1
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 quarterly period ended December 31, 1999
[ ] 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 small business issuer as specified in its charter)
MONTANA 81-0387503
------- ----------
(state of other jurisdiction of incorporation (I.R.S. employer
or organization) identification no.)
1601 AVIATION PLACE
BILLINGS LOGAN INTERNATIONAL AIRPORT
BILLINGS, MT 59105
(406) 247-3910
--------------
(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 during the past 12 months (or for
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] NO[ ]
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
CLASS: 1996 Series Common Stock, no par value
SHARES OUTSTANDING: At February 10, 2000: 1,264,462
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BIG SKY TRANSPORTATION CO.
FORM 10-QSB
For the Period-Ended December 31, 1999
CONTENTS
Part I Financial Information
Item 1. Financial Statements (condensed format):
Balance Sheets
December 31, 1999 (unaudited) and
June 30, 1998 (audited)...............................................3
Income Statements
Three months-ended and six months-ended
December 31, 1999 and 1998.............................................4
Cash Flow statements
Six months-ended December 31, 1999 and 1998 (unaudited)...............5
Item 2. Management's Discussion and Analysis or Plan of Operation............................6-13
Part II Other Information
Item 1. Legal Proceedings......................................................................14
Item 2. Change in Security.....................................................................14
Item 3. Defaults Upon Senior Securities........................................................14
Item 4. Submission of Matter of a Vote of Security Holders.....................................14
Item 5. Other Information......................................................................14
Item 6 Exhibits and reports on Form 8-K....................................................14-15
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PART I. FINANCIAL INFORMATION, ITEM 1.
Financial Statements (condensed format)
BIG SKY TRANSPORTATION CO.
Balance Sheets
31-Dec-99 30-Jun-99
----------- -----------
(unaudited) (audited)
ASSETS
CURRENT ASSETS
CASH $ 59,157 $ 220,294
RESTRICTED CASH 150,396 137,500
ACCOUNTS RECEIVABLE, NET 1,805,252 1,698,313
INCOME TAX REFUND RECEIVABLE 79,625 35,603
EXPENDABLE PARTS & SUPPLIES, AT COST 596,205 444,882
PREPAID EXPENSES 120,173 111,360
ASSETS HELD FOR LIQUIDATION 30,000 30,000
DEFERRED INCOME TAXES 305,963 69,000
----------- -----------
TOTAL CURRENT ASSETS 3,146,771 2,746,952
PROPERTY AND EQUIPMENT, AT COST
FLIGHT EQUIPMENT 2,483,525 2,329,732
FACILITY UNDER CAPITAL LEASE 456,185 456,185
OTHER PROPERTY AND EQUIPMENT 461,090 509,031
----------- -----------
3,400,800 3,294,948
ACCUMULATED DEPRECIATION & AMORTIZATION (624,490) (592,357)
----------- -----------
NET PROPERTY & EQUIPMENT 2,776,310 2,702,591
----------- -----------
DEPOSITS/OTHER ASSETS 94,349 176,991
----------- -----------
TOTAL ASSETS $ 6,017,430 $ 6,545,428
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
NOTES PAYABLE $ 1,268,208 $ 700,000
CURRENT INSTALLMENTS OF LONG-TERM DEBT 180,286 190,169
CURRENT INSTALLMENTS OF CAPITAL LEASE 17,582 267,216
ACCOUNTS PAYABLE 854,023 856,073
DUE TO AFFILIATE 0 0
ACCRUED EXPENSES 774,741 596,437
TRAFFIC BALANCES & UNUSED TICKETS 556,041 296,930
----------- -----------
TOTAL CURRENT LIABILITIES 3,650,881 2,906,825
----------- -----------
LONG-TERM DEBT, EXCLUDING CURRENT INSTALLMENTS 1,109,973 1,192,981
CAPITAL LEASE, EXCLUDING CURRENT INSTALLMENTS 246,156 0
STOCKHOLDERS' DEFICIT
COMMON STOCK OF NO PAR VALUE;
(AUTHORIZED 20,000,000) SHARES OUTSTANDING 815,475 814,225
ADDITIONAL PAID-IN CAPITAL 242,034 242,034
RETAINED EARNINGS (23,236) 494,322
LESS TREASURY 20,000 SHARES, AT COST (23,853) (23,853)
STOCKHOLDERS' EQUITY 1,010,420 1,526,728
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 6,017,430 $ 5,626,534
=========== ===========
See notes to financial statements
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BIG SKY TRANSPORTATION CO.
