<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 September 30, 1997
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 November 10, 1997
----- --------------------------------
Common stock, no par value 10,194,117
<PAGE> 2
SKYWEST, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Part I - Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
As of September 30, 1997 and
March 31, 1997 3
Condensed Consolidated Statements of
Income For the Three Months and Six
Months Ended September 30, 1997 and 1996 5
Condensed Consolidated Statements of
Cash Flows For the Six Months Ended
September 30, 1997 and 1996 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 4. Submission of Matters to a Vote of Security 12
Holders
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
SKYWEST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
================================================================================
ASSETS
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
------------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 55,980 $ 37,786
Available-for-sale securities 16,201 17,970
Receivables, net 9,945 10,851
Inventories 11,262 9,987
Prepaid aircraft rents 7,463 8,612
Other current assets 4,853 5,089
--------- ---------
Total current assets 105,704 90,295
--------- ---------
PROPERTY AND EQUIPMENT:
Flight equipment 183,879 171,239
Buildings and ground equipment 47,293 43,508
Rental vehicles 4,460 3,291
--------- ---------
235,632 218,038
Less-accumulated depreciation and
amortization (90,299) (80,295)
--------- ---------
145,333 137,743
--------- ---------
OTHER ASSETS 4,346 4,860
--------- ---------
$ 255,383 $ 232,898
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
SKYWEST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in Thousands)
(Unaudited)
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
------------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 7,350 $ 6,399
Trade accounts payable 27,445 29,503
Accrued payroll 6,739 6,095
Taxes other than income taxes 2,445 1,537
Air traffic liability 1,408 1,488
Income taxes payable 1,588 --
--------- ---------
Total current liabilities 46,975 45,022
--------- ---------
LONG-TERM DEBT, net of current maturities 54,302 47,337
--------- ---------
DEFERRED INCOME TAXES PAYABLE 18,237 15,987
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock 89,626 89,146
Retained earnings 66,528 55,691
Treasury stock (20,285) (20,285)
--------- ---------
Total stockholders' equity 135,869 124,552
--------- ---------
$ 255,383 $ 232,898
========= =========
</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 For the
Three Months Ended Six Months Ended
September 30, September 30,
------------------------------- -------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Passenger $ 66,900 $ 62,423 $ 128,311 $ 122,084
Freight 1,090 1,060 2,343 2,070
Public service and other 269 362 558 672
Nonairline 12,043 11,955 21,205 21,543
------------ ------------ ------------ ------------
80,302 75,800 152,417 146,369
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Flying operations 25,482 25,764 51,785 48,949
Aircraft, traffic and passenger service 9,655 9,080 18,531 17,671
Maintenance 7,159 7,048 13,969 14,790
Promotion and sales 7,879 7,713 15,184 15,036
General and administrative 3,897 3,306 7,212 6,745
Depreciation and amortization 4,740 4,523 9,380 8,902
Nonairline 9,242 10,367 17,405 18,599
------------ ------------ ------------ ------------
68,054 67,801 133,466 130,692
------------ ------------ ------------ ------------
OPERATING INCOME 12,248 7,999 18,951 15,677
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (1,050) (666) (1,570) (1,196)
Interest income 902 738 1,610 1,239
Gain on sales of property and equipment 33 38 156 241
------------ ------------ ------------ ------------
(115) 110 196 284
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 12,133 8,109 19,147 15,961
PROVISION FOR INCOME TAXES (4,623) (3,119) (7,292) (6,137)
------------ ------------ ------------ ------------
NET INCOME $ 7,510 $ 4,990 $ 11,855 $ 9,824
============ ============ ============ ============
NET INCOME PER COMMON SHARE $ .74 $ .50 $ 1.17 $ .98
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 10,181,041 10,076,041 10,165,862 10,061,703
============ ============ ============ ============
</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
Six Months Ended
September 30,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 11,855 $ 9,824
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,380 8,902
Gain on sales of property and equipment (156) (241)
Maintenance expense related to disposition of rotable spares 392 59
Increase in deferred income taxes 2,250 1,551
Amortization of deferred credits -- (1,332)
Nonairline depreciation and amortization 2,488 1,703
Tax benefit from exercise of common stock options -- 56
Changes in operating assets and liabilities:
Decrease in receivables, net 906 2,108
Increase in inventories (1,275) (516)
Decrease in other current assets 1,385 40
(Decrease) increase in trade accounts payable (2,058) 2,281
Increase in other current liabilities 3,060 1,752
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 28,227 26,187
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of available-for-sale securities 1,769 3,081
Acquisition of property and equipment:
Aircraft and rotable spares (14,282) (5,349)
Buildings and ground equipment (3,785) (2,720)
Rental vehicles (2,067) (2,168)
Proceeds from sales of property and equipment 815 868
Decrease (increase) in other assets 137 (70)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (17,413) (6,358)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 480 410
Payment of cash dividends (1,016) (803)
Reduction of long-term debt (3,584) (3,099)
Proceeds from long-term debt 11,500 --
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 7,380 (3,492)
-------- --------
Increase in cash and cash equivalents 18,194 16,337
Cash and cash equivalents at beginning of period 37,786 24,529
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 55,980 $ 40,866
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,565 $ 1,186
Income taxes 2,565 3,277
</TABLE>
See notes to condensed consolidated financial statements.
