BIG SKY TRANSPORTATION CO.
Billings Logan International Airport
1601 Aviation Place
Billings, Montana 59105
406.245.9449
NOTICE
OF
ANNUAL MEETING
TO THE STOCKHOLDERS OF BIG SKY TRANSPORTATION CO.:
The Annual Meeting of the Stockholders will be held in the Conference Room
at BigSky Transportation Co., Billings Logan International Airport, 1601
Aviation Place, Billings, Montana, on April 16, 1997, at 3:30 p.m. (local
time) for the following purposes:
1) To elect six directors to serve for one-year terms
2) To consider and ratify the board's appointment of independent
auditors
In addition to the foregoing, Stockholders will act upon such matters as may
properly come before the meeting, or any adjournments thereof.
Holders-of-record of 1996 Series Common Stock at the close of business on
February 26, 1997 are entitled to vote at this meeting or any adjournment
thereof.
Stockholders who will not be attending the meeting, or who do not wish to
vote in person, are requested to execute the enclosed proxy and return it
promptly in the enclosed envelope so that their shares will be voted at the
meeting.
On Behalf of the
Board of Directors of
BIG SKY TRANSPORTATION CO.
/s/ Stephen D. Huntington
Stephen D. Huntington
Corporate Secretary
Billings, Montana
March 14, 1997
Proxy Statement attached
BIG SKY TRANSPORTATION CO.
Billings Logan International Airport
1601 Aviation Place
Billings, Montana 59105
406.245.9449
PROXY STATEMENT
THIS PROXY STATEMENT IS BEING FURNISHED BY THE
BOARD OF DIRECTORS, OFFICERS AND
MANAGEMENT OF BIG SKY TRANSPORTATION CO.
IN CONNECTION WITH SOLICITATION OF PROXIES FOR USE
AT THE ANNUAL MEETING
Only holders-of-record of 1996 Series Common Stock of Big Sky
Transportation Co. at the close of business on February 26, 1997 (the record
date) may vote at the meeting or any adjournment. As of this date, there
were an estimated 1,047,864 million outstanding shares of 1996 Series
Common Stock, the only class of securities of the Corporation outstanding and
entitled to vote at the meeting. A majority of such stock will constitute a
quorum for the transaction of business at the Annual Meeting.
A Plan of Recapitalization was approved by the stockholders at the July 1996
Annual Meeting and became effective August 23, 1996. Under this Plan, there
was a 300/1 reverse split of the Corporation's existing common stock,
immediately followed by a 1/59 stock dividend (a forward split). This process
resulted in approximately a 5/1 reverse split, overall, in which shares of 1996
Series Common Stock were issued in replacement of the Corporations then
existing common stock, and fractional shares were eliminated via re-purchase
by the Corporation. Under the Plan of Recapitalization, the Corporation's
then existing stock could only be utilized for the purpose of exchange,
with such shares (until exchanged) having no rights to vote or to receive
dividends.
Stockholders who have not yet exchanged their certificates under the
provisions of the Plan of Recapitalization are encouraged to do so
immediately. Certificates may be exchanged via the Exchange Agent for a
period of two years following the effective date of the Plan.
In this Proxy Statement, data have been converted to 1996 Series Common
Stock in accordance with the Plan of Recapitalization. The terms
post-recapitalization and post-recap refer to common stock data converted
in accordance with the Plan of Recapitalization. The terms
pre-recapitalization and pre-recap refer to common stock data prior to the
Plan of Recapitalization, which has not been converted.
With regard to Proposal No. 1, election of directors, each holder of 1996
Series Common Stock present in person or represented by proxy has the right
to cumulate his or her votes for the election of directors by multiplying the
number of votes to which the Stockholder is entitled to vote by six (6) (the
total number of directors to be elected) and cast all such votes for one nominee
or distribute the total votes among any two or more nominees. The persons
designated as proxies on the enclosed form of proxy will exercise discretionary
authority to cumulate votes as to the shares for which they are designated as
proxies, should they deem cumulative voting to be desirable at the time of the
meeting. For purposes of determining the outcome of the vote on the election
of directors, an instruction to "abstain" from voting will be treated as shares
present and entitled to vote, but will not be voted for or against any nominee.
With regard to Proposal No. 2, ratification of auditors, the affirmative vote of
the majority of shares of 1996 Series Common Stock present in person or
represented by proxy and entitled to vote on the matter, is necessary for
approval. For purposes of determining the outcome of the vote, an instruction
to "abstain" from voting will be treated as shares present and entitled to vote,
but will not be voted for or against the proposal.
For both proposals, broker non-votes which occur when brokers are prohibited
from exercising discretionary voting authority for beneficial owners who have
not provided voting instructions, are not counted for the purpose of
determining the number of shares present in-person or represented by proxy on
a voting matter and shall have no effect on the outcome of the vote.
The Corporation has filed its Annual Report which contains information
concerning the Corporation and its operations, including financial statements,
on Form 10-K for the fiscal year ended June 30, 1996, with the U.S.