Income Statements
Three months ended Six months ended
December 31, December 31,
----------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(unaudited) (unaudited)
Operating Revenues:
Passenger $ 2,453,702 1,983,499 4,947,675 3,423,997
Cargo 51,950 61,754 114,472 104,332
Public service 2,638,211 1,735,140 5,155,557 2,883,681
Other 37,908 26,704 62,426 76,083
----------- ----------- ----------- -----------
Total 5,181,771 3,807,097 10,280,130 6,488,093
----------- ----------- ----------- -----------
Operating Expenses:
Flying 2,210,084 1,722,971 4,402,172 2,690,102
Maintenance 1,441,510 572,856 2,632,867 1,109,111
Traffic 1,208,820 773,976 2,383,782 1,287,925
Marketing 359,302 291,139 740,913 500,262
General/Admin. 339,289 218,600 648,227 401,741
Depreciation 88,252 51,654 168,236 81,242
----------- ----------- ----------- -----------
Total 5,647,257 3,631,196 10,976,197 6,070,383
----------- ----------- ----------- -----------
Operating Income (465,486) 175,901 (696,067) 417,710
Other Income (Exp)
Interest, net (55,600) (12,800) (111,013) (24,845)
Capital gain(loss) (100) (4,717) 100 (4,819)
----------- ----------- ----------- -----------
Total (55,700) (17,517) (110,913) (29,664)
----------- ----------- ----------- -----------
Income before taxes (521,186) 158,384 (806,980) 388,046
Income taxes (189,992) 67,371 (289,421) 158,701
Net Income (331,194) 91,013 (517,559) 229,345
=========== =========== =========== ===========
Per share data:
Basic earnings per
common share $ (.26) $ .08 $ (.41) $ .20
Diluted earnings
per common share $ (.25) $ .08 $ (.39) $ .20
See notes to financial statements
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BIG SKY TRANSPORTATION CO.
Cash Flow Statements
1999 1998
(unaudited) (unaudited)
----------- ------------
Net cash provided (used):
By operations 175,836 (102,313)
By investing (240,604) (1,462,004)
By financing (96,369) 1,433,282
Increase in cash (161,137) (131,035)
Cash at beginning of period 220,294 512,670
----------- ------------
Cash at end of period 59,157 381,635
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PART I. FINANCIAL INFORMATION, ITEM 2.
BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operation
Summary of Airline Operating Statistics:
Three months-ended Six months-ended
December 31, December 31,
----------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Passengers carried 32,183 23,335 63,976 39,341
Average passenger trip (miles)
264 252 265 255
Revenue passenger miles 8,496,190 5,883,285 16,975,322 10,017,148
Available seat miles 24,699,600 16,702,406 50,468,065 28,551,813
Passenger load factor (%) 34.40 35.22 33.64 35.08
Aircraft miles 1,299,979 843,677 2,656,214 1,467,585
Yield per revenue passenger mile
(cents) 28.88 33.71 29.15 34.18
Freight pounds enplaned 64,362 77,776 146,385 124,657
Operating cost per available seat
mile (cents) 22.86 21.74 21.75 21.26
Operating break-even load factor (%) 37.49 33.60 35.91 32.83
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BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operation
Analysis of Results for the three months ended December 31, 1999 and 1998:
On November 15, 1998 Big Sky began service under an Essential Air Service
("EAS") contract with the U.S. Department of Transportation ("DOT") to eight
communities in the south central U.S. as reported in the SEC Form 8-K filing
dated October 9, 1998. That service, referred to as the DFW operations, resulted
in a large increase in the size and scope of our business. The operating results
for the three-month and six-month periods ending December 31, 1999 include this
service for the entire period. The operating results for the prior year
three-month and six-month periods include that service only from November 15,
1998 to December 31, 1998.
