comments, a second draft
was filed May 2, 1996.
Several number of issues are being presented for approval by stockholders.
Presently, the Annual Meeting of Stockholders is planned for June 10, 1996.
This date could change based on the date of SEC approval of the proxy.
BIG SKY TRANSPORTATION CO.
Signature
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.
BIG SKY TRANSPORTATION CO.
registrant
By: /s/ Terry D. Marshall By: /s/ Craig Denney
Terry D. Marshall Craig Denney
President & CEO Executive VP & Division Manager
(Officer in charge of accounting)
May 31, 1996