Securities and Exchange Commission (SEC). A copy of the fiscal 1996
Annual Report, including financial statements and the Form 10-K, accompanies
this Notice of Annual Meeting and Proxy Statement and is being mailed to
each Stockholder of record on or before March 17, 1997. The financial
statements, the notes thereto, the accountant's report therein, and the section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in the Annual Report are incorporated herein
by reference. No other part of such report is incorporated herein or is to be
considered proxy soliciting material.
The following information and data regarding the Corporation are set forth, per
specific federal requirements. Copies of this document have been provided to
the SEC and the Pacific Stock Exchange.
Directors/Executive Officers: Executive officers of the Corporation are
elected by and serve at the discretion of the Board of Directors. No
arrangement exists between any executive officer and any other person or
persons pursuant to which any officer was or is to be selected as an executive
officer. None of the executive officers has any family relationship to any
nominee for director or to any other executive officer of the Corporation.
The slate of directors includes a majority of "outside" directors.
Nominees are listed below in descending order of time served on the
board, along with the following information:
Name, Executive Offices Held With
Big Sky Transportation Co.,
Principal Occupation, Previous
Employment, Outside Directorships, Stock % of
Education (a) Age Owned(b) Class (i)
Jon Marchi: BigSky--Chairman of the
Board & Treasurer, April 1996 to-date;
Secretary 1991-1995; Outside Director
since 1979; Principal Business--Owner
& President, Marchi Angus Ranches,
Polson, MT, 1985 to-date; Director &
Chairman, Glacier Venture Fund, The
Montana Small Business Investment
Capital Company; Director & Chairman,
Development Corporation of Montana;
Director & President, Montana Private
Capital Network; Director, Montana
Community Finance Corporation; Director,
Montana Small Business Connections;
Previous Employment--D.A.Davidson & Co.,
Great Falls, MT (regional investment
company & securities dealer), 1972-1985;
Other--Director, College of Business
Advisory Board, Montana State
University-Billings; Director, Montana
Small Business Administration Advisory
Council; Director, Montana Ambassadors;
Education--B. S. Business & M. S.
Finance, University of Montana 50 46,828 (c) 4.5 (i)
Terry D. Marshall: BigSky--President/CEO,
1980 to-date; Vice President/Planning,
1979-1980; Director/Market Planning, 1979;
Chairman of the Board,1991-1995; Director
since 1980; Previous Employment--Hughes
AirCorp dba Hughes Airwest, San Francisco,
CA, 1972-1978; TAP, Inc. Economic &
Aviation Consultants, Bozeman, MT, 1970-72;
Ford Motor Company, Industrial Division,
Birmingham, MI, 1969-1970; Other--Past
Board Member & Officer, Regional Airline
Association; Past Board Member, Montana
Aeronautics Division; Education--B. S.
Economics & Business, Montana State
University; M. S. Economics, Oregon State
University; 51 25,974 (d) 2.5 (i)
Jack K. Daniels: BigSky--Vice-Chairman
of the Board & Assistant Secretary,
April 1995 to-date; Outside Director
since 1990. Principal Business--
Owner/President, SerVair Accessories, Inc.
(fixed base aviation operator), Williston,
ND, 1950 -1994 (retired); Other--Chairman,
North Dakota Aeronautics Commission;
Treasurer, National Committee of Cities &
States for Airline Service (NCCSAS) 71 16,443 (e) 1.6 (i)
Alan D. Nicholson: BigSky--Outside Director
since 1994; Principal Business-
- -Owner/President, Nicholson, Inc.
(commercial real estate development),
Helena, MT; Other--Member, Helena Area
Chamber ofCommerce; Member, Montana State
University Foundation Board; Member,
President's Council, Carroll College
(Helena, MT), Second Vice-President,
Montana Ambassadors; Education--B. S.
Mathematics & Physics, Montana State
University; M. A. Mathematics,
Northwestern University 56 14,430 (f) 1.4 (i)
Stephen D. Huntington: BigSky--Secretary
1996; Outside Director since 1995;
Principal Business--Principal, Mountain
West Management & Northern Rockies Venture
Fund, Butte, MT (previously Helena, MT),
1990 to-date; Manager, Corporate
Development & Finance, MSE, Inc.,
Butte, MT; Other--Director, Montana
Private Capital Network; Director,
MSE-HKM, Inc., Director, MSE Technology
Applications, Inc., Director, Safe Shop
Tools, Inc., 1997; Previous Employment-
- -State of Montana, 1982-1990.
Education--B. A. Political Science
and Graduate Studies, Law & Public
Administration, University of Montana 40 3,667 (g) 0.4 (i)
Craig Denney: BigSky--Executive
Vice President & Division Manager,
December 1995 to-date;
Vice President/Operations & COO,
1989-1995; Vice President/Ground Services,
Director/Ground Services, Director/Customer
Service & Station Manager, various
periods 1978-1989. Director since 1995;
Previous Employment--Transportation Agent,
Northwest Airlines, Inc., Great Falls &
Butte, MT, 1974-1978; Member & Chairman,
Air Carrier Advisory Committee,
Billings Logan International Airport;
Member, Aviation Council, Department
of Aviation, Rocky Mountain College;
Education--A. A. Aviation Administration,
Anoka Ramsey J. C., Coon Rapids, MN 43 6,968 (h) 0.7 (i)
(a) The Corporation's present officers and Board leadership were elected in
April and October 1996. Except as indicated above, each nominee held the
outside positions shown above, or other executive positions with the same
business for the past five years. Each nominee was elected as a director at the
July 1996 annual meeting of stockholders.
