U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the period-ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE CHANGE ACT
for the transition period ___________ to __________
Commission file number 1-7991
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 Int'l Airport
Billings MT 59105
(406) 245-9449
(address of registrant's principal executive offices)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the past 12 months (or such 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]
State the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS: Common Stock, no par value
SHARES OUTSTANDING: at FEBRUARY 10, 1998: 1,062,218
BIG SKY TRANSPORTATION CO.
FORM 10-QSB
For the Period-Ended December 31, 1997
CONTENTS
Part I Financial Information
Item 1. Condensed Financial Statements:
Balance Sheets
December 31, 1997 (unaudited) and
June 30, 1997 (audited)
Statements of Operations
Three months-ended and Six months-ended
December 31, 1997 and 1996 (unaudited)
Statements of Cash flows
Six months-ended December 31, 1997 and
1996 (unaudited)
Notes to Unaudited Financial Statements
Item 2. Management's Discussion and Analysis or
Plan of Operation
Part II Other Information
Item 6. Exhibits and reports on Form 8-K
Part I. Financial Information, Item 1.
BIG SKY TRANSPORTATION CO.
Balance Sheets
December 31, June 30,
1997 1997
ASSETS (unaudited) (audited)
Current Assets:
Cash $ 575,371 $ 544,706
Restricted cash 542,301 600,151
Accounts receivable, net 766,561 416,192
Expendable parts/supplies 261,015 254,282
Inventory held for sale 30,000 30,000
Prepaid expenses 102,697 --
Total current assets 2,277,945 1,845,331
Property & Equipment:
Flight equipment 230,164 612,108
Capital lease facility 456,185 456,185
Other property & equipment 196,588 187,497
882,937 1,255,790
Accumulated depreciation (215,248) (554,916)
Net property & equipment 667,689 700,874
Other assets 7,258 17,258
Total assets $ 2,952,892 $ 2,563,463
===================================
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Current long-term debt $ 140,950 $ 132,674
Current capital lease 7,826 11,639
Accounts payable 269,426 64,213
Accrued expenses 678,396 701,034
Traffic payable 102,639 43,155
Total current liabilities 1,199,237 952,715
Long-term debt, excluding current 179,759 263,765
Capital lease, excluding current 271,416 275,379
Total liabilities 1,650,412 1,491,859
Stockholders' Equity
Common stock of no par value
authorized 20,000,000 shares;
1,062,218 shares outstanding 478,138 471,207
Additional Paid-in Capital 197,511 110,159
Retained earnings 650,684 490,238
Total capital and
retained earnings
Less Treasury 20,000 shares(at cost)( 23,853) --
Stockholders' equity 1,302,480 1,071,604
Total liabilities & equity $ 2,952,892 $ 2,563,463
===================================
See notes to financial statements.
BIG SKY TRANSPORTATION CO.
Statements of Operations
Three months-ended Six months-ended
December 31, December 31,
1997 1996 1997 1996
(unaudited)(unaudited) (unaudited)(unaudited)
Operating Revenues:
Passenger $ 958,639 $ 385,976 $1,344,323 $ 787,761
Charter -- 5,900 -- 5,900
Cargo 40,139 26,094 58,684 47,264
Public service 1,194,813 772,053 1,992,883 1,525,645
Other 20,474 15,341 36,058 39,074
Total $2,214,065 $1,205,364 $3,431,948 $2,405,644
Operating Expenses:
Flying 837,282 394,531 1,338,500 788,959
Maintenance 439,286 280,179 720,991 533,544
Passenger service 370,077 275,225 685,543 545,791
Sales 172,530 45,021 213,488 88,440
General/Admin. 138,890 121,707 292,412 249,445
Depreciation 22,926 20,200 42,828 40,850
Total $1,980,991 $1,136,863 $3,293,762 $2,247,029
Operating Income (Loss) 233,074 68,501 138,186 158,615
Other Income/(expenses):
Interest, net (8,750) (9,910) (16,274) (19,369)
Gain (loss) equipment (4,867) (12,327) 146,637 (13,280)
Total (13,617) (22,237) 130,363 (32,649)
Income (loss) before taxes 219,457 46,264 268,549 125,966
Income Tax Expense:
Current 17,282 3,610 20,752 9,483
Charge in lieu of taxes 71,672 16,309 87,352 42,839
Total 88,954 19,919 108,104 52,322
Net Income (loss): 130,503 26,345 160,645 73,644
=============================================
Per share data:
Income per common and
common equivalent share .12 .03 .15 .07
Weighted average number
of common & common
equivalent shares
outstanding less
Treasury stock 1,042,218 1,047,864 1,042,218 1,047,864
See notes to financial statements.
