<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-14719
SKYWEST, INC.
Incorporated under the laws of Utah 87-0292166
(I.R.S. Employer ID No.)
444 South River Road
St. George, Utah 84790
(801) 634-3000
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 ______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 8, 1996
----- -----------------------------
Common stock, no par value 10,047,208
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SKYWEST, INC.
TABLE OF CONTENTS
Part I - Financial Information
<TABLE>
<CAPTION>
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Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
As of June 30, 1996 and
March 31, 1996 3
Condensed Consolidated Statements of
Income For the Three Months
Ended June 30, 1996 and 1995 5
Condensed Consolidated Statements of
Cash Flows For the Three Months Ended
June 30, 1996 and 1995 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
2
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PART I. FINANCIAL INFORMATION
SKYWEST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 31,647 $ 24,529
Available-for-sale securities 17,967 19,097
Receivables, net 13,103 12,893
Inventories 9,209 8,923
Other current assets 13,181 11,020
--------- ---------
Total current assets 85,107 76,462
--------- ---------
PROPERTY AND EQUIPMENT:
Aircraft and rotable spares 174,107 171,840
Buildings and ground equipment 40,192 39,092
Deposits on aircraft and rotable spares 3,603 3,603
Rental vehicles 2,761 2,237
--------- ---------
220,663 216,772
Less-accumulated depreciation and
amortization (76,192) (71,701)
--------- ---------
144,471 145,071
--------- ---------
OTHER ASSETS 5,839 6,017
--------- ---------
$ 235,417 $ 227,550
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
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SKYWEST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
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<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 6,323 $ 6,236
Current portion of deferred credits 807 1,614
Trade accounts payable 28,044 23,740
Accrued salaries, wages and benefits 4,867 5,451
Taxes other than income taxes 2,289 1,330
Air traffic liability 1,386 1,485
Income taxes payable 1,854 --
Fleet restructuring accrual 2,822 3,788
--------- ---------
Total current liabilities 48,392 43,644
--------- ---------
LONG-TERM DEBT, less current maturities 51,968 53,736
--------- ---------
DEFERRED INCOME TAXES PAYABLE 15,226 14,370
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock 88,183 88,183
Retained earnings 51,933 47,902
Treasury stock (20,285) (20,285)
--------- ---------
Total stockholders' equity 119,831 115,800
--------- ---------
$ 235,417 $ 227,550
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
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SKYWEST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For The
Three Months Ended
June 30,
-----------------------------------
1996 1995
------------ ------------
<S> <C> <C>
OPERATING REVENUES:
Passenger $ 59,661 $ 47,402
Freight 1,010 1,045
Public service and other 310 553
Nonairline 11,144 11,381
------------ ------------
72,125 60,381
------------ ------------
OPERATING EXPENSES:
Flying operations 23,185 19,107
Aircraft, traffic and passenger service 8,591 7,202
Maintenance 7,742 7,054
Promotion and sales 7,323 5,549
General and administrative 3,439 2,759
Depreciation and amortization 4,379 3,449
Nonairline 9,788 10,462
------------ ------------
64,447 55,582
------------ ------------
OPERATING INCOME 7,678 4,799
------------ ------------
OTHER INCOME AND (EXPENSE):
Interest expense (530) (476)
Interest income 501 669
Gain on sales of property and equipment 203 75
------------ ------------
174 268
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 7,852 5,067
PROVISION FOR INCOME TAXES (3,018) (1,978)
------------ ------------
NET INCOME $ 4,834 $ 3,089
============ ============
NET INCOME PER COMMON SHARE $ .48 $ .30
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 10,047,208 10,318,978
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
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SKYWEST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Three Months Ended
June 30,
---------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,834 $ 3,089
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,379 3,449
Gain on sales of property and equipment (203) (75)
Maintenance expense related to disposition of rotable spares 43 97
Increase in deferred income taxes 856 957
Amortization of deferred credits (807) (204)
Nonairline depreciation and amortization 788 578
Changes in operating assets and liabilities:
Increase in receivables, net (210) (3,095)
Increase in inventories (286) (19)
(Increase) decrease in other current assets (2,161) 350
Increase in trade accounts payable 4,304 1,121
Decrease in fleet restructuring accrual (966) --
Increase in other current liabilities 2,130 1,197
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 12,701 7,445
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale securities -- (165)
Proceeds from sale of available-for-sale securities 1,130 --
Acquisition of property and equipment:
Aircraft and rotable spares (2,602) (6,570)
Buildings and ground equipment (1,307) (1,690)
Deposits on aircraft and rotable spares -- (1,100)
Rental vehicles (1,019) (845)
Proceeds from sales of property and equipment 699 408
Decrease in deposits on aircraft and rotable spares -- 4,310
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (3,099) (5,652)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock -- 40
Payment of cash dividends (803) --
Reduction of long-term debt (1,681) (1,071)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (2,484) (1,031)
-------- --------
Increase in cash and cash equivalents 7,118 762
Cash and cash equivalents at beginning of period 24,529 27,416
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 31,647 $ 28,178
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 464 $ 524
Income taxes 366 --
</TABLE>
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See notes to condensed consolidated financial statements.