(b) Shares shown reflect outstanding shares of 1996 Series Common Stock
beneficially owned, both directly and indirectly, as of January 31, 1996, as
well as options exercisable within 60 days thereof. Beneficial ownership
shown represents sole voting and investment power. 1996-97 service-related
stock option awards included for outside directors. Options may not be
exercised.
(c) 40,828 shares owned, plus options exercisable on 6,000 shares.
(d) 10,974 shares owned, plus options exercisable on 15,000 shares.
(e) 10,433 shares owned, plus options exercisable on 6,000 shares.
(f) 10,443 shares owned, plus options exercisable on 4,000 shares.
(g) options exercisable on 3,667 shares.
(h) 118 shares owned, plus options exercisable on 6,850 shares.
(i) Shares owned, plus options, as percent of total outstanding shares, shown
to nearest tenth.
At the Annual Meeting, the Board recommends election of the nominees listed
above. During 1997, the Corporation will continue its search for qualified
directors. The Board may appoint one or more additional directors prior to the
next meeting of Stockholders.
The proxies solicited herein cannot be voted for a greater number of directors
than the number of nominees stated above. No arrangement or understanding
exists between any nominee and any other person or persons, pursuant to
which any nominee was, or is, to be selected as a director or nominee. None
of the nominees has any family relationship to any other nominee, or to any
other executive officer of the Corporation.
Should any of the above not be candidates for election at the time of meeting,
which is not presently anticipated, the proxies may vote for such other person
or persons as they, in their own discretion, may determine.
Board Meetings: The Board of Directors is scheduled to meet monthly. It
also meets at the call of the President or any director. During the year-ended
June 30, 1996, the Board held a total of 12 regular meetings, one special
meeting and one executive meeting. Each director attended no less than 90%
of the regular meetings of the Board, as well as Committees, of which they
were members.
Committees of the Board: During fiscal 1996, the Board of Directors
maintained a Financial Audit Committee, a Compensation and Management
Development Committee, a Future Planning Committee and an Operations
Audit Committee. General descriptions of the duties of these committees are:
1. Financial Audit. The Financial Audit Committee is comprised of Messrs.
Nicholson and Marchi. It monitors the functions and reports of the
accountants and auditors and strives to insure that the financial records
of the Corporation fairly and accurately portray the condition and position
of the Corporation. Matters in this regard are reviewed and discussed by the
Committee and brought before the Board of Directors. Additionally, all Board
members receive copies of the auditors' annual report and letter to
management. When necessary, the Committee also meets with the independent
auditors.
2. Future Planning. The Future Planning Committee is comprised of Messrs.
Marchi, Marshall, Nicholson and Huntington. It meets monthly, usually with
the entire board present, to discuss and explore new opportunities and
strategies and recommend or initiate appropriate actions. Principal
objectives are growth, decreasing dependency on the DOT contract and
enhancement of Stockholders' value. In conjunction with management, during
1996 the Committee examined various business development strategies and
reviewed several specific opportunities. A staff committee on New Business
Development, comprised of the President/CEO, the VP Business Development
and the Executive VP/Division Manager, also reports to the Future Planning
Committee.
3. Compensation & Management Development Committee. The Compensation and
Management Development Committee is comprised of Messrs. Marchi, Huntington
and Marshall. Mr. Marshall, the President/CEO, participates in relationship
to general items and those pertaining to other personnel; but, abstains from
participation with regard to matters directly involving his own employment.
With the exception of the President/CEO, none of the members of the Committee
is or ever has been an employee of the Corporation and none is affiliated
with any entity other than the Corporation with which an executive officer
of the Corporation is affiliated. The Committee met six times during fiscal
year 1996.
The Committee's primary purposes are: establish annual base compensation and
performance bonus compensation for the President/CEO; administer the
Corporation's stock option award plans; provide counsel and guidance to the
President/CEO regarding compensation for principal management, and provide
general input regarding employee compensation, benefits programs and
management development. The Compensation and Management Development
Committee has adopted the policy of maintaining relatively moderate base
salaries to executive officers, while basing the award of any bonuses and/or
options on achievement of specific goals related to revenue and profit, as well
as non-monetary goals designed to provide performance incentive.
4. Operations Audit. The Operations Audit committee is comprised of
Messrs. Daniels and Denney, who is the Executive VP/COO. The Committee
meets as required to review operating policies and procedures, and to discuss
certain regulatory operating compliance issues. The Committee met three
times in 1996.
