<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 December 31, 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 January 16, 1998
----- -------------------------------
Common stock, no par value 10,317,152
<PAGE> 2
SKYWEST, INC.
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
as of December 31, 1997 and
March 31, 1997 3
Condensed Consolidated Statements of
Income for the Three Months and Nine
Months Ended December 31, 1997 and 1996 5
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
December 31, 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 6. Exhibits and Reports on Form 8-K 12
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
SKYWEST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
------------ ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 70,418 $ 37,786
Available-for-sale securities 17,887 17,970
Receivables, net 7,185 10,851
Inventories 11,343 9,987
Prepaid aircraft rents 4,646 8,612
Other current assets 4,910 5,089
-------- --------
Total current assets 116,389 90,295
-------- --------
PROPERTY AND EQUIPMENT:
Aircraft and rotable spares 181,167 171,239
Buildings and ground equipment 48,829 43,508
Rental vehicles 3,488 3,291
-------- --------
233,484 218,038
Less accumulated depreciation and
amortization (93,187) (80,295)
-------- --------
140,297 137,743
-------- --------
OTHER ASSETS 4,247 4,860
-------- --------
$260,933 $232,898
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
SKYWEST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands)
(Unaudited)
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
------------ ---------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 8,429 $ 6,399
Trade accounts payable 30,823 29,213
Accrued salaries, wages and benefits 5,543 6,095
Taxes other than income taxes 1,482 1,537
Air traffic liability 1,382 1,488
Fleet restructuring accrual -- 290
-------- --------
Total current liabilities 47,659 45,022
-------- --------
LONG-TERM DEBT, less current maturities 51,248 47,337
-------- --------
DEFERRED INCOME TAXES PAYABLE 19,485 15,987
-------- --------
STOCKHOLDERS' EQUITY:
Common stock 91,392 89,146
Retained earnings 71,434 55,691
Treasury stock (20,285) (20,285)
-------- --------
Total stockholders' equity 142,541 124,552
-------- --------
$260,933 $232,898
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
SKYWEST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------------ ------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Passenger $ 65,472 $ 55,684 $ 193,783 $ 177,768
Freight 756 1,050 3,099 3,120
Public service and other 294 308 852 980
Nonairline 6,744 6,609 27,949 28,171
----------- ----------- ----------- -----------
Total operating revenues 73,266 63,651 225,683 210,039
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Flying operations 26,765 26,587 78,550 75,536
Aircraft, traffic and passenger service 9,933 9,563 28,464 27,234
Maintenance 7,752 6,804 21,721 21,594
Promotion and sales 5,123 7,119 20,307 22,155
Depreciation and amortization 4,789 4,742 14,169 13,644
General and administrative 3,794 2,575 11,006 9,320
Nonairline 7,358 7,997 24,763 26,615
----------- ----------- ----------- -----------
Total operating expenses 65,514 65,387 198,980 196,098
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 7,752 (1,736) 26,703 13,941
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (467) (311) (2,037) (1,507)
Interest income 1,071 614 2,681 1,853
Gain on sales of property and equipment 385 98 541 339
----------- ----------- ----------- -----------
Total other income, net 989 401 1,185 685
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE (PROVISION) BENEFIT
FOR INCOME TAXES 8,741 (1,335) 27,888 14,626
(PROVISION) BENEFIT FOR INCOME TAXES (3,319) 514 (10,611) (5,623)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 5,422 $ (821) $ 17,277 $ 9,003
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE:
Basic $ 0.53 $ (0.08) $ 1.70 $ 0.89
Diluted 0.52 (0.08) 1.68 0.89
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 10,207 10,096 10,179 10,073
Diluted 10,427 10,114 10,297 10,104
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
SKYWEST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,277 $ 9,003
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,169 13,644
Nonairline depreciation and amortization 3,728 2,643
Gain on sales of property and equipment (541) (339)
Maintenance expense related to disposition of rotable spares 565 82
Increase in deferred income taxes 3,498 1,414
Amortization of deferred credits -- (1,614)
Tax benefit from exercise of common stock options -- 56
Changes in operating assets and liabilities:
Decrease in receivables 3,666 4,682
Increase in inventories (1,356) (1,564)
Decrease in other current assets 4,145 1,740
Increase in trade accounts payable 521 1,979
Increase (decrease) in other current liabilities 78 (311)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 45,750 31,415
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of available-for-sale securities 83 628
Acquisition of property and equipment:
Aircraft and rotable spares (17,259) (7,611)
Buildings and ground equipment (5,383) (3,609)
Rental vehicles (2,146) (2,850)
Proceeds from sales of property and equipment 4,880 1,538
Decrease (increase) in other assets 46 (184)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (19,779) (12,088)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 11,500 --
Issuance of common stock 2,246 708
Payment of cash dividends (1,526) (1,308)
Reduction of long-term debt (5,559) (4,797)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 6,661 (5,397)
-------- --------
Increase in cash and cash equivalents 32,632 13,930
Cash and cash equivalents at beginning of period 37,786 24,529
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 70,418 $ 38,459
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,962 $ 1,431
Income taxes 5,757 3,944
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
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 nine months ended December 31, 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 carried at the lower of aggregate cost or
market value.