BIG SKY TRANSPORTATION CO.
Statements of Cash Flows
Six months-ended
December 31,
1997 1996
(unaudited) (unaudited)
From operating activities:
Net income (loss) $ 160,445 $ 73,644
Depreciation 42,828 40,850
(Gain) loss on equipment (146,637) 12,327
Excess reorganization value
amortization and charges
in lieu of taxes 87,352 42,839
Changes in assets/liabilities:
Restricted cash 57,850 (87,683)
Accounts receivable (350,369) 38,654
Expendable parts (6,733) (8,248)
Prepaid expenses (102,697) (21,461)
Accounts Payable 205,213 (4,201)
Accrued expenses (22,638) 83,427
Traffic payable 59,484 2,604
Net cash provided by operations (15,902) 172,752
From investing activities:
Proceeds from equipment 230,211 359
Property & equipment (76,285) (12,520)
Net cash(used) provided
by investing 153,926 (12,161)
From financing activities:
Treasury stock purchased (23,853) --
Payments on long-term debt (75,730) (70,059)
Payments on capital lease ( 7,776) (7,780)
Net cash used by financing (107,359) (77,839)
Net cash increase (decrease) 30,665 82,752
Cash at beginning of period 544,706 360,668
Cash at end of period $ 575,371 $ 443,420
==================================
Supplement disclosures of
cash flow information:
Cash paid during the period for:
Interest $ 33,519 $ 36,879
Income taxes 11,566 --
See notes to financial statements
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 its
understanding of 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-QSB and therefore, do not include
all information and footnotes necessary for a fair
presentation of financial position, statement 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-KSB.
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-dilutive and therefore not presented.
NOTE C. Results of operations for the three months-ended and the
six months-ended December 31, 1997 and 1996 are not
necessarily indicative of the results to be expected for
the full year.
NOTE E. Certain reclassifications have been made to the 1996
numbers to conform to the 1997 presentations.
PART I. Financial Information, Item 2.
BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operations
Summary of Airline Operating Statistics:
Three months-ended Six months-ended
December 31, December 31,
% change %change
1997 1996 +/(-) 1997 1996 +/(-)
Passengers carried 12,641 6,948 81.9 18,373 13,244 38.7
Average passenger
trip (miles) 209 194 7.7 206 196 5.2
Revenue passenger
miles 2,643,530 1,351,204 95.6 3,789,678 2,591,977 46.2
Available seat
miles (scheduled) 8,187,506 3,780,346 116.6 12,003,106 7,614,536 57.6
Available seat
miles (charter) -- -- -- -- 9,825 (100)
Total available
seat miles 8,187,506 3,780,346 116.6 12,003,106 7,624,361 57.4
Passenger load
factor (%) 32.3 35.7 (9.5) 31.6 34.0 (7.1)
Aircraft miles 439,516 256,119 71.6 691,755 519,322 33.2
Operating breakeven
(with subsidy)
load factor (%) 28.9 33.7 (14.3) 30.3 31.8 (4.6)
Yield per revenue
passenger mile (cents) 36.3 29.1 24.9 35.5 30.4 16.7
Operating cost per
available seat mile
(cents) 27.0 31.9 (15.2) 28.6 31.5 (9.4)
Freight pounds
enplaned 67,803 17,233 293.4 87,989 34,977 151.6
BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operations
Analysis of Results for the three months-ended
December 31, 1997 and 1996:
Three months-ended
December 31,
1997 1996 Change
(unaudited) (unaudited)
Operating Revenues:
Passenger $ 958,639 $ 385,976 $ 572,663
Charter -- 5,900 (5,900)
Cargo 40,139 26,094 14,045
Public service 1,194,813 772,053 422,760
Other 20,474 15,341 5,133
Total $2,214,065 $1,205,364 $1,008,701
Total operating revenues in the second quarter of fiscal year 1998
were $2.21 million, compared with $1.21 millon in the same quarter
last year. Passenger revenues increased $572,663 or 148% to total
$958,639. In addition, freight revenues increased $14,045 or 53.8%
to $40,139. Both increases are primarily due to added service
between Billings MT and Helena and Missoula MT implemented October
12, 1997. Number of passengers carried October through December
1997 totaled 12,641, 5,749 more than the same period in 1996. The
average fare rose from $56.62 to $75.13.