Executive Compensation: Below is set forth compensation information for
the only named executive of the Corporation, for which such reporting is
required--Terry D. Marshall, President/CEO:
Long-Term Other
Annual Compensation($) Compensation-- Compensation--
Year Salary (1) Bonus (2) Stock Options # (3) Non-Cash $ (4)
1996 74,267 3,815 0 9,000
1995 77,469 5,676 5,000 10,800
1994 74,200 9,396 0 10,800
(1) Base compensation.
(2) Bonus reflects profit-based compensation under program terminated
effective January 1, 1996--replaced by Team Incentive program related solely
to business development success, under which no compensation was paid in
fiscal 1996. No other compensation was paid.
(3) Stock options shown are post-recapitalization.
(4) Includes payment for insurance program, as required by the Board.
Payment, net of payroll and withholding taxes, funds disability insurance and
life insurance premiums. Disability benefits are payable to the insured and
life insurance benefits are payable to the insureds beneficiary(s). As of
October 3, 1996, cash surrender value plus investment fund value of the life
insurance policy was $14,997 and death benefit was $303,130. Premiums are
not refundable to the Corporation in the event of termination of policies.
Also includes compensation of $300 per month for performance of duties and
responsibilities as Chairman of the Board and for providing special
administrative services to the Board, which was terminated in 1995.
Board Compensation: At June 30, 1996, the Corporation had six officers
and directors--four being outside (non-employee) directors. The Corporation
is authorized to pay each of its outside directors base compensation of
$1,000 per year, plus $300 for each regularly scheduled in-person Board
meeting attended and $150 for each tele-conference meeting attended.
Additionally, outside directors may receive $75 per hour, up to a maximum of
$300 per day, for work on assigned special projects. Board members also are
reimbursed for reasonable out-of-pocket expenses required in the performance
of their duties and to attend Board meetings and committee meetings. As of
April 1, 1995, the Chairman also is paid fixed compensation of $1,000 per
month.
Under the above plan, aggregate payments to outside directors during fiscal
1996 were $70,190, as follows:
Payments($)
Compensation: Meetings, Conferences, etc. (1) 29,602
Assigned Special Projects (2) 24,226
Expense Reimbursement (3) 16,362
(1) Includes directors annual base compensation, all meeting-related
compensation and Chairmans monthly base compensation.
(2) Marchi--$17,602 for financial analysis, meetings and conferences on future
planning and capitalization matters; Nicholson--$4,274 for future planning,
personnel & stock-related matters; Huntington--$1,600 for future planning
matters; and Daniels--$750 for future planning & operations audit matters.
(3) Includes travel and per diem.
The Corporation has an Outside Directors Stock Option Plan, granting outside
directors the option to purchase 2,000 shares of stock annually at the
conclusion of each year's service, at the market price on that date. The option
term is five years. Under this Plan, options have been granted to purchase up
to 10,000 shares at $.9375 per share. Options to purchase an additional 8,000
shares were granted under this Plan in February of 1997. (Note: above share
price and share amounts are post-recapitalization)
Certain Transactions: The Corporation leased no aircraft from any business
involving affiliated persons during fiscal 1995. Between April 1980 and
May 1995 the Corporation leased one Fairchild Metroliner II aircraft from BSE
Aircraft Equipment Corporation (previously BSE Partnership). BSE's owners
prior to its dissolution in 1995, consisted of several individuals who had
served on the Corporation's Board and/or were stockholders of the Corporation.
In May 1995, the aircraft was sold to an unrelated party, from which the
Corporation has a new lease.
Capital Leases: In March and August 1994 the Corporation entered into
Lease Agreements with Jon Marchi, a member of the Board of Directors.
The Leases are comprised of two components. The first provides for an
assumption of a lease for airport land between Mr. Marchi and the City of
Billings. The term of the airport land sublease is 20 years with an initial
annual rate of $10,397. The airport land lease also provides for an annual
adjustment of the rental amount based on increases in the Consumer Price Index.
The second component of the Leases relates to the construction costs of the
new facility on the airport land. These costs were financed with $300,000
provided by Mr. Marchi and approximately $150,000 provided by the
Corporation. The facility is owned by Mr. Marchi and leased to the
Corporation under the Lease Agreement. The lease term is 20 years with an
option to extend for an additional six years. The monthly rent is equal to Mr.
Marchi's principal and interest payments due a bank on a $300,000 loan
obtained by Mr. Marchi to finance his portion of the construction costs (the
"Bank Debt"). The Bank Debt is a term loan at 8.5% with principal due
monthly based on a 20 year amortization schedule with a balloon payment after
five years. Mr. Marchi has indicated an intent, but is not required, to extend
the Bank Debt term or refinance the balloon payment at the current maturity
date. In addition, the Corporation is required to maintain a $50,000 security
deposit with the bank. All tax benefits of ownership are retained by
Mr. Marchi. The Corporation expects to recover its $150,000 original investment
at the maturity of the Lease or earlier if the facility is sold prior to
maturity.
The Lease provides the Corporation the option to purchase the building on the
following dates: March 1, 1999, 2004, 2009, or 2014 and a right of first
refusal upon approval by Mr. Marchi of a sale of his interests to a third party.