Three months ended
December 31,
----------------------------------------------
1999 1998
(unaudited) (unaudited) Change
------------- ------------ ------------
Operating Revenues:
Passenger $ 2,453,702 1,983,499 470,203
Cargo 51,950 61,754 (9,804)
Public service 2,638,211 1,735,140 903,071
Other 37,908 26,704 11,204
------------- ------------ ------------
Total 5,181,771 3,807,097 1,374,674
------------- ------------ ------------
Total operating revenues in the second quarter of fiscal year 2000 totaled $5.2
million, as compared to $3.8 million in the same quarter of fiscal year 1999.
Passenger revenues of $2.5 million in the quarter were $500,000 or 24% greater
than the same quarter last year. Revenue passengers during the quarter ending
December 31, 1999 totaled 32,183, an increase of 8,848, or 38%, more than the
same quarter in 1998. The average passenger fare during the quarter was $76.27
compared to $85.03 during the same quarter last year. The average fare decrease
is caused by a lower average fare per passenger in the DFW operation. DFW
operations account for 32% of the total passengers in the current quarter
compared to 16% in the previous year.
EAS revenues in the second quarter of fiscal year 2000 were $2.6 million
compared to $1.7 million during the same quarter of fiscal year 1999 - an
increase of 52%. EAS revenues were $100,000 less than planned due to a lower
flight completion performance than projected. The lower performance was
partially caused by the continuation of flight crew shortages into the months of
October and November. These shortages began in the
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BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operation
Analysis of Results for the three months ended
December 31, 1999 and 1998: (Continued)
summer of 1999. Plus non-scheduled engine maintenance required because of two
bird strikes that grounded one aircraft for approximately three weeks also
affected the performance.
Three months ended
December 31,
---------------------------------------------
1999 1998
(unaudited) (unaudited) Change
------------ ------------ ----------
Operating Expenses
Flying 2,210,084 1,722,971 487,113
Maintenance 1,441,510 572,856 868,654
Traffic 1,208,820 773,976 434,844
Marketing 359,302 291,139 68,163
General/Admin. 339,289 218,600 120,689
Depreciation 88,252 51,654 36,598
----------- ------------ ---------
Total 5,647,257 3,631,196 2,016,061
----------- ------------ ----------
Total operating expenses in the second quarter totaled $5.6 million compared to
$3.6 million in the second quarter of fiscal 1999, an increase of 56%. All
expense categories increased due to the costs of the DFW operations for the full
period. There were also four major non-scheduled engine maintenance repairs
during the current period that together amounted to $400,000 of the increased
expenses.
Flight operations expenses increased $487,000, or 28%, as compared to the second
quarter of fiscal year 1999. The reasons for this increase were the full period
costs associated with the DFW operations, approximately $100,000 of flight crew
training costs related to crew shortages, and 25%-30% increase in the average
fuel price per gallon during the quarter.
Maintenance expense increased by $869,000, or 152%, over the second quarter of
fiscal year 1999. The increase resulted from an expansion of the fleet to
thirteen aircraft in the current period from eight aircraft in the prior year,
and the non-scheduled engine maintenance and related expenses mentioned above.
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BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operation
Analysis of Results for the three months ended
December 31, 1999 and 1998: (Continued)
Passenger service expense increased by $435,000, or 56% in the second quarter of
fiscal year 2000 compared to the same period in fiscal year 1999. The increase
is due to the full period of expense in the DFW operation this year as compared
to the partial period for last year.