6
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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 and six months ended September 30, 1997,
are not necessarily indicative of the results that may be expected for the year
ending March 31, 1998.
Note B - Available-for-Sale Securities
Available-for-sale securities are recorded at fair market value.
Note C - Income Taxes
For the six months ended September 30, 1997 and 1996, 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 recorded a net current deferred
tax asset of $2.0 million and a net noncurrent deferred tax liability of $18.2
million at September 30, 1997.
Note D - Net Income Per Common Share
Net income per common share is calculated based upon the weighted average shares
outstanding during the periods. No material dilution results from common stock
equivalents which are outstanding options to purchase common stock.
Note E - United Airlines Agreement
On July 23, 1997, SkyWest Airlines and United Airlines announced a marketing
agreement in which SkyWest will operate as United Express in Los Angeles, Las
Vegas, Phoenix and various intra-California markets. The United Express
code-share arrangement will provide extensive connecting opportunities for
SkyWest/United express customers in Los Angeles where United Airlines is the
largest major carrier. The new agreement became effective October 1, 1997, and
there has been no financial impact for the quarter ended September 30, 1997. At
the same time, SkyWest has also re-affirmed its Delta Air Lines, Inc. marketing
agreement with a newly signed Delta Connection contract which allows for a
reduced number of SkyWest flights which is consistent with the current level of
Delta Air Lines, Inc. flights into and out of Los Angeles as well as a
strengthened relationship in Salt Lake City.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
<TABLE>
<CAPTION>
Operating Statistics
--------------------------------------------------------------------
For the For the
Three Months Ended Six Months Ended
September 30, September 30,
----------------------------- ----------------------------------
1997 1996 % Change 1997 1996 % Change
------- ------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Passengers carried 735,354 683,067 7.7% 1,447,707 1,346,772 7.5%
Revenue passenger miles (000s) 195,752 188,161 4.0% 384,792 367,808 4.6%
Available seat miles (000s) 377,448 358,437 5.3% 750,349 702,891 6.8%
Passenger load factor 51.9% 52.5% (0.6)pts 51.3% 52.3% (1.0)pts
Passenger breakeven load factor 45.3% 47.8% (2.5)pts 45.8% 47.5% (1.7)pts
Yield per revenue passenger mile $ .342 $ .332 3.0% $ .333 $ .332 0.3%
Revenue per available seat mile $ .181 $ .178 1.7% $ .175 $ .178 (1.7%)
Cost per available seat mile $ .158 $ .162 (2.5%) $ .156 $ .161 (3.1%)
Average passenger trip (miles) 266 275 (3.3%) 266 273 (2.6%)
</TABLE>
For the Three Months Ended September 30, 1997 and 1996
For the quarter ended September 30, 1997, the Company experienced record levels
of passenger enplanements, operating revenues and net income. Operating revenues
increased to $80.3 million for the quarter ended September 30, 1997 compared to
$75.8 million for the quarter ended September 30, 1996. Net income was $7.5
million or $.74 per share for the quarter ended September 30, 1997 compared to
$5.0 million or $.50 per share for the quarter ended September 30, 1996.