The purchase price of the building to the Corporation is based on the facility's
fair market value. However, the purchase price under the Corporation's option
to purchase cannot be less than $450,000. The Corporation will be given
credit for $150,000 of its original investment and a graduated portion of any
fair value appreciation in excess of $450,000 in the event the Corporation
exercises either purchase option. In the event the hanger facility is sold to a
third party, the Corporation is to receive all amounts in excess of the
remainder owed on the original $300,000 bank debt until the Corporation has
recovered its $150,000 investment, together with interest at the rate of 8.5%
per annum on said investment, from the inception of the lease. The
Corporation would also recover its initial lease deposit of $50,000 to the
extent this deposit has not been previously returned or credited to the
Corporation. Once those amounts have been paid to the Corporation, any and all
remaining proceeds from a sale to a third party are the property of Mr. Marchi.
The Corporation believes that the terms of the Leases are at least as favorable
as those that could have been obtained from independent third parties.
Principal Stockholders: The following table provides information, as of
December 30, 1996, with respect to each person known to the Corporation to
own beneficially more than five percent (5%) of the outstanding 1996 Series
Common Stock and the number of shares owned by all officers and directors of
the Corporation as a group:
Beneficial Owner Shares % Class
Derby West Corp,LLC, Sheridan, WY (a) 326,978 31.3
H. V. Holeman, Las Vegas, NV (b) 107,026 10.3
All Officers & Directors (c) 114,323 11.0
(a) On February 29, 1988 (pre-recap), the Corporation sold 500,000 shares of
10% convertible preferred stock for $1 per share to Derby West Corporation, a
Delaware corporation, having Peter M. Kennedy as its only stockholder. Prior
to reorganization, an additional 43,348 shares of preferred stock were issued to
Derby West in lieu of required quarterly cash dividends. Per the preferred
stock agreement, each share of preferred stock was convertible into three
shares of. Upon Plan confirmation, all preferred stock held by Derby West
was converted to at the ratio of one share preferred stock for three shares of
common stock. As a result, Derby West received 1,662,645 (pre-recap) shares of
common stock in exchange for its preferred stock. Following this conversion, no
shares of the Corporations preferred stock were outstanding. During the 1996
Recapitalization (5/1 reverse stock split), Derby Wests holdings were converted
to 326,978 shares of 1996 Series Common Stock.
(b) H. V. Holeman is a retired director of the Corporation. Prior to
dissolution of Great Plains Transportation Company in January of 1995
(pre-recap), Mr. Holeman owned 51% of the stock of that company and was a
director of that company. Great Plains owned a substantial block of the
Corporation's. In October 1993, Messrs. Marchi and Marshall also became
stockholders of Great Plains. Their respective equity interests were as
follows: Mr. Marchi, 14.5% and Mr. Marshall, 4.5%. Great Plains was dissolved
in January 1995, with each of the owners of Great Plains being issued equivalent
shares of the Big Sky Transportation Co.
(c) Represents 1996 Series Common Stock owned, as well as options
exercisable, by all officers and directors as a group as shown on page 2,
hereto. There were a total of six officers and directors at fiscal year-end
1996. Since that time, an Assistant Treasurer was elected.
(d) Percent stock owned and options are of total 1996 Series Common Stock
outstanding. Note that all options granted may not be exercised.
Section 16(a) Compliance: Section 16(a) of the Securities Exchange Act of
1934 requires the Corporation's executive officers and directors, and persons
who own more than ten percent of the Corporation's 1996 Series 1996 Series
Common Stock, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of common stock
and other equity securities of the Corporation. Officers, directors and greater
that ten percent stockholders ("Insiders") are required by SEC regulation to
furnish the Corporation with copies of all Section 16(a) forms they file.
To the Corporation's knowledge, based solely on a review of the copies of
such reports furnished to the Corporation, during the fiscal year ended June 30,
1996, all Section 16(a) filing requirements applicable to Insiders have been
met.
Stock Options: The Corporation has two incentive stock option plans for its
employees, the 1986 Plan and the 1996 Plan. Each of these plans provides
that stock options may be granted for shares of common stock of the
Corporation to "key" employees by the Board of Directors or a committee
thereof. The Corporation has also adopted a Special Stock Option Plan for its
Business Development Specialist. Options granted under the Corporation's
Stock Option Plans may be either incentive stock options within the meaning of
Section 422 (formerly 422A) of the Internal Revenue Code or options which
are not entitled to special tax treatment. Each of the plans provides that the
purchase price for shares subject to an option must be not less than 100% of
the fair market value of a share of the Corporation's common stock, as of the
date of grant, and that the maximum option term is five years. The
Corporation has an Outside Directors Stock Option Plan. At the 1995 Annual
Meeting of Stockholders, a Compensation Plan was approved authorizing each
non-management director to receive stock options in the amount of 10,000 shares
of common stock for each year of service completed, which became 2,000 shares
of 1996 Series Common Stock following the 1996 Plan of Recapitalization.
Options have been granted annually under this Plan and are anticipated to be
granted in future years.