Sales expense increased by $68,000, or 23%, over the second quarter of fiscal
year 1999. This increase is proportional to the increase in passenger revenues
in the current period over the prior year.
General and administrative expense was $120,000, or 55%, greater than the second
quarter of fiscal year 1998. The increase is the result of costs associated with
additional administrative staff and services required for the increased
operations, revenues, and sales.
Depreciation expense was $37,000, or 71%, greater than the second quarter of
fiscal year 1999. The increase is due to the addition of ground support
equipment, maintenance tooling, rotable (replaceable) aircraft parts, and
additional computer hardware and software needed to support the expanded
operations and aircraft fleet.
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10
BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operation
Analysis of Results for the six-months ended
December 31, 1999 and December 31, 1998
Six months-ended
December 31,
-------------------------------------------
1999 1998
(unaudited) (unaudited) Change
----------- ----------- -----------
Operating Revenues:
Passenger 4,947,675 3,423,997 1,523,678
Cargo 114,472 104,332 10,140
Public service 5,155,557 2,883,681 2,271,876
Other 62,426 76,083 (13,657)
----------- ----------- -----------
Total 10,280,130 6,488,093 3,792,037
----------- ----------- -----------
Total revenues of $10.3 million for the six months ending December 31, 1999 were
$3.8 million, or 58%, greater than the six months ending December 31, 1998.
Approximately 87% of the increase came from the DFW operation for the full
period this year compared to six weeks of DFW operations in last fiscal year's
financial results. The remaining increase is due to increased passenger revenues
in our Montana region. The increase in the Montana revenues came from new
services (45%), growth in existing markets (32%), and our Northwest code-share
relationship (23%). Overall, passenger revenues increased by $1.5 million, or
44%, and public service revenues increased $2.3 million, or 79%, for the six
months ending December 31, 1999, as compared to the six-month period for the
previous fiscal year. The total number of revenue passengers, 63,976, was 63%
greater than the six month period in 1998.
Six months-ended
December 31,
------------------------------------------
1999 1998
(unaudited) (unaudited) Change
----------- ---------- -----------
Operating Expenses
Flying 4,402,172 2,690,102 1,712,070
Maintenance 2,632,867 1,109,111 1,523,756
Traffic 2,383,782 1,287,925 1,095,857
Marketing 740,913 500,262 240,651
General/Admin. 648,227 401,741 246,486
Depreciation 168,236 81,242 86,994
----------- ---------- -----------
Total 10,976,197 6,070,383 4,905,814
----------- ---------- -----------
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BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operation
Analysis of Results for the six-months ended
December 31, 1999 and December 31, 1998: (Continued)
All expense categories increased in the six months ending December 31, 1999
compared to the period ending December 31, 1998.
Flight operations expenses increased by $1.7 million, or 64%, in the six months
ending December 31, 1999 as compared to the six-month period ending December 31,
1998. The increase resulted from the fleet expansion, additional flight crews,
fuel, and other related expenses for the DFW operation and other expanded
services in the Montana region. The flight crew shortage situation that we
reported in the first quarter 10QSB continued into the second quarter, and also
contributed to the increase. The cost of hiring, training, and other related
expenses to replace pilots lost through attrition was approximately $400,000 in
the six-month period and was $350,000 higher than the prior year.
Maintenance expenses were $1.5 million, or 137%, greater in the fiscal year 2000
period as compared to the fiscal year 1999 period. The increase resulted from
the expanded fleet and aircraft utilization associated with the new and expanded
services and the non-scheduled engine maintenance and related expense in the
current period.
Passenger service expense for the six-month period ending December 31, 1999 was
$1.1 million, or 85%, greater than the same period in 1998. This increase is
directly related to the DFW operation and the expanded service in the Montana
region.