Passenger revenues, which represented 83.3 percent of total operating revenues,
increased 7.2 percent to $66.9 million for the quarter ended September 30, 1997
compared to $62.4 million or 82.4 percent of total operating revenues for the
quarter ended September 30, 1996. The increase is attributable to a 4.0 percent
increase in revenue passenger miles ("RPMs") as well as a 3.0 percent increase
in yield per RPM. The increase in RPMs is primarily the result of improved
traffic generated from an all cabin-class fleet. In addition, due to the
acquisition of more Brasilia aircraft, the availability of more discount seats
has generated greater passenger demand. In spite of the availability of more
discount seats, yield per RPM increased 3.0 percent to $.342 for the quarter
ended September 30, 1997 compared to $.332 for the quarter ended September 30,
1996. The increase in yield per RPM is primarily the result of a new method of
prorating fares with Delta Air Lines, Inc. in the Los Angeles hub operations as
well as general industry-wide fare increases. As a result, the revenue per
available seat mile ("RASM") increased to $.181 for the quarter ended September
30, 1997 compared to $.178 for the quarter ended September 30, 1996.
The Company's passenger load factor decreased .6 points to 51.9 percent for the
quarter ended September 30, 1997 compared to 52.5 percent for the quarter ended
September 30, 1996. The slight reduction in load factor is due to the completion
of the transition to an all cabin-class fleet whereby the Company acquired 15
new Brasilia aircraft, which has provided more seats in the markets served.
Additionally, due to RASM increasing and cost per available seat mile ("CASM")
decreasing, the spread between RASM and CASM increased 43.7 percent to 2.3 cents
for the quarter ended September 30, 1997 compared to 1.6 cents for the quarter
ended September 30, 1996.
Total operating expenses and interest increased .9 percent to $69.1 million for
the quarter ended September 30, 1997 compared to $68.5 million for the quarter
ended September 30, 1996. As a percentage of consolidated operating revenues,
total operating expenses and interest decreased to 86.1 percent for the quarter
ended September 30, 1997, from 90.3 percent for the comparable quarter ended
September 30, 1996. For the quarter ended September 30, 1997, total airline
operating expenses and interest (excluding nonairline expenses) were 87.4
percent of airline operating revenues compared to 91.0 percent for the quarter
ended September 30, 1996. 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 lower fuel expenses, airline
operating costs per available seat mile (including interest expense)
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
decreased to $.158 for the quarter ended September 30, 1997 from $.162 for the
comparable quarter ended September 30, 1996. Factors relating to the change in
operating expenses are discussed below.
Salaries, wages and employee benefits increased as a percentage of airline
operating revenues to 24.9 percent for the quarter ended September 30, 1997
from 24.2 percent for the quarter ended September 30, 1996. The increase is
primarily attributable to higher employee incentives based on increased
profitability. The average number of full-time equivalent employees for the
quarter ended September 30, 1997 was 2,194 compared to 2,175 for the quarter
ended September 30, 1996. Salaries, wages and employee benefits per ASM
increased to 4.5 cents for the quarter ended September 30, 1997 compared to 4.3
cents for the quarter ended September 30, 1996.
Aircraft costs, including aircraft rent and depreciation, decreased as a
percentage of airline operating revenues to 18.7 percent for the quarter ended
September 30, 1997 from 19.2 percent for the quarter ended September 30, 1996.
The decrease is due to airline operating revenues increasing at a faster rate
than aircraft costs. Aircraft costs per ASM in each of the quarters ended
September 30, 1997 and 1996 was 3.4 cents.
Maintenance expense decreased as a percentage of airline operating revenues to
7.3 percent for the quarter ended September 30, 1997 compared to 7.8 percent for
the quarter ended September 30, 1996. This decrease was the result of the
acquisition and utilization of 15 new Brasilia aircraft which are more efficient
than Metroliner aircraft and due to airline operating revenues increasing at a
faster rate than maintenance expenses. Maintenance expense per ASM decreased
slightly to 1.3 cents for the quarter ended September 30, 1997 from 1.4 cents
for the quarter ended September 30, 1996.
Fuel costs decreased as a percentage of airline operating revenues to 10.3
percent for the quarter ended September 30, 1997 from 12.1 percent for the
quarter ended September 30, 1996, primarily due to a decrease in the average
fuel price per gallon to $.84 from $.93. Fuel costs per ASM decreased to 1.9
cents for the quarter ended September 30, 1997 from 2.2 cents for the quarter
ended September 30, 1996.
Other expenses, primarily consisting of commissions, landing fees, station
rentals, computer reservation system fees and hull and liability insurance,
decreased as a percentage of airline operating revenues to 24.9 percent for the
quarter ended September 30, 1997 from 26.6 percent for the quarter ended
September 30, 1996. The decrease is due to airline operating revenues increasing
at a faster rate than other expenses.