The status of stock options for the year-ended June 30, 1996 involving the
only named executive for which such reporting is required, was as follows --
Terry D. Marshall, President/CEO:
Individual Stock Options
Grants: none.
Aggregated Stock Options Exercised & Option Values
Exercised: none; Exercisable: 12,250; Un-Exercisable: 6,750; Value: none (1).
Note: Option shown are exclusive of awards to other management and board of
directors. Shares and prices are shown on post-recapitalization basis,
including options currently exercisable and those exercisable within 60 days,
both as of June 30 ,1996.
(1) Closing price of the Corporation's stock on June 30, 1996, converted to a
post-recapitalization basis, was less than the converted option exercise prices.
Stock Bonus Plan. At the July 1996 Annual Meeting, a Stock Bonus Plan was
approved by the Stockholders. Under the Plan, the Corporation has the authority
to award bonuses in the form of the Corporations 1991 Common Stock, not to
exceed 180,000 shares in the aggregate and 60,000 shares in any one year to
officers, directors and employees of the Corporation. The award of any bonus
shall be effective only at such time as counsel to the Corporation shall have
determined that the issuance and delivery of shares will not violate any state
or federal securities laws and will be in compliance with all tax laws
applicable to the Corporation. Rights to receive the bonuses shall not be
assignable and therefore the Stock Bonus Plan shall not be registered under
state or federal securities laws. All officers, directors and employees are
eligible to receive awards under the Plan; however, the Board has reserved the
initial awards under the Plan for three senior management employees, as a part
of a special Business Development Incentive Plan. The three employees are:
the President/CEO, Executive VP/Division Manager and VP Business Development.
Principal Accounting Officer: Karie Kane is the Corporation's Accounting
Manager and also serves as Assistant Treasurer of the Corporation.
She has been employed in the Corporation's accounting department for 10 years.
Ms. Kane reports to the Executive VP/Division Manager. Mr. Marchi serves as
Treasurer of the Corporation. The Accounting Manager and Executive VP/Division
Manager both provide in-person reports on a regular monthly basis to the
Board of Directors.
Auditors: At a regular meeting on February 12, 1997, the Board of Directors
adopted the recommendation of its Audit Committee to appoint Charles Bailly
& Company, P.L.L.P. (Charles Bailly & Co.) as the Corporation's certifying
accountants for the period-ended June 30, 1997, subject to approval of the
stockholders. KPMG Peat Marwick LLP (KPMG Peat Marwick) was notified of the
change on February 14, 1997. Charles Bailly & Co. replaces the Corporation's
previous certifying accountant, KPMG Peat Marwick, which were dismissed by
the Board. The appointment of Charles Bailly & Co. and the dismissal of
KPMG Peat Marwick became effective February 20, 1997.
The dismissal of KPMG Peat Marwick, which has served as the Corporation's
cerifying accountants for serveral years, and the retention of Charles Bailly
& Co. was not the result of any disagreement between the Registrant and
KPMG Peat Marwick or dissatisfaction with the firm's services; but rather
was the result of competitive bidding process for the Registrant's auditing
and accounting work, which was solicited by the Registrant in order to
secure economies in its professional fees. Charles Bailly & Co. is a
reputable regional accounting firm, properly licensed and fully-capable of
meeting the Company's audit requirements.
In connection with its audit of the Corporation's financial statments for the
years-ended June 30, 1996 and June 30, 1995, KPMG Peat Marwick's reports
contain no adverse opinion, disclaimer of opinion, or qualification or
modification as to uncertainty, audit scope or accounting principles. There
have been no disagreements with KPMG Peat Marwick on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope
or procedures, which disagreements if not resolved to their satisfaction
would have caused them to make reference in connection with their opinion
to the subject matter of the disagreement.
In connection with its audits for the past two most recent years, KPMG Peat
Marwick did not advise the Corporation that: (1) internal controls necessary
to develop reliable financial statements did not exist; (2) information came
to its attention that led it to no longer be able to rely on management's
representations or that made it unwilling to be associated with the
financial statements prepared by management; or (3) there was need to expand
significantly the scope of the audit or further investigate information that
would materially impact the fairness and reliability of audit reports or
underlying financial statments.
During the years-ended June 30, 1996 and June 30, 1997, Charles Bailly & Co.,
the newly-appointed certifying accountants for the Corporation, has not been
consulted regarding any of the following with respect to the Corporation:
(1) the application of accounting principles to a specified transaction,
either completed or proposed; (2) the type of audit opinion that might be
rendered on the Corporation's financial statments; (3) any matter that was
either the subject of a disagreement or a reportable event.
The Board's action replacing the certifying accountants was reported via
filing of a Form 8-K with the SEC on February 19, 1997. The Corporation
requested that KPMG Peat Marwick furnish a letter addressed to the SEC
stating whether it agrees with the statments set forth in its Form 8-K, and
if not, stating the respects in which it does not agree. KPMG Peat Marwick
issued such a letter on February 21, 1997, stating it was substantially in
agreement. A copy of KPMG Peat Marwick's response letter was filed as
Exhibit 16 to the Registrant's Form 8-K/A submission.