7
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SKYWEST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Consolidated Financial Statements
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. These condensed consolidated financial
statements reflect all adjustments which, in the opinion of management, are
necessary to present fairly the results of operations for the interim periods
presented. All adjustments are of a normal recurring nature. Certain information
and disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
following disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's latest annual report on Form 10-K.
The results of operations for the three months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 1997.
Note B - Available-for-Sale Securities
Available-for-sale securities are recorded at fair market value.
Note C - Income Taxes
For the three months ended June 30, 1996 and 1995, the Company provided for
income taxes based upon the estimated annualized effective tax rate. Under the
provisions of the Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", the Company has classified the net current and
noncurrent deferred tax assets and liabilities which at June 30, 1996 included a
current deferred tax asset of approximately $2.9 million and a deferred tax
liability of approximately $15.2 million.
Note D - Net Income Per Common Share
Net income per common share is calculated based upon the weighted average shares
outstanding during the period. No material dilution results from common stock
equivalents which are outstanding options to purchase common stock.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Operating Statistics
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For the
Three Months Ended
June 30,
---------------------------------
1996 1995 % change
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<S> <C> <C> <C>
Passengers carried 663,705 534,560 24.2%
Revenue passenger miles (000s) 179,647 135,088 33.0%
Available seat miles (000s) 344,454 291,814 18.0%
Passenger load factor 52.2% 46.3% 5.9 pts
Passenger breakeven load factor 47.2% 43.1% 4.1 pts
Yield per revenue passenger mile $ .332 $ .351 (5.4%)
Cost per available seat mile $ .160 $ .156 2.6%
Average passenger trip (miles) 271 253 7.1%
</TABLE>
For the Three Months Ended June 30, 1996 and 1995:
For the quarter ended June 30, 1996, the Company experienced record levels for
passenger enplanements, operating revenues and net income per share. In
addition, revenue passenger miles ("RPMs") increased 33 percent while available
seat miles ("ASMs") increased 18 percent due to additional aircraft deliveries
related to its equipment transition program. Operating revenues increased to
$72.1 million for the quarter ended June 30, 1996, compared to $60.4 million for
the quarter ended June 30, 1995. Nonairline revenues were relatively constant at
$11.1 million for the quarter ended June 30, 1996, compared to $11.4 million for
the quarter ended June 30, 1995. Net income was $4.8 million or $.48 per share
for the quarter ended June 30, 1996, compared to $3.1 million or $.30 per share
for the quarter ended June 30, 1995.
Passenger revenues, which represented 82.7 percent of total operating revenues,
increased 25.9 percent to $59.7 million for the quarter ended June 30, 1996,
compared to $47.4 million or 78.5 percent of total operating revenues for the
quarter ended June 30, 1995. The increase is attributable to a 33.0 percent
increase in RPMs which was offset by a 5.4 percent decrease in yield per RPM.