Note C - Income Taxes
For the three and nine months ended December 31, 1997 and 1996, the Company
provided for income taxes based upon the estimated annualized effective tax
rate. Under the provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes", the Company has recorded a net current tax
asset of $2.4 million and a net noncurrent deferred tax liability of $19.5
million at December 31, 1997.
Note D - Net Income (Loss) Per Common Share
In accordance with Statement of Financial Accounting Standards No. 128 "Earnings
per Share," which became effective December 15, 1997, basic net income per
common share was computed by dividing net income by the weighted average number
of common shares outstanding during the period. Diluted net income per common
share takes into consideration the effects of outstanding stock options
outstanding. The calculation of the weighted average number of common shares
outstanding is as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended December 31, Ended December 31,
------------------- ------------------
1997 1996 1997 1996
------- ------ ------ -----
<S> <C> <C> <C> <C>
(In thousands):
Weighted average number of shares for basic net income
per common share.......................................................... 10,207 10,096 10,179 10,073
Stock options............................................................... 220 18 118 31
------ ------ ------ ------
Weighted average number of shares for diluted net income per
common share.............................................................. 10,427 10,114 10,297 10,104
====== ====== ====== ======
</TABLE>
Note E - United Airlines Agreement
On July 23, 1997, SkyWest Airlines, Inc. ("SkyWest") and United Airlines, Inc.
("United") announced a marketing agreement under which SkyWest has operated as
United Express in Los Angeles, Las Vegas, Phoenix and various intra-California
markets since October 1, 1997. The United Express code-share arrangement
provides extensive connecting opportunities for SkyWest/United Express customers
at United's Los Angeles hub where United is the largest major carrier. The
related financial impact for the quarter and nine months ended December 31,
1997, has been included in the accompanying Condensed Consolidated Financial
Statements. At the same time, SkyWest has also reaffirmed its Delta Air Lines,
Inc. ("Delta") marketing agreement with a modification to its Delta Connection
contract which allows for a reduced number of SkyWest flights at Los Angeles
which is more consistent with the current level of Delta flights into and out of
Los Angeles. The modified agreement also strengthens SkyWest's relationship with
Delta in Salt Lake City. On January 19, 1998, SkyWest and United executed a
United Express Agreement for United's Los Angeles hub and an addendum to the
United Express Agreement pursuant to which SkyWest will operate as the United
Express carrier at United's San Francisco hub, beginning June 1, 1998.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
<TABLE>
<CAPTION>
Airline Operating Data
------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
December 31, December 31,
---------------------------------------- -------------------------------------------
1997 1996 % Change 1997 1996 % Change
------- ------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Passengers carried 781,034 639,599 22.1% 2,228,741 1,986,371 12.2%
Revenue passenger miles (000s) 182,645 172,235 6.0% 567,437 540,043 5.1%
Available seat miles (000s) 363,137 351,044 3.4% 1,113,486 1,053,935 5.7%
Passenger load factor 50.3% 49.1% 1.2 pts 51.0% 51.2% (0.2) pts
Passenger breakeven load factor 44.2% 49.4% (5.2) pts 45.3% 48.2% (2.9) pts
Yield per revenue passenger mile 35.8c 32.3c 10.8% 34.2c 32.9c 4.0%
Revenue per available seat mile 18.3c 16.2c 13.0% 17.8c 17.3c 2.9%
Cost per available seat mile 16.1c 16.4c (1.8%) 15.8c 16.2c (2.5%)
Average passenger trip (miles) 234 269 (13.0%) 255 272 (6.3%)
</TABLE>
Three Months Ended December 31, 1997 Compared to Three Months Ended December 31,
1996
For the three months ended December 31, 1997, the Company enplaned a record
number of passengers and reported record consolidated net income of $5.4
million, or $0.52 diluted net income per share, compared to a net loss of ($0.8)
million or ($0.08) net loss per share for the three months ended December 31,
1996. Consolidated operating revenues increased 15.0 percent to $73.3 million
for the three months ended December 31, 1997, compared to $63.7 million for the
three months ended December 31, 1996.