Sales and marketing expenses increased by $241,000, or 48%, in the 1999 period
over the 1998 period. This increase is proportional to the increase in
passengers and passenger revenues in the period. Advertising expense for the DFW
operation also contributed to the increase.
General and administrative expenses in the six months ending December 31, 1999
were $246,000, or 61%, greater than the six months ending December 31, 1998. The
increase resulted from additional administrative personnel and legal and
professional fees associated with the expanded services.
Depreciation expense was $87,000, or 107%, greater in the six-month period of
1999 as compared to 1998. Depreciation expense for our owned aircraft recorded
for the full period in the current period as compared to only one quarter in the
prior year accounted for approximately 33% of the increase. Depreciation of
ground support equipment, maintenance tooling, rotable spare parts, and
additional computer hardware and software
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BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operation
Analysis of results for the six-months-ended
December 31, 1999 and 1998: (Continued)
purchased to support the expanded fleet and operation accounted for the
remainder of the increase.
Net non-operating income was $134,000 for the three months ending December 1999,
compared to non-operating expense of $85,000 for the December 1998 quarter.
Interest expense of $56,000 during the current quarter was offset by a credit
provision for federal income tax of $190,000. In the prior year interest expense
was $18,000 and a provision for state and federal income tax was $67,000. The
increased interest expense resulted from increased use of our line of credit and
debt service of a construction loan related to the building of our new corporate
office. Net non-operating income for the six-month period ending December 1999
was $179,000 compared to non-operating expense of $188,000 in the prior year.
The quarter ending December 1999 generated an operating loss of $465,000, and a
net loss of $331,000, compared to operating income of $176,000 and net income of
$91,000 during the same period in 1998. The abnormal number of non-scheduled
engine maintenance repairs and related costs during the current period was the
primary reason for the negative operating results. The economic effect of these
events including repairs, rental expense, and loss of revenue in the period was
approximately $500,000.
For the six months ending December 31, 1999 the operating loss was $696,000 and
the net loss was $518,000. This compares to operating income of $418,000 and net
income of $229,000 in the 1998 six-month period. In addition to the
non-scheduled maintenance described above, the six-month results were affected
by the pilot shortage problem described in the Form 10-QSB for the quarter
ending September 30, 1999. The pilot shortage problem ended in November 1999.
The total cost of solving this problem during the six-month period was
approximately $600,000.
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BIG SKY TRANSPORTATION CO.
Management's Discussion and Analysis or
Plan of Operation
Liquidity and Capital Resources:
A review of current liquidity and capital resources are as follows:
Working Capital Current Ratio
--------------- -------------
Year-end June 30, 1999 $ (159,783) 0.94:1
Period-ending December 31, 1999 $ (504,110) 0.86:1
Long-term Debt Stockholder's
(excluding current portion) Equity
--------------------------- -------------
Year-end June 30, 1999 $1,192,981 $1,526,728
Period-ending December 31, 1999 $1,356,129 $1,010,420
Stockholder equity at December 31, 1999 decreased 33.8% in the six-month period
as a result of the net loss. We are current on all of our debt service
obligations.
Cash provided by operations in the six months ended December 31, 1999 was
$175,836. Cash used in investing activities was $240,604 during the period.
Big Sky has established a line of credit through First Interstate Bank and Trust
Co. of Billings for an amount of up to $1,500,000. We use the line to supplement
timing differences in cash flows. The maximum amount Big Sky drew on the line of
credit during the quarter was $1,046,000. The large losses over the past
six-months have required us to increase the use of the line of credit. We
believe that these losses were caused by an abnormal number of problems, and
therefore believe that the line of credit is adequate for our current needs.
However, we are evaluating options to increase our capitalization to reduce our
reliance on the line of credit.
A new two-year EAS contract for the DFW operation became effective December 1,
1999. The contract increases our annual subsidy for this operation by
approximately 5% per year over the previous contract. The EAS contract that
covers our Montana communities expires on November 30, 2000.