Nonairline revenues were consistent at $12.0 million for both quarters ended
September 30, 1997 and 1996. However, nonairline expenses decreased 10.9 percent
to $9.2 million for the quarter ended September 30, 1997 compared to $10.4
million for the quarter ended September 30, 1996. The decrease in expense is due
to the following: 1) selling lower priced tour packages which have lower
operating expenses associated with them, 2) a reduction in aircraft rental
expenses for Twin Otter aircraft resulting from renegotiated leases and 3) a
reduction in personnel related expenses which resulted from the average number
of full-time equivalent employees decreasing to 279 for the quarter ended
September 30, 1997 from 316 for the quarter ended September 30, 1996.
For the Six Months Ended September 30, 1997 and 1996
For the six months ended September 30, 1997, the Company experienced record
levels of passenger enplanements, operating revenues and net earnings per share.
Operating revenues increased to $152.4 million for the six months ended
September 30, 1997 compared to $146.4 million for the six months ended September
30, 1996. Net income was $11.9 million or $1.17 per share for the six months
ended September 30, 1997 compared to $9.8 million or $.98 per share for the six
months ended September 30, 1996.
Passenger revenues, which represented 84.2 percent of total operating revenues,
increased 5.1 percent to $128.3 million for the six months ended September 30,
1997 compared to $122.1 million or 83.4 percent of total operating revenues for
the six months ended September 30, 1996. The increase is attributable to a 4.6
percent increase in RPMs as well as a .3 percent increase in yield per RPM. The
increase in RPMs is primarily the result of improved traffic generated from an
all cabin-class fleet. In addition, due to the acquisition of more Brasilia
aircraft, the availability of more discount seats has generated greater
passenger demand. In spite of the availability of more discount seats, yield per
RPM increased slightly to $.333 for the six months ended September 30, 1997
compared to $.332 for the six months ended September 30, 1996. However,
available seat miles ("ASMs") increased 6.8 percent resulting in
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
a slight decrease in RASM to $.175 for the six months ended September 30, 1997
compared to $.178 for the six months ended September 30, 1996. Although RASM
decreased for the six months ended September 30, 1997, the spread between RASM
and CASM increased to 1.9 cents for the six months ended September 30, 1997
compared to 1.7 cents for the six months ended September 30, 1996.
The Company's load factor decreased 1.0 point to 51.3 percent for the six months
ended September 30, 1997 compared to 52.3 percent for the six months ended
September 30, 1996. The slight reduction in load factor is due to the completion
of the transition to an all cabin-class fleet whereby the Company acquired 15
new Brasilia aircraft, which has provided more seats in the markets served.
Total operating expenses and interest increased 2.4 percent to $135.0 million
for the six months ended September 30, 1997 compared to $131.9 for the six
months ended September 30, 1996. As a percentage of consolidated operating
revenues, total operating expenses and interest decreased to 88.6 percent for
the six months ended September 30, 1997 from 90.1 percent for the six months
ended September 30, 1996. For the six months ended September 30, 1997, total
airline operating expenses and interest (excluding nonairline expenses) were
89.3 percent of airline operating revenues compared to 90.8 percent for the six
months ended September 30, 1996. 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 lower fuel expenses, airline
operating costs per ASM (including interest expense) decreased to $.156 for the
six months ended September 30, 1997 from $.161 for the six months ended
September 30, 1996. Factors relating to the change in operating expenses are
discussed below.
Salaries, wages and employee benefits increased as a percentage of airline
operating revenues to 24.9 percent for the six months ended September 30, 1997
from 24.3 percent for the six months ended September 30, 1996. The increase is
primarily attributable to higher employee incentives based on increased
profitability. The average number of full-time equivalent employees for the six
months ended September 30, 1997 was 2,168 compared to 2,152 for the six months
ended September 30, 1996. Salaries, wages and employee benefits per ASM
increased slightly to 4.4 cents for the six months ended September 30, 1997 from
4.3 cents for the six months ended September 30, 1996.
Aircraft costs, including aircraft rent and depreciation, increased as a
percentage of airline operating revenues to 19.8 percent for the six months
ended September 30, 1997 from 19.0 percent for the six months ended September
30, 1996. The increase is due to the higher average rents for Brasilia aircraft
as compared to Metroliner aircraft. Aircraft cost per ASM increased slightly to
3.5 cents for the six months ended September 30, 1997 from 3.4 cents for the
six months ended September 30, 1996.