Passenger revenues, which represented 89.4 percent of total consolidated
operating revenues, increased 17.6 percent to $65.5 million for the three months
ended December 31, 1997, compared to $55.7 million or 87.5 percent of total
consolidated operating revenues for the three months ended December 31, 1996.
The increase was primarily the result of a 6.0 percent increase in revenue
passenger miles ("RPMs") as well as a 10.8 percent increase in yield per RPM.
SkyWest entered into a new code-sharing relationship with United and began
operating as United Express in Los Angeles, California beginning October 1, 1997
which resulted in both increased RPMs and increased yield per RPM. The increased
yield per RPM also resulted from an increase in SkyWest's portion of prorated
fares with Delta in certain markets. Additionally, the Company acquired a
state-of-the-art revenue management and control system which utilizes historical
booking data and trends to optimize revenue. These factors combined have
resulted in an increase in revenue per available seat mile to 18.3c for the
three months ended December 31, 1997, compared to 16.2c for the same period
ended December 31, 1996.
Management has continued its efforts to reduce airline operating costs per
available seat mile and as a percentage of airline revenues. For the three
months ended December 31, 1997, total operating expenses and interest were 87.8
percent of airline operating revenues compared to 101.2 percent for the quarter
ended December 31 1996.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Salaries, wages and employee benefits increased as a percentage of airline
operating revenues to 27.5 percent for the three months ended December 31, 1997,
from 26.1 percent for the three months ended December 31, 1996. The average
number of full-time equivalent employees for the three months ended December 31,
1997 was 1,947, compared to 1,859 for the three months ended December 31, 1996.
The increase in the number of personnel was due to hiring flight attendants and
customer service personnel to support increased operations. Salaries, wages, and
employee benefits per ASM increased to 4.7c for the three months ended December
31, 1997, compared to 4.2c for the three months ended December 31, 1996,
primarily due to increased employee incentives and profit sharing.
Aircraft expenses, including aircraft rent and depreciation, decreased as a
percentage of airline operating revenues to 21.2 percent for the three months
ended December 31, 1997, from 22.8 percent for the three months ended December
31, 1996. Aircraft costs per ASM decreased slightly to 3.6c for the three months
ended December 31, 1997, compared to 3.7c for the three months ended December
31, 1996.
Maintenance expense increased as a percentage of airline operating revenues to
8.8 percent for the three months ended December 31, 1997, compared to 8.3
percent for the three months ended December 31, 1996. This increase was
attributed to jet aircraft coming off warranty resulting in the Company
expending more on parts and repairs. Maintenance expense per ASM increased to
1.5c for the three months ended December 31, 1997, compared to 1.4c for the
three months ended December 31, 1996.
Fuel expenses decreased as a percentage of airline operating revenues to 12.2
percent for the three months ended December 31, 1997, from 14.2 percent for the
three months ended December 31, 1996, due primarily to a decrease in the average
fuel price per gallon to $0.83 from $1.00. Fuel expenses per ASM decreased to
2.1c for the three months ended December 31, 1997, compared to 2.3c for the
three months ended December 31, 1996.
Other expenses, consisting primarily of commissions, landing fees, station
rentals, computer reservation system fees and hull and liability insurance,
decreased as a percentage of airline operating revenues to 23.6 percent for the
three months ended December 31, 1997, from 29.3 percent for the three months
ended December 31, 1996. The decrease is due primarily to SkyWest not incurring
certain commissions on contract-related passenger revenues.
Nonairline revenues, generated from the operations of Scenic Airlines, Inc.
("Scenic") and National Parks Transportation, Inc. ("NPT"), increased 2.0
percent to $6.7 million for the three months ended December 31, 1997 from $6.6
million for the three months ended December 31, 1996. Nonairline expenses
decreased 8.0 percent to $7.4 million for the three months ended December 31,
1997 from $8.0 million for the three months ended December 31, 1996. The
decrease in expense is primarily due to the renegotiation of aircraft leases.
Additionally, the average number of full-time equivalent employees decreased to
261 for the three months ended December 31, 1997 from 301 for the three months
ended December 31, 1996.
Nine Months Ended December 31, 1997 Compared To Nine Months Ended December 31,
1996
For the nine months ended December 31, 1997, SkyWest enplaned a record
number of passengers and the Company reported record consolidated net income of
$17.3 million, or $1.68 diluted net income per share, compared to $9.0 million,
or $0.89 per share, for the nine months ended December 31, 1996. Consolidated
operating revenues increased 7.4 percent to a record $225.7 million for the nine
months ended December 31, 1997, compared to $210.0 million for the comparable
period in 1996.