The increase in RPMs is due to the addition of two regional jets which are
serving new SkyWest destinations such as San Francisco, California, Pasco,
Washington and Colorado Springs, Colorado. The Company has also upgraded
service, with regional jets, for previously served destinations in California
such as Ontario, Palm Springs, Orange County as well as Tucson, Arizona. In
addition, the Company has acquired nine new cabin-class Brasilia aircraft which
are being used to replace Metro aircraft as their leases terminate. The RPMs
have also increased as a result of higher passenger acceptance of the new
Brasilia aircraft and due to better equipment dispatch reliability for these
aircraft. Yield per RPM decreased 5.4 percent to $.332 for the quarter ended
June 30, 1996, compared to $.351 for the quarter ended June 30, 1995, primarily
due to a 7.1 percent increase in the average passenger trip length resulting
from increased utilization of the Canadair Regional Jet where the average trip
length is 460 miles. Although yield per RPM decreased 5.4 percent, revenue per
ASM increased 6.8 percent to 17.3c for the quarter ended June 30, 1996,
compared to 16.2c for the quarter ended June 30, 1995.
As a result of a general traffic increase system wide and due to the Company's
transition program whereby Metroliner aircraft are being replaced by cabin-class
aircraft, load factor increased 5.9 points to 52.2 percent for the quarter ended
June 30, 1996, compared to 46.3 percent for the quarter ended June 30, 1995. In
addition, the increased passenger enplanements resulted in a positive spread
between actual and breakeven load factor of 5.0 points for the quarer ended June
30, 1996, compared to 3.2 points for the quarter ended June 30, 1995.
9
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Total operating expenses and interest increased 15.9 percent to $65.0 million
for the quarter ended June 30, 1996, compared to $56.1 million for the quarter
ended June 30, 1995. As a percentage of consolidated operating revenues, total
operating expenses and interest decreased to 90.1 percent for the quarter ended
June 30, 1996, from 92.8 percent for the comparable quarter ended June 30, 1995.
For the quarter ended June 30, 1996, total airline operating expenses and
interest (excluding nonairline expenses) were 90.5 percent of airline operating
revenues compared to 93.0 percent for the comparable quarter ended June 30,
1995. The improved margin is the result of increased passenger enplanements and
operating revenue which has outpaced the increase in operating expenses.
Primarily, as a result of increased fuel and passenger handling expenses,
airline operating costs per ASM (including interest expense) increased to
16.0(cent) for the quarter ended June 30, 1996 from 15.6(cent) for the
comparable quarter ended June 30, 1995. Factors relating to the change in
operating expenses and interest are discussed below.
Salaries, wages and employee benefits decreased as a percentage of airline
operating revenues to 24.3 percent for the quarter ended June 30, 1996, from
26.1 percent for the quarter ended June 30, 1995. The average number of
full-time equivalent employees for the quarter ended June 30, 1996 was 2,128,
compared to 2,013 for the quarter ended June 30, 1995. The increase in number of
personnel was due to hiring flight attendants and customer service personnel to
support increased operations. Salaries, wages and employee benefits per ASM
decreased to 4.3(cent) for the quarter ended June 30, 1996, compared to
4.4(cent) for the quarter ended June 30, 1995, primarily due to the ASMs
generated by aircraft which are more efficient on a unit cost basis.
Aircraft costs, including aircraft rent and depreciation, decreased as a
percentage of airline operating revenues to 18.8 percent for the quarter ended
June 30, 1996 from 20.9 percent for the quarter ended June 30, 1995. Aircraft
costs per ASM decreased slightly to 3.3(cent) for the quarter ended June 30,
1996, compared to 3.5(cent) for the quarter ended June 30, 1995. The decrease is
due primarily to the ASMs generated by aircraft which are more efficient on a
unit cost basis.
Maintenance expense decreased as a percentage of airline operating revenues to
9.4 percent for the quarter ended June 30, 1996, compared to 10.6 percent for
the quarter ended June 30, 1995. This decrease was the result of the utilization
of more Brasilia aircraft which are more efficient than Metroliner aircraft.
Maintenance expense per ASM decreased slightly to 1.7(cent) for the quarter
ended June 30, 1996, from 1.8(cent) for the quarter ended June 30, 1995.
Fuel costs increased as a percentage of airline operating revenues to 11.2
percent for the quarter ended June 30, 1996, from 9.5 percent for the quarter
ended June 30, 1995, primarily due to an increase in the average fuel price per
gallon to $.88 from $.73. Included in the increased fuel price per gallon is a
charge of 4.3(cent) per gallon for federal excise tax. As a result of this
increase in tax, the Company's management estimates an additional annual
operating cost of approximately $1.3 million for fuel expenses. Fuel costs per
ASM increased to 2.0(cent) for the quarter ended June 30, 1996 compared to
1.6(cent) for the quarter ended June 30, 1995, as a result of these increased
charges.