Maintenance expense decreased as a percentage of airline operating revenues to
7.4 percent for the six months ended September 30, 1997 from 8.6 percent for
the six months ended September 30, 1996. This decrease was the result of the
acquisition and utilization of 15 new Brasilia aircraft which are more
efficient than Metroliner aircraft. Maintenance expense per ASM decreased
slightly to 1.3 cents for the six months ended September 30, 1997 from 1.4 cents
for the six months ended September 30, 1996.
Fuel costs decreased as a percentage of airline operating revenues to 11.1
percent for the six months ended September 30, 1997 from 11.7 percent for the
six months ended September 30, 1996, primarily due to a decrease in the average
fuel price per gallon to $.85 from $.91. Fuel costs per ASM decreased to 1.9
cents for the six months ended September 30, 1997 from 2.1 cents for the six
months ended September 30, 1996.
Other expenses, primarily consisting of commissions, landing fees, station
rentals, computer reservation system fees and hull and liability insurance,
decreased as a percentage of airline operating revenues to 25.3 percent for the
six months ended September 30, 1997 from 26.2 percent for the six months ended
September 30, 1996. The decrease is due to airline operating revenue increasing
at a faster rate than other expenses.
Nonairline revenues decreased slightly to $21.2 million for the six months ended
September 30, 1997 from $21.5 million for the six months ended September 30,
1996. The slight decrease is due to selling lower priced tour packages, as part
of a competitive strategy, rather than higher priced premium tour packages.
Nonairline expenses decreased 6.4 percent to $17.4 million for the six months
ended September 30, 1997 from $18.6 million for the six months ended September
30, 1996. The decrease in expenses is due to the following: 1) selling lower
priced tour packages which have lower operating expenses associated with them,
2) a reduction in aircraft rental expenses for Twin Otter aircraft resulting
from renegotiated leases and 3) a reduction in personnel related expenses which
resulted
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
from the average number of full-time equivalent employees decreasing to 283 for
the six months ended September 30, 1997 from 311 for the six months ended
September 30, 1996.
Liquidity and Capital Resources
The Company had working capital of $58.7 million and a current ratio of 2.3:1 at
September 30, 1997 compared to working capital of $45.3 million and a current
ratio of 2.0:1 at March 31, 1997. During the first six months of fiscal 1998,
the Company invested $14.3 million in flight equipment, $5.9 million in
buildings, ground equipment and other fixed assets, reduced long-term debt by
$3.6 million and paid cash dividends of $1.0 million. The principal sources of
cash during the first six months of fiscal 1998 were $28.2 million provided by
operating activities, $11.5 million of proceeds from long-term debt and $3.3
million from the sale of securities, property and equipment, and the issuance of
common stock. These factors resulted in an $18.2 million increase in cash and
cash equivalents.
At September 30, 1997, the Company's long-term debt to equity position was 29
percent debt and 71 percent equity compared to 28 percent debt and 72 percent
equity at March 31, 1997.
The Company has options to acquire ten 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
8.25 percent at September 30, 1997.
Future Results
This Form 10-Q contains forward-looking statements within the meaning of that
term in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are inherently subject to risks and uncertainties, some of which
cannot be predicted or quantified based on current expectations.
Readers are cautioned not to place undue reliance on any forward-looking
statements contained herein, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of unexpected
events.
11
<PAGE> 12
PART II. OTHER INFORMATION
SKYWEST, INC.
Item 4: Submission of Matters to a Vote of Security Holders
The registrant held its Annual Meeting of Shareholders on August 12, 1997. The
shareholders elected the following Board of Directors to serve for one year:
<TABLE>
<CAPTION>
Name Shares Voted For
---- ----------------
<S> <C>
Jerry C. Atkin 9,155,848
Sidney J. Atkin 9,156,014
J. Ralph Atkin 9,125,046
Mervyn K. Cox 9,154,111
Ian M. Cumming 9,154,759
Steven F. Udvar-Hazy 9,155,196
Hyrum W. Smith 9,152,261
Henry J. Eyring 9,154,404
</TABLE>
The shareholders also ratified the appointment of Arthur Andersen LLP as
independent auditors for fiscal year 1998 by a vote of 9,181,625 shares for and
8,370 against.
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 September 30, 1997.
12
<PAGE> 13
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.
Registrant
November 10, 1997 BY: /s/ Bradford R. Rich
-------------------------------------
Bradford R. Rich
Executive Vice President,
Chief Financial Officer and Treasurer
13
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0
0
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