Passenger revenues, which represented 85.9 percent of total consolidated
operating revenues, increased 9.0 percent to $193.8 million for the nine months
ended December 31, 1997, compared to $177.8 million or 84.6 percent of total
consolidated operating revenues for the nine months ended December 31, 1996. The
increase resulted primarily from a 5.1 percent increase in RPMs as well as a 4.0
percent increase in yield per RPM. SkyWest entered into a new code-sharing
relationship with United and began operating as United Express in Los Angeles,
California beginning October 1, 1997 which resulted in both increased RPMs and
increased yield per RPM. The increased yield per RPM also resulted from an
increase in SkyWest's portion of prorated fares with Delta in certain markets.
Additionally, SkyWest acquired a new state-of-the-art revenue management and
control system which utilizes historical booking data and trends to optimize
revenue. The combination of these factors was principally responsible for an
increase in revenue per ASM to 17.8c for the nine months ended December 31,
1997, compared to 17.3c for the same period of 1996.
Management has continued its efforts to reduce airline operating costs per
ASM and as a percentage of airline operating revenues. For the nine months ended
December 31, 1997, total airline expenses and interest were 88.8 percent of
airline operating revenues compared to 94.0 percent for the nine months ended
December 31, 1996.
Salaries, wages and employee benefits increased as a percentage of airline
operating revenues to 25.2 percent for the nine months ended December 31, 1997,
from 24.8 percent for the nine months ended December 31, 1996. The average
number of full-time equivalent employees for the nine months ended December 31,
1997, was 1,916 compared to 1,847 for the nine months ended December 31, 1996.
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 increased slightly to 4.5c for the nine months ended
December 31, 1997, compared to 4.3c for the nine months ended December 31, 1996,
due primarily to increased employee incentives and profit sharing.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Aircraft expenses, including aircraft rent and depreciation, decreased as a
percentage of airline operating revenues to 19.8 percent for the nine months
ended December 31, 1997, from 20.2 percent for the nine months ended December
31, 1996. Aircraft costs per ASM were consistent at 3.5c for the nine months
ended December 31, 1997 and 1996.
Maintenance expense decreased as a percentage of airline operating revenues
to 7.7 percent for the nine months ended December 31, 1997, from 8.5 percent for
the nine months ended December 31, 1996. This decrease resulted primarily from
the acquisition and utilization of 15 new Brasilia aircraft, which are more
efficient than Metroliner aircraft. Maintenance expense per ASM decreased
slightly to 1.4c for the nine months ended December 31, 1997, from 1.5c for the
nine months ended December 31, 1996.
Fuel expenses decreased as a percentage of airline operating revenues to
11.2 percent for the nine months ended December 31, 1997, from 12.4 percent for
the nine months ended December 31, 1996, due primarily to a decrease in the
average fuel price per gallon to $0.85 from $0.94. Fuel expenses per ASM
decreased to 2.0c for the nine months ended December 31, 1997, from 2.1c for the
nine months ended December 31, 1996.
Other expenses, consisting primarily of commissions, landing fees, station
rentals, computer reservation system fees and hull and liability insurance,
decreased as a percentage of airline operating revenues to 24.2 percent for the
nine months ended December 31, 1997, from 27.2 percent for the nine months ended
December 31, 1996. The decrease is due primarily to SkyWest not incurring
certain commissions on contract-related passenger revenues.
Nonairline revenues, generated from the operations of Scenic and NPT,
decreased 0.8 percent to $27.9 million for the nine months ended December 31,
1997 from $28.2 million for the nine months ended December 31, 1996. Nonairline
expenses and interest decreased 4.4 percent to $25.4 million for the nine months
ended December 31, 1997, compared to $26.6 million for the nine months ended
December 31, 1996. The decrease was due to implementation of cost control
measures and the restructuring of the financing of flight equipment and
facilities.
Liquidity and Capital Resources
The Company had working capital of $68.7 million and a current ratio of
2.4:1 at December 31, 1997, compared to working capital of $45.3 million and a
current ratio of 2.0:1 at March 31, 1997. During the first nine months of fiscal
1998, the Company invested $17.3 million in flight equipment, $7.5 million in
buildings, ground equipment and other fixed assets, reduced long-term debt by
$5.6 million and paid cash dividends of $1.5 million. The principal sources of
cash during the first nine months of fiscal 1998 were $45.8 million provided by
operating activities, $11.5 million of proceeds from long-term debt and $7.3
million from the sale of marketable securities, property and equipment, and the
issuance of common stock resulting from exercises of employee stock options.