Other expenses, primarily consisting of commissions, landing fees, station
rentals, computer reservation system fees and hull and liability insurance,
increased as a percentage of airline operating revenues to 25.8 percent for the
quarter ended June 30, 1996, from 25.1 percent for the quarter ended June 30,
1995. The increase is due primarily to significant rate increases in customer
reservation system boarding fees and related passenger handling charges.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Nonairline expenses decreased 6.4 percent to $9.8 million for the quarter ended
June 30, 1996, compared to $10.5 million for the quarter ended June 30, 1995,
due to a decreased volume of activity. Additionally, the average number of
full-time equivalent employees was 309 for the quarter ended June 30, 1996,
compared to 303 at June 30, 1995.
Liquidity and Capital Resources
The Company had working capital of $36.7 million and a current ratio of 1.8:1 at
June 30, 1996, compared to working capital of $32.8 million and a current ratio
of 1.8:1 at March 31, 1996. During the first quarter of fiscal 1997, the Company
invested $2.6 million in flight equipment, $2.3 million in buildings, ground
equipment and other fixed assets, reduced long-term debt by $1.7 million and
paid cash dividends of $.8 million. The principal sources of cash during the
first quarter of fiscal 1997 were $12.7 million provided by operating activities
and $1.8 million from the sale of securities and property and equipment. These
factors resulted in a $7.1 million cash and cash equivalents increase.
At June 30, 1996, the Company's long-term debt to equity position was 30 percent
debt and 70 percent equity compared to 32 percent debt and 68 percent equity at
March 31, 1996.
SkyWest took delivery of three new Brasilia aircraft during the first quarter of
fiscal 1997 and has agreed to purchase 12 additional Brasilia aircraft and
related spare parts inventory and support equipment at a future aggregate cost
of approximately $96 million, including estimated cost escalations. These
aircraft are scheduled for delivery during the remainder of fiscal 1997.
Depending in large part upon the state of the aircraft financing market and
general economic conditions at the time, management will determine whether to
purchase aircraft with available cash or acquire the aircraft through
third-party long-term loans or lease arrangements. The Company also has options
to acquire 10 additional Brasilia aircraft at fixed prices (subject to cost
escalation and delivery schedules) exercisable through fiscal 1999. Options to
acquire an additional ten Canadair Regional Jets have been obtained and are
exercisable at any time with no expiration.
The Company has available $5.0 million in an unsecured bank line of credit with
interest payable at the bank's base rate less one-quarter percent, which was 8.0
percent at June 30, 1996. In addition, the Company has available $1.0 million in
an unused reducing revolving credit facility bearing interest at the bank's base
rate plus one half percent. The amount available under the facility reduces to
$.5 million on December 1, 1996, and will expire December 1, 1997. There were no
amounts outstanding on either of the facilities as of June 30, 1996.
11
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PART II. OTHER INFORMATION
SKYWEST, INC.
Item 6: Exhibits and Reports on Form 8-K
a. Exhibits - Financial Data Schedule Exhibit 27.
b. Reports on Form 8-K - There were no reports on Form 8-K filed during the
quarter ended June 30, 1996.
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.
SKYWEST, INC.
August 8, 1996 BY: /s/ Bradford R. Rich
---------------------
Bradford R. Rich
Executive Vice President - Finance,
Chief Financial Officer and Treasurer
12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000793733
<NAME> SKYWEST, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 31,647
<SECURITIES> 17,967
<RECEIVABLES> 13,324
<ALLOWANCES> 221
<INVENTORY> 9,209
<CURRENT-ASSETS> 85,107
<PP&E> 220,663
<DEPRECIATION> 76,192
<TOTAL-ASSETS> 235,417
<CURRENT-LIABILITIES> 48,392
<BONDS> 51,968
0
0
<COMMON> 67,898
<OTHER-SE> 51,933
<TOTAL-LIABILITY-AND-EQUITY> 235,417
<SALES> 72,125
<TOTAL-REVENUES> 72,125
<CGS> 0
<TOTAL-COSTS> 64,447
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 530
<INCOME-PRETAX> 7,852
<INCOME-TAX> 3,018
<INCOME-CONTINUING> 4,834
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,834
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
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