Plan of Reorganization: The Corporation continues to operate in accordance
with a Plan of Reorganization confirmed by the U.S. Bankruptcy Court on July
16, 1991. This Plan adjusted the Corporation's debt and equity structure. To
the best of its knowledge, the Corporation has successfully met all requirements
to date of the Plan, including the issuance of stock, settlement of certain
creditor claims in December of 1991, and the making of all payments required
under the Plan. The Corporation's liabilities under the Plan and its
restructured capital are stated and reflected in the Corporation's audited
financial statements. It is the Corporation's intent to comply fully with the
Plan of Reorganization. The Corporation prepaid and liquidated its obligations
to certain unsecured creditors in October 1994.
Restrictions on Dividends: Under the Corporation's Plan of Reorganization
the Corporation may not pay any cash dividend unless all claims under the
Plan, including secured claims, are satisfied in full under the terms of the
Plan. The Plan provides for payments to claimants through 2001.
Essential Air Service (EAS): The fiscal 1996 budget included funding for the
national program of $22.5 million, down from $33.6 million in 1995. As a
result, service cutbacks mandated by DOT were implemented in late November
1995 and again in April 1996. Overall, the Montana services were reduced
approximately 20 percent in terms of capacity (available seat miles). Subsidy
support was be reduced by $500,000 annually. These reductions were
vigorously appealed to DOT, without success.
Legislation was approved by Congress and signed into law in December 1996,
which extends the EAS program indefinitely, establishes a permanent
independent revenue source and provides a basis for increased funding
beginning in the fall of 1998. Restoration of basic services, as well as new
enhanced services in some cases, is expected to occur, with corresponding
increases in compensation.
While it is actively involved in development efforts, the Corporation remains
dependent upon the EAS. At June 30, 1996, all of the Corporation's scheduled
air service routes were located within Montana and the majority were operated
under DOT contract requiring EAS subsidies. No single customer accounts for
more than five percent of the Corporation's revenues, exclusive of the
compensation received from the DOT. Accounts receivable from the DOT were
$287,048, $294,949, and $295,214 or 37%, 38%, and 41% of total Stockholders'
equity at June 30, 1996, 1995 and 1994, respectively. Absent an alternative
business plan (see Future Planning), loss of the EAS contract could raise
substantial doubt about the Corporation's ability to continue in business.
In January 1997, the DOT finalized its order selecting the Corporation to
provide services for a new two year period, from December 1996 through
November 30, 1998. The first year rate is $3.247 million and the second year
rate is $3.085 million. With restoration of pre-November 1995 service levels
in late 1997, compensation is expected to increase by approximately $500,000
annually.
Other Services: The Corporation also offers outside maintenance, leasing of
hangar space and air charter services.
Commitments and Contingencies: In December 1995, the FAA issued a final rule
subjecting commercial operators of aircraft seating 10 to 30 passengers to FAR
Part 121 regulations. Full implementation is required by March 20, 1997. Due
to these requirements, the cost of operations initially is projected to increase
by $12,000 per month. This amount is included in the rate base for the new EAS
contract.
Future commitments for operating and capital leases totaled $705,890 and
$287,022, respectively, at fiscal year-end 1996. Additional contingencies are
described under Essential Air Service.
Stock Trading & Recapitalization: The Corporation's stock is listed and
traded on the Pacific Stock Exchange (PSE).
In March 1995, the PSE advised the Corporation that it was in compliance
with all requirements of the new rules for Tier II registrants, except for
minimum price per share. The Corporation was advised that certain latitude
does exist in the rules with respect to price per share. Subsequently, in
mid-May 1995, the Corporation was told that, due to a drop in bid price, the
minimum market value requirement of the new rules for Tier II registrants no
longer was being met. The Corporation was advised that no flexibility for
waiver exists on this item.
Over a period of months, the Corporation prepared a Recapitalization Plan
designed to rectify both the price per share and market value deficiencies.
The Plan was approved by the Stockholders at the July 1996 Annual Meeting and
became effective August 23, 1996. Following effectiveness, the Corporation is
in compliance with PSE requirements. However, should the Corporation fail to
maintain compliance in the future, it's listing and/or trading status on the
PSE could be affected.
As a result of implementing the Recapitalization Plan, the Corporation has an
estimated 1,000 holders of 1996 Series Common Stock. Through December 1996,
the market price per share of its stock has ranged from $1 1/16 to $1 5/16.
The market value of the Corporations public float exceeds $500,000.
Organizational Restructure Plan: At the previous Annual Meeting of Stockholders
held July 18, 1996, the Organizational Plan of Restructure was approved. The
plan authorizes the Corporation to implement a parent/subsidiary organizational
structure. Implementation has been temporarily deferred upon advice of counsel
pending specific business developments. In anticipation of the new structure,
since January 1996 all airline operations have been operated as a division of
the Corporation.
Corporate Performance: Relationships of the cumulative total Stockholder
return of the Corporation's stock (BSA.P), the Standard and Poor's 500
composite index (SPS) and the industry large airline composite index (007) are
shown in the following graphic. The Corporation does not believe there are
comparable small regional airlines, which are publicly-owned; therefore, a peer
group index has not been developed. The graphic assumes that the value of the
investments in the Corporation's common stock and the other indexes shown was
$100 on June 30, 1991 and that any and all dividends were reinvested.