These factors resulted in a $32.6 million increase in cash and cash equivalents
from $37.8 million as of March 31, 1997 to $70.4 million as of December 31,
1997.
SkyWest has options to acquire ten additional Brasilias and ten additional
CR's at fixed prices (subject to cost escalation and delivery schedules). The
Brasilia options are exercisable through fiscal 1999 and the CRJ Options are
exercisable at any time with no expiration.
In connection with SkyWest's expansion into San Francisco, SkyWest expects
to acquire an additional 17 Brasilias, related spare parts inventory and support
facilities and equipment. Depending upon the outcome of current aircraft
acquisition negotiations, SkyWest expects to acquire a combination of new and
used Brasilias. The deliveries are expected to be scheduled between February and
June 1998. The Company also anticipates that SkyWest will incur costs of
approximately $12.0 million associated with the acquisition of additional ground
and maintenance facilities, support equipment and spare parts inventory related
to the San Francisco expansion.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Depending in large part upon the outcome of current aircraft acquisition
negotiations, the mix of new and used Brasilia aircraft, as well as the state of
the aircraft financing market at the time, management will determine whether to
purchase these Brasilia aircraft or acquire the aircraft through third-party,
long-term loans or lease arrangements.
SkyWest has significant long-term lease obligations primarily relating to
its aircraft fleet. These leases are classified as operating leases and
therefore are not reflected as liabilities in the Company's consolidated balance
sheets. At December 31, 1997, SkyWest leased 44 SkyWest aircraft and eight
Scenic aircraft under leases with an average remaining term of approximately 9.6
years. Future minimum lease payments due under all long-term operating leases
were approximately $457.4 million at December 31, 1997.
At December 31, 1997, the Company had outstanding long-term debt, including
current maturities, of approximately $59.7 million. Of the long-term debt, $48.8
million was incurred in connection with the acquisition of Brasilia aircraft and
is subject to subsidy payments through the export support program of the
Federative Republic of Brazil. The interest rates on $11.0 million of the $48.8
million of long-term debt are floating based on one month and three month LIBOR.
The subsidy payments reduced the stated interest rates on the $48.8 million of
long-term debt to an average effective rate of approximately 4.0 percent as of
December 31, 1997. The debt is payable in either quarterly or semi-annual
installments through January 2006. The remaining $10.9 million of long-term debt
was incurred to purchase ten VistaLiner aircraft operated by Scenic. These ten
aircraft were previously financed under long-term operating lease arrangements
and were purchased in October 1997.
The Company spent approximately $13.3 million for nonaircraft capital
expenditures during the nine months ended December 31, 1997, consisting
primarily of aircraft engine overhauls, aircraft modifications to be made
pursuant to industry-wide FAA directives, buildings and ground equipment and
rental vehicles.
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 December 31, 1997. The Company believes that, in the absence
of unusual circumstances, the working capital available to the Company will be
sufficient to meet its present requirements, including expansion, capital
expenditure, lease payment and debt service requirements for at least the next
12 months.
11
<PAGE> 12
PART II. OTHER INFORMATION
SKYWEST, INC.
Item 6:
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 December 31, 1997.
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
January 21, 1998 BY: /s/ Bradford R. Rich
-------------------------------------
Bradford R. Rich
Executive Vice President,
Chief Financial Officer and Treasurer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SKYWEST, INC. FOR THE THREE MONTH PERIOD ENDED DECEMBER
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 70,418
<SECURITIES> 17,887
<RECEIVABLES> 7,246
<ALLOWANCES> 61
<INVENTORY> 11,343
<CURRENT-ASSETS> 116,389
<PP&E> 233,484
<DEPRECIATION> 93,187
<TOTAL-ASSETS> 260,933
<CURRENT-LIABILITIES> 47,659
<BONDS> 51,248
0
0
<COMMON> 71,107
<OTHER-SE> 71,434
<TOTAL-LIABILITY-AND-EQUITY> 260,933
<SALES> 73,266
<TOTAL-REVENUES> 73,266
<CGS> 0
<TOTAL-COSTS> 65,514
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 467
<INCOME-PRETAX> 8,741
<INCOME-TAX> 3,319
<INCOME-CONTINUING> 5,422
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,422
<EPS-PRIMARY> .53
<EPS-DILUTED> .52
</TABLE>
