<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, 1998
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
(435) 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 4, 1998
----- -----------------------------
Common stock, no par value 24,181,421
<PAGE> 2
SKYWEST, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Part I - Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
As of June 30, 1998 and
March 31, 1998 3
Condensed Consolidated Statements of
Income For the Three Months
Ended June 30, 1998 and 1997 5
Condensed Consolidated Statements of
Cash Flows For the Three Months Ended
June 30, 1998 and 1997 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Part II - Other Information
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
SKYWEST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 118,468 $ 139,772
Available-for-sale securities 14,441 14,627
Receivables, net 15,643 10,699
Inventories 13,776 11,200
Prepaid aircraft rents 9,618 12,145
Other current assets 5,239 4,358
--------- ---------
Total current assets 177,185 192,801
--------- ---------
PROPERTY AND EQUIPMENT:
Aircraft and rotable spares 219,890 185,712
Deposits on aircraft 5,800 --
Buildings and ground equipment 46,036 42,663
Rental vehicles 4,726 3,148
--------- ---------
276,452 231,523
Less-accumulated depreciation and
amortization (103,394) (98,053)
--------- ---------
173,058 133,470
--------- ---------
OTHER ASSETS 3,954 4,135
--------- ---------
$ 354,197 $ 330,406
========= =========
</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>
June 30, March 31,
1998 1998
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 8,333 $ 8,238
Trade accounts payable 40,110 31,202
Accrued salaries, wages and benefits 6,778 7,317
Taxes other than income taxes 2,550 1,698
Air traffic liability 1,378 1,237
Income taxes payable 6,033 --
--------- ---------
Total current liabilities 65,182 49,692
--------- ---------
LONG-TERM DEBT, less current maturities 47,317 49,571
--------- ---------
DEFERRED INCOME TAXES PAYABLE 20,166 20,010
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock 157,299 155,917
Retained earnings 84,518 75,501
Treasury stock (20,285) (20,285)
--------- ---------
Total stockholders' equity 221,532 211,133
--------- ---------
$ 354,197 $ 330,406
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
SKYWEST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For The
Three Months Ended
June 30,
-----------------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATING REVENUES:
Passenger $ 80,514 $ 61,411
Freight 663 1,253
Public service and other 351 289
Nonairline 10,155 9,162
------------ ------------
91,683 72,115
------------ ------------
OPERATING EXPENSES:
Flying operations 29,173 26,303
Aircraft, traffic and passenger service 12,753 8,876
Maintenance 9,647 6,810
Promotion and sales 6,512 7,305
General and administrative 5,200 3,315
Depreciation and amortization 4,766 4,640
Nonairline 9,270 8,163
------------ ------------
77,321 65,412
------------ ------------
OPERATING INCOME 14,362 6,703
------------ ------------
OTHER INCOME AND (EXPENSE):
Interest expense (443) (520)
Interest income 1,840 708
Gain on sales of property and equipment 86 123
------------ ------------
1,483 311
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 15,845 7,014
PROVISION FOR INCOME TAXES 6,104 2,669
------------ ------------
NET INCOME $ 9,741 $ 4,345
============ ============
NET INCOME PER COMMON SHARE:
Basic $ .41 $ .22
Diluted $ .40 $ .22
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 24,064,426 20,301,034
Diluted 24,604,934 20,301,034
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
SKYWEST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Three Months Ended
June 30,
-----------------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,741 $ 4,345
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,766 4,640
Gain on sales of property and equipment (86) (123)
Maintenance expense related to disposition of rotable spares 9 79
Increase in deferred income taxes 156 853
Nonairline depreciation and amortization 1,028 1,206
Changes in operating assets and liabilities:
(Increase) decrease in receivables, net (4,944) 2,242
Increase in inventories (2,576) (904)
Decrease in other current assets 1,646 2,760
Increase in trade accounts payable 8,784 1,431
Decrease in fleet restructuring accrual -- (290)
Increase in other current liabilities 6,487 989
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 25,011 17,228
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of available-for-sale securities 186 17
Acquisition of property and equipment:
Aircraft and rotable spares (34,217) (13,196)
Deposits on aircraft and rotable spares (5,800) --
Buildings and ground equipment (3,373) (1,750)
Rental vehicles (2,188) (1,307)
Proceeds from sales of property and equipment 466 502
Increase in other assets (12) (50)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (44,938) (15,784)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 1,382 328
Proceeds from long-term debt -- 11,500
Reduction of long-term debt (2,159) (1,919)
Payment of cash dividends (600) (508)
--------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,377) 9,401
--------- ---------
(Decrease) increase in cash and cash equivalents (21,304) 10,845
Cash and cash equivalents at beginning of period 139,772 37,786
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 118,468 $ 48,631
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 385 $ 588
Income taxes 475 --
</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 months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 1999.
