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 September 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE 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 September 30, 2001: 1,252,112
BIG SKY TRANSPORTATION CO.
FORM 10-QSB
For the Period Ended September 30, 2001
CONTENTS
Part I Financial Information
Item 1. Financial Statements (condensed format):
Balance Sheets
September 30, 2001 and
June 30, 2001 ...........................................3
Income Statements
Three months ended
September 30, 2000 and 2001..............................4
Cash Flow Statements
Three months ended September 30, 2000 and 2001...........5
Item 2. Management's Discussion and Analysis or Plan of Operation.......6-9
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K.................................10
2
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIG SKY TRANSPORTATION CO.
Balance Sheets
September 30, 2001 June 30, 2001
(unaudited) (audited)
------------------ ---------------
Assets
Current Assets
Restricted Cash $ 137,500 $ 137,500
Accounts Receivable, net 1,207,163 2,378,528
Expendable parts & supplies, at cost 960,115 941,011
Prepaid expenses 410,283 266,589
Deferred income taxes & other 69,000 69,000
----------- -----------
Total Current Assets 2,784,061 3,792,628
Property and Equipment, net 3,317,648 3,379,850
Deferred Income Taxes & Other 705,700 587,650
Total Assets $ 6,807,409 $ 7,760,128
=========== ===========
Liabilities & Stockholders' Equity
Current Liabilities
Current maturities of long-term debt $ 220,318 $ 224,288
Notes payable 986,648 1,414,058
Accounts payable 1,892,739 2,208,786
Accrued expenses 858,022 920,922
Traffic balances & unused tickets 1,002,778 932,144
----------- -----------
Total Current Liabilities 4,960,505 5,700,198
Long-Term Debt, Excluding Current Installments 1,529,337 1,586,285
Stockholders' Equity
Common stock of no par value;
(20,000,000 shares authorized 1,252,112 shares issued &
outstanding) 819,125 819,125
Additional paid-in capital 242,034 242,034
Accumulated deficit (719,739) (563,661)
Less treasury stock (20,000 shares, at cost) (23,853) (23,853)
----------- -----------
Stockholders' Equity 317,567 473,645
----------- -----------
Total Liabilities & Stockholder's Equity $ 6,807,409 $ 7,760,128
=========== ===========
3
BIG SKY TRANSPORTATION CO.
Income Statements
(unaudited)
<Table>
<Caption>
Three Months Ended
September 30,
2001 2000
------------ -----------
Operating Revenues:
Passenger $ 3,203,744 $ 3,178,968
Cargo 38,413 48,209
Public service 2,961,394 2,731,035
Other 137,488 30,916
------------ -----------
Total 6,341,039 5,989,128
Operating Expenses:
Flying 2,777,924 2,353,556
Maintenance 1,541,102 1,340,800
Traffic 1,524,065 1,317,721
Marketing 461,327 440,415
General/Administrative 322,470 305,010
Depreciation 115,645 87,085
------------ -----------
Total 6,742,533 5,844,587
Operating income (loss) (401,494) 144,541
Other Income (Expense)
Federal Air Stabilization
Act Assistance 253,253 --
Interest, net (73,383) (49,398)
Capital gain (983) 250
------------ -----------
Total 178,887 (49,148)
Income (loss) before taxes (222,607) 95,393
Income tax provision (benefit) (66,529) 51,138
------------ -----------
Net income (loss) $ (156,078) $ 44,255
============ ===========
Per share data:
Basic earnings (loss) per common
share $ (.12) $ .04
============ ===========
Diluted earnings (loss) per common
share $ (.12) $ .04
============ ===========
</Table>
4
BIG SKY TRANSPORTATION CO.
Cash Flow Statements
(unaudited)
Three Months Ended
September 30,
2001 2000
--------- ---------
Net cash provided (used):
By operations $ 541,771 $(294,576)
By investing activities (53,443) (107,426)
By financing activities (488,328) 402,002
--------- ---------
Increase in cash -- --
Cash at beginning of period -- --
--------- ---------
Cash at end of period $ -- $ --
========= =========
5
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
September 30,
2001 2000
----------------------------
Passengers carried 35,610 36,410
Average passenger trip (miles) 294 304
Revenue passenger miles 10,463,611 11,078,387
Available seat miles 30,107,761 26,881,770
Passenger load factor (%) 34.75 41.21
Aircraft miles 1,584,619 1,414,830
Yield per revenue passenger mile (cents)
30.62 28.70
Freight pounds enplaned 39,194 49,275
Operating cost per available seat mile (cents)
22.39 21.74
Operating break-even load factor (%) 36.95 40.22
6
Analysis of Results for the Three Months Ended
September 30, 2000 and 2001:
The terrorist activities of September 11, 2001 had a negative impact on Big Sky
Transportation's ("Big Sky") operations. Management estimates that the federal
ground stop order, which effectively suspended operations for approximately 4
days, along with decreased passenger demand resulted in approximately $400,000
in lost revenue during the period September 11-30, 2001. Big Sky received
$253,253 in initial federal aid from the Air Transportation System Safety and
Stabilization Act (the "Act") that partially offset these lost revenues. Big Sky
expects to receive another $253,000 in federal aid under the Act by early 2002.
While the long-term effects of the terrorist activities are not readily
determinable, management believes that decreased passenger demand will continue
into the second fiscal quarter of 2002, although not to the extent experienced
in September 2001. The Act also provided an authorization for Essential Air
Service ("EAS") subsidy funding at $120 million for the period October 1, 2001
to September 30, 2002, that is substantially greater than the $50 million EAS
subsidy level authorized prior to the events of September 11, 2001. The ultimate
amount of funding is subject to congressional appropriation which has not yet
been established. Big Sky would be eligible for any additional subsidy funding
that may occur to offset the decreased passenger demand. Management believes
that liability insurance premiums and security expenses will increase during the
remainder of the fiscal year as expenses and losses related to terrorist
activities are spread among passenger air carriers. The Act contains provisions
that may provide federal aid to partially offset the increased insurance
premiums and to fund the increased security costs.