Stock Comparison
by Fiscal Year, 1991-1996 (data points --$)
6/30/91 6/30/92 6/30/93 6/30/94 6/30/95 6/30/96
BigSky Transportation Co. $ 100 143 114 114 86 100
StockVal Airline Index $ 100 107 121 94 125 155
S&P 500 Composite Index $ 100 110 122 120 147 181
Note: The June 30, 1991 Index Value for BigSky is based on the price of
BSA as of December 31, 1991, because the Corporation's stock did not trade
from November 1990 to October 1991. During this period, trading was
suspended pending approval of the Chapter 11 Plan of Reorganization. The
June 30, 1996 Index Value for BigSky is based on the price as of June 24,
1996, the date of the last trade in the fiscal year. (Data points provided by
Shawn Narancich , D. A. Davidson & Co., Great Falls, MT)
Other Matters: The Board of Directors of the Corporation does not intend to
present any business to this year's meeting, other than as specifically set
forth in the Notice of Annual Meeting of Stockholders. Further, the Directors
presently know of no other business to come before this meeting. However,
should other matters be brought before the meeting, the proxies will vote on
such matters based on their judgment of the best interests of the Corporation.
Proxy Soliciting: The cost of soliciting proxies, including the cost of
preparing and mailing the Notice of the Annual Meeting of Stockholders and
this Proxy Statement, will be paid by the Corporation. Solicitation primarily
will be by mailing of this Proxy Statement to all Stockholders entitled to vote
at the meeting.
Proxies may be solicited personally by officers of the Corporation; however,
no compensation in addition to their regular compensation as officers will be
provided. The Corporation will reimburse brokers, banks and those holding
shares in their names for others for the reasonable cost of forwarding proxy
material to, and obtaining proxies from, their principals.
The accompanying proxy ballot is solicited by the Board of Directors of Big
Sky Transportation Co. in connection with the Annual Meeting of Stockholders
of the Corporation to be held in the Conference Room of BigSky Transportation
Co., Billings Logan International Airport, 1601 Aviation Place, Billings,
Montana, at 3:30 p.m. (local time) on April 16, 1997, and any adjournments of
this meeting. Proxies may be revoked at any time prior to their being voted,
by giving written notice of revocation to the Corporate Secretary. Unless so
revoked, all properly executed proxies will be voted.
This Proxy Statement is being mailed on or before March 17, 1997 to all
holders of 1996 Series Common Stock.
On Behalf of the Board of Directors of
BIG SKY TRANSPORTATION CO.,
/s/ Terry D. Marshall
Terry D. Marshall
President/CEO
/s/ Stephen D. Huntington
Stephen D. Huntington
Corporate Secretary
Billings, Montana
March 14 , 1997
Note: Summary of Proposals for Vote of Stockholders is attached
Summary of Proposals for Vote of Stockholders
Proposal 1:
Election of Directors
The Board of Directors has set the number of directors to be elected at six (6).
The Board recommends election of Jon Marchi, Terry D. Marshall, Jack K. Daniels,
Alan D. Nicholson, Stephen D. Huntington and Craig Denney, those persons listed
on page 3 of this proxy, to serve until the next Annual Meeting of Stockholders.
A proposal to elect this slate of six individuals to the Board of Directors of
the Corporation will be presented to the Stockholders at the Annual Meeting.
Those director nominees who receive the greatest number of shares present in
person or represented by proxy at the Annual Meeting, voting in favor of their
nomination in accordance with the voting rules described on page 2 of this
Proxy Statement, will be elected.
THE CORPORATION'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS VOTE TO ELECT JON
MARCHI, TERRY D. MARSHALL, JACK K. DANIELS, ALAN D.
NICHOLSON, STEPHEN D. HUNTINGTON AND CRAIG DENNEY TO
THE CORPORATION'S BOARD OF DIRECTORS
Proposal 2:
Ratification of Auditors
Charles Bailly & Company, P.L.L.P., has been appointed by the Board of
Directors to serve as the Corporations independent auditors for the fiscal year
ending June 30, 1997.
A proposal to ratify the appointment of Charles Bailly & Company, P.L.L.P
will be presented to the Stockholders at the Annual Meeting. A majority of
shares voting at the Annual Meeting, as described at page 2 of the Proxy
Statement, is required for Stockholders ratification.
A representative of Charles Bailly & Company, P.L.L.P. will be present at the
Annual Meeting of Stockholders and will be available to respond to appropriate
questions from Stockholders. The representative will have an opportunity to
make a statement on behalf of the firm, if so desired.
THE CORPORATION'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF CHARLES BAILLY &
COMPANY P.L.L.P.
Note: Auditor appointment pursuant to action at February 12, 1997 regular
meeting of the Board of Directors, based on Audit Committee recommendation.
Refer to discussion of appointment of auditors on page 8 of this Proxy
Statement.