Effective October 1, 1997 Big Sky entered into a new enhanced
Essential Air Service (EAS) contract with the Department of
Transportation (DOT) at an annual rate of $4.8 million through
November 1998. The enhancement restored services lost during a
program-wide reduction in November 1995. The new contract also
provided an upgrade from a Metro II to Metro III type aircraft.
The Metro III aircraft seats 19 passengers and cruises at 300 miles
per hour. Public service revenues increased $422,760 or 54.8% over
the same three month period in 1996.
Big Sky performed no charter services in the second fiscal quarter
of 1998.
BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operations
Analysis of Results for the three months-ended
December 31, 1997 and 1996 (continued):
Three months-ended
December 31,
1997 1996 Change
(unaudited) (unaudited)
Operating Expenses:
Flying $ 837,282 $ 394,531 $ 442,751
Maintenance 439,286 280,179 159,107
Passenger service 370,077 275,225 94,852
Sales 172,530 45,021 127,509
General/Admin. 138,890 121,707 17,183
Depreciation 22,926 20,200 2,726
Total $1,980,991 $1,136,863 $ 844,128
All operating expense categories experienced increases, totaling
$844,128 or 74.2%. This was expected as the enhanced EAS and
Western MT services implemented in October 1997 required fleet
transition and expansion from three Metro II and one Cessna 402C to
a fleet of six Metro III aircraft on December 31, 1997.
Flight had the largest increase of $442,751 or 112%. An increased
number of flight crews along with higher aircraft lease, insurance
and fuel costs made up the bulk of the increase. Block hours
increased 75.3% from a monthly average of 469 in the three month
period of 1996 to a monthly average of 822 in the same three month
period of 1997.
Maintenance increased $159,107 or 56.8%. This increase is two-
fold, additional manpower and equipment associated with the larger
fleet and, secondly, costs with returning the Metro II aircraft to
their lessors.
Passenger service costs increased $94,852 or 34.5%. Increased
staffing at station locations and the addition of two new
destinations, along with higher airport costs of space rental,
security and landing fees, all are the result of added services.
BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operations
Analysis of Results for three months-ended
December 31, 1997 & 1996 (continued):
Sales expense experienced a substantial increase of $127,509 or
283% due to several factors. Advertising was increased to promote
the new Western Montana and enhanced EAS service. Reservations
computer system upgrades to better serve and monitor the added
passenger reservations were initiated. Corresponding with the
increased passengers, CRS and travel agency commissions also
increased.
General and administration expense increased $17,183 or 14.1%,
largely due to printing of the annual report and proxy material and
legal fees associated with the "new" Metro III aircraft lease
agreements.
Depreciation rose slightly as a result of the Global Positioning
Systems (GPS) avionics equipment installed on each of the Metro III
aircraft.
BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operations
Analysis of Results for six months-ended
December 31, 1997 & 1996:
Six months-ended
December 31,
1997 1996 Change
(unaudited) (unaudited)
Operating Revenues:
Passenger $1,344,323 $ 787,761 $ 556,562
Charter -- 5,900 (5,900)
Cargo 58,684 47,264 11,420
Public service 1,992,883 1,525,645 467,238
Other 36,058 39,074 (3,016)
Total $3,431,948 $2,405,644 $1,026,304
Six months ended December 1997 had revenues of $3.43 million,
$1.03 million or 42.7% greater than the same period one year earlier.
Passenger revenue and public service revenue increases of $556,562 (70.6%)
and $467,238 (30.6%) were almost entirely attributable to the
October through December quarter. As previously stated, the
Company began service to Helena and Missoula MT and initiated
expanded service under a new EAS contract in October 1997, both of
which increased revenues. The only revenue categories which
experienced decreases were the other revenue category ($3,016) and
charter revenue ($5,900).
BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operations
Analysis of Results for six months-ended
December 31, 1997 & 1996 (continued):
Six months-ended
December 30,
1997 1996 Change
(unaudited) (unaudited)
Operating Expenses:
Flying $1,338,500 $ 783,959 $ 549,541
Maintenance 720,991 553,544 187,447
Passenger service 685,543 545,791 139,752
Sales 213,488 88,440 125,048
General/Admin. 292,412 249,445 42,967
Depreciation 42,828 40,850 1,978
Total $3,293,762 $2,247,029 $1,046,733
As with the quarterly results, the six month period also reflected
increases in all expense categories, a total increase of $1,046,733
or 46.6% for the six months ended December 1997 compared to the
same six months in 1996. Again, this is a direct result of
staffing, aircraft and station expense for the added flights to the
seven EAS communities and the two new Western Montana locations.