Big Sky's operating results, excluding the September 11, 2001 terrorist
activities, reflect year-over-year increases in operating expenses, most notably
payroll, aircraft ownership and maintenance expense, that have exceeded
increases in revenue. In late July 2001, Big Sky began service from Moses Lake,
WA to Seattle and Spokane under a new EAS contract. This new service partially
accounts for the increases in operating expenses referred to above. Preliminary
results, from inception of service to September 11, 2001, met management's
expectations.
The combined impact of the September 11, 2001 terrorist activities, new Moses
Lake service and a general slowdown in the U.S. economy resulted in an operating
loss of $401,494 for the three months ended September 30, 2001 compared with
operating income of $144,541 for the same period in the prior year. It is
important to note that under accounting rules set forth by the Financial
Accounting Standards Board's Emerging Issues Task Force, the $253,253 in federal
assistance under the Act is classified as non-operating income.
7
Three Months Ended
September 30
2001 2000
(unaudited) (unaudited) Change %
----------- ----------- --------- ------
Operating Revenues:
Passenger $3,203,744 $3,178,968 $ 24,776 1
Cargo 38,413 48,209 (9,796) (20)
Public service 2,961,394 2,731,035 230,359 8
Other 137,488 30,916 106,572 --
---------- ---------- ---------
Total $6,341,039 $5,989,128 $ 351,911 6
========== ========== =========
The modest 1% increase in passenger revenues reflects new Moses Lake service and
growth in existing markets offset by the September 11, 2001 events described
above. The increase in public service revenues is due to an increase in subsidy
rates, effective December 1, 2000, for Big Sky's northern EAS route system, new
Moses Lake service, and a higher year-over-year flight completion percentage.
The increase in other revenues is due primarily to funds received under an
agreement with Lea County, New Mexico whereby the county will provide an
operating subsidy (not to exceed $35,000 per month) based on a number of factors
including flight completion, passenger revenue and allocable expenses. Included
in other revenue is approximately $100,000 related to this agreement.
Three Months Ended
September 30
2001 2000
(unaudited) (unaudited) Change %
---------- ---------- ---------- -------
Operating Expenses:
Flying $2,777,924 $2,353,556 $ 424,368 18
Maintenance 1,541,102 1,340,800 200,302 15
Traffic 1,524,065 1,317,721 206,344 16
Marketing 461,327 440,415 20,912 5
General/Admin 322,470 305,010 17,460 6
Depreciation 115,645 87,085 28,560 33
---------- ---------- ----------
Total $6,742,533 $5,844,587 $ 897,946 15
========== ========== ==========
The increase in flying operations expense is attributable to increased pilot
payroll, fuel and aircraft ownership (e.g., lease, property taxes, insurance)
expenses. Pilot payroll and fuel expense increases are primarily attributable to
and consistent with additional flight hours associated with new Moses Lake
services. Aircraft ownership expenses reflect the
8
addition of two leased aircraft in the second half of fiscal 2001. Fuel prices
decreased slightly on a year-over-year basis.
The increase in maintenance expense is due to higher payroll expenses, airframe
and avionics repairs, maintenance material consumption and engine reserves. The
increase in payroll expense is due partially to the opening of a new maintenance
facility in Ponca City, OK in October 2000. This facility replaces a maintenance
facility located in the southern region that was closed in April 2000. Wing spar
inspection and repair on two aircraft contributed approximately $86,000 in
incremental airframe expense. The increases in avionics, maintenance materials
and engine reserves reflect the addition of two leased aircraft and higher
year-over-year flight hours.
The increase in traffic servicing expense is due in part to additional traffic
associated with new Moses Lake service and additional service to Denver. Also
contributing to the rise in traffic servicing was an increase in Big Sky's
passenger liability insurance.
The increases in marketing and general and administrative expense are consistent
with the above increases in passenger traffic.
The increase in depreciation is attributable to the purchase of an additional
spare engine, leasehold improvements associated with leased aircraft and gate
facilities in Dallas and the purchase of customer reservation software.
Liquidity and Capital Resources:
A review of current liquidity and capital resources are as follows:
Working Capital Current Ratio
--------------- -------------
Year-end June 30, 2001 $ (1,907,570) 0.67:1
Period-ending September 30, 2001 $ (2,176,444) 0.56:1
Long-term Debt Stockholder's
(excluding current portion) Equity
--------------------------- ------
Year-end June 30, 2001 $1,586,285 $473,645
Period-ending September 30, 2001 $1,529,337 $317,567
Cash provided by operations for the three months ended September 30, 2001 was
$541,771. Cash used in investing and financing activities was $53,443 and
$488,328, respectively 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. Big Sky uses the line to
supplement timing differences in cash flows. The maximum amount drawn on the
line of credit during the quarter was $1,500,000 compared to a low of $423,096.
The losses over the past two years have required Big Sky to increase the use of
the line of credit. Management is evaluating options to increase Big Sky's
capitalization to reduce its reliance on the line of credit.
9
PART II. OTHER INFORMATION
BIG SKY TRANSPORTATION CO.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) Material Contracts
DOT Order 2001-9-17, issued September 25, 2001, authorizing Big Sky
Transportation to modify its existing service pattern at Harrison,
Arkansas with three round trip flights each weekday and weekend via Hot
Springs, Arkansas to Dallas/Ft. Worth beginning October 1, 2001.
B) Reports of Form 8-K
No reports on Form 8-K were filed during the September 30, 2001
quarter.
10
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
November 14, 2001
11