Year 2000: All of our computerized information systems successfully made the
year 2000 transition without incident. All systems continue to function
normally.
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PART II. OTHER INFORMATION
BIG SKY TRANSPORTATION CO.
Item 1 Legal Proceedings
There are no pending legal proceedings in which Big Sky is
involved with.
Item 2. Change in Securities and Use of Proceeds
No actions have been taken with respect to the modification of
any class of security other then for exchange for outstanding
securities. No matters have arisen with respect to the use of
proceeds from any securities offering.
Item 3. Defaults Upon Senior Securities
There have been no defaults in the payments of any securities.
Item 4. Submission of Matter to a Vote of Security Holders
There were no matters submitted to a vote of security holders
during the period.
Item 5. Other Information
Not applicable
Item 6. Exhibits and reports on Form 8-K
A) Exhibits
2: The Supplement to Disclosure Statement and Third Plan of
Reorganization filed August 30, 1991 on Company's Form 8-K
report and incorporated herein by reference.
3: (I) and (II) Articles of Incorporation Incorporating
Amendments and Restated Bylaws were filed as Exhibits 2.1 and
2.2 to Form 8-A Registration filed August 23, 1997, and
incorporated herein by reference.
4: (a) Specimen certificate for shares of 1996 Series Common
Stock was filed as Exhibit 1.1 to the 8-A Registration filed
August 23, 1997, and incorporated herein by reference.
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PART II. OTHER INFORMATION
BIG SKY TRANSPORTATION CO.
10: (a) DOT Order 98-9-12, issued September 14, 1998, selected
Big Sky as the Essential Air Service carrier for seven Montana
Points with a hub at Billings, Montana, and one daily trip
between Sidney and Bismarck, through November 30, 2000. See
Exhibit 10(a) to Form 10-K filed September 25, 1998,
incorporated herein by reference.
(b) DOT Order 98-10-9, issued October 7, 1998 selected
Big Sky as the Essential Air Service carrier for eight points
in Arkansas, Oklahoma and Texas, with a hub at Dallas, Texas,
through November 30, 1999. See Exhibit 28 to Form 10-QSB filed
November 16, 1998, incorporated herein by reference.
(c) DOT Order 99-12-28, issued December 29, 1999 selected
Big Sky as the Essential Air Service carrier for seven points
in Arkansas, Oklahoma and Texas, with a hub at Dallas, Texas,
through November 30, 2001. The referenced Order was filed with
the Company's Form 10-QSB filed February 14, 2000.
11: A new method for computing earnings per share has been
established by SFAS No. 128 "Earnings per Share". The new
standard simplifies the standards for computing earnings per
share and requires presentation of two new amounts, basic and
diluted and requires presentation of two new amounts, basic
and diluted earnings per share. This standard has been applied
retroactively.
15: The accompanying unaudited condensed financial statements
have been prepared by Big Sky 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, for 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. Results of operations for the three and
six months ended December 31, 1999 and 1998 are not
necessarily indicative of the results to be expected for the
full year. Big Sky recommends that these interim financial
statements be read together with the financial statements and
notes included in Big Sky's latest annual report on Form
10-KSB.
15
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PART II. OTHER INFORMATION
BIG SKY TRANSPORTATION CO.
18: No change.
19: Not applicable
20: Not applicable
22: Not applicable
23: Not applicable
24: Not applicable
25: Not applicable
27: Not applicable
B) Reports on Form 8-K
No reports on Form 8-K were filed during the December 1999 quarter.
C) Item 27 Financial Data Schedule
(Only for filings via EDGAR)
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BIG SKY TRANSPORTATION CO.
Signature
The Registrant, by the undersigned, has signed this report in accordance with
the requirements of the Securities Exchange Act of 1934.
BIG SKY TRANSPORTATION CO.
- - --------------------------
Registrant
By: /s/ Kim B. Champney
----------------------
President & CEO
February 11, 2000
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