The 1997 results include start up costs of the new service and
aircraft along with termination costs associated with returning the
Metro II aircraft.
Flight expense increased $549,541 or 69.6%. Areas that experienced
higher costs were aircraft lease, insurance and crew salaries,
along with additional fuel usage. Aircraft lease expense rose 192%
and insurance 100% over the same six months in 1996. Fuel expense
increased only 28%; a 74% increase in usage was partially offset by
a 25% decrease in average fuel cost per gallon.
Maintenance costs rose $187,447 or 35.1%. The increase in aircraft
fleet size combined with the cost of preparing the "old" Metro II
aircraft for return accounted for the bulk of the increase.
BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operations
Analysis of Results for six months-ended
December 31, 1997 & 1996 (continued):
Passenger service expense experienced increases in station staffing
along with airport-related costs such as space rental, landing fees
and security costs reflecting higher service frequencies and two
new destinations. The six month period of 1997 has higher costs by
$139,752 or 25.6%.
Sales expense increased $125,048 or 141%, all of which was
experienced in the December quarter. Advertising accounted for the
largest increase of 199% followed by travel commissions, equipment
rental and CRS fees, all related to the new routes and increased
passenger loads.
General and administration increased $42,967 or 17.2%, again the
majority of this was during the December quarter. Legal fees
incurred the highest rate of increase largely attributable to the
implementation of the Metro III aircraft lease agreements.
Depreciation in the six months ended December 1997 rose $1,978 or
4.8% over the same six month period in 1996.
BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operations
Liquidity and Capital Resources:
Net non-operating expenses were $102,571 for the December 1997
quarter and $42,156 for the December 1996 quarter. Pursuant to
Chapter 11 Reorganization "Fresh Start" reporting, a $71,672 charge
in lieu of tax was recorded in the December 1997 quarter
compared to $16,309 in the December 1996 quarter.
The December 1997 quarter generated operating profit of $233,074
and net income of $130,503. By comparison, the same quarter in
1996 produced a $68,501 operating profit and net profit of $49,203.
Six month results ending December 31, 1997 had an operating profit
of $138,186 and a net profit of $160,645, compared to $158,615 and
$73,644 for the same six month period of 1996.
A review of current liquidity and capital resources are presented
below:
Working Capital Current Ratio
Year-end 6/30/97 $ 892,616 1.9:1
Quarter-end 12/31/97 $1,078,708 1.9:1
Long-Term Debt Stockholder's
(excluding current portion) Equity
Year-end 6/30/97 $ 539,144 $1,071,604
Quarter-end 12/31/97 $ 451,175 $1,302,480
Stockholder equity at December 31, 1997 increased 21.5% over the
balance at fiscal year-end. The Company is current on all of its
debt service obligations. In September 1997 the Company made the
sixth of eight annual scheduled payments to its unsecured creditors
under the plan of reorganization.
BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operations
Liquidity and Capital Resources (continued):
Cash used by operations during the six months ended December 31,
1997 was $15,902. This reflects the start-up costs associated with
increased services and fleet transition offset by a one-time
capital gain on the sale of a Cessna 402C aircraft. Cash provided
by investing activities was $153,926 primarily due to the sale of
an aircraft and related parts. Cash used by financing was $107,359
for the payments on long term debt, capital lease obligations and
the purchase of treasury stock.
The Company has established a line of credit through First
Interstate Bank and Trust Co. of Billings. To-date this line has
not been utilized. The Company also received a $150,000 advance on
subsidy from the DOT to supplement cash flow during start-up of
enhanced EAS service. This advance is being reimbursed in equal
monthly payments (subsidy offsets) through November 30, 1998, the
remaining period of the DOT/EAS contract.
The Company's EAS contract expires November 30, 1998. Big Sky
Airlines has held this contract through two year renewals since
1980. Preparations for contract renewal negotiations with the DOT
have begun. Negotiations are expected to begin in the fourth
fiscal quarter of 1998, concluding in the first fiscal quarter of
1999. Loss of this contract would be material. Concurrently, the
company will actively seek profitable expansion and new business
opportunities.
Part II. Other Information
BIG SKY TRANSPORTATION CO.
Item 6. Exhibits and reports on Form 8-K
Exhibit No. Exhibit Name
27 Financial Data Schedule
(only for filings via EDGAR)
Reports on Form 8-K
No reports on form 8-K were filed during the December 1997
quarter.
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/ Brent L. Johnson By: /s/ Karie Kane
Brent L. Johnson Karie Kane
Vice President, Business Development Accounting Director
and CFO
February 13, 1998