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, 1998 and 1997, 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 recorded a net current tax asset of
$2.2 million and a noncurrent deferred tax liability of $20.2 million at June
30, 1998.
7
<PAGE> 8
Note D - Net Income 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. The
calculation of the weighted average number of common shares outstanding is as
follows:
<TABLE>
<CAPTION>
For the
Three Months Ended
June 30,
----------------------
1998 1997
------ ------
(In thousands):
<S> <C> <C>
Weighted average number of shares for basic net income
per common share 24,064 20,301
Effect of outstanding stock options 541 --
------ ------
Weighted average number of shares for diluted net income
per common share 24,605 20,301
====== ======
</TABLE>
Note E - United Agreements
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. At the
same time, SkyWest has also re-affirmed its Delta Air Lines, Inc. ("Delta")
marketing agreement with a modification to its Delta Air Lines 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 would operate as the United Express
carrier at United's San Francisco hub, which began June 1, 1998. On February 9,
1998, SkyWest executed an amendment to the United Express Agreement to provide
service as United Express in United's Portland and Seattle/Tacoma markets and in
additional Los Angeles markets which began April 23, 1998. The related financial
impact for the quarter ended June 30, 1998, has been included in the
accompanying Condensed Consolidated Financial Statements.
Note F - Stock Dividend
On May 5, 1998, the Company's Board of Directors declared a 100 percent stock
dividend (one share for each share outstanding) payable to stockholders of
record on May 20, 1998. The dividend was distributed on June 8, 1998. The
Company paid cash in lieu of issuing fractional shares. All common shares and
per share information in the accompanying Condensed Consolidated Financial
Statements have been retroactively adjusted to reflect this stock dividend.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Operating Statistics
<TABLE>
<CAPTION>
For the
Three Months Ended
June 30,
--------------------------------------------------------
1998 1997 % change
---- ---- --------
<S> <C> <C> <C>
Passengers carried 1,017,312 712,353 42.8%
Revenue passenger miles (000s) 215,726 189,040 14.1%
Available seat miles (000s) 393,755 372,901 5.6%
Passenger load factor 54.8% 50.7% 4.1 pts
Passenger breakeven load factor 45.9% 46.3% (.4) pts
Yield per revenue passenger mile 37.3(cent) 32.5(cent) 14.8%
Revenue per available seat mile 20.7(cent) 16.9(cent) 22.5%
Cost per available seat mile 17.3(cent) 15.4(cent) 12.3%
Average passenger trip (miles) 212 265 (20.0%)
</TABLE>
For the Three Months Ended June 30, 1998 and 1997:
For the quarter ended June 30, 1998, the Company enplaned a record number of
passengers and reported record consolidated net income of $9.7 million, or $.40
diluted net income per share, compared to $4.3 million, or $.22 diluted net
income per share, for the quarter ended June 30, 1997. Consolidated operating
revenues increased 27.1 percent to $91.7 million for the quarter ended June 30,
1998 from $72.1 million for the quarter ended June 30, 1997.
Passenger revenues, which represented 87.8 percent of consolidated operating
revenues, increased 31.1 percent to $80.5 million for the quarter ended June 30,
1998 from $61.4 million, or 85.2 percent of consolidated operating revenues for
the quarter ended June 30, 1997. The increase was primarily the result of a 14.1
percent increase in revenue passenger miles ("RPMs") as well as a 14.8 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. In addition, SkyWest began operating as United
Express in Portland, Oregon and Seattle/Tacoma, Washington on April 23, 1998 and
in San Francisco, California beginning June 1, 1998. This new code-sharing
relationship has 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. SkyWest has also previously
acquired a state-of-the-art revenue management and control system which utilizes
historical booking data to optimize revenue. Together these factors have
resulted in a 22.5 percent increase in revenue per available seat mile to
20.7(cent) for the quarter ended June 30, 1998 from 16.9(cent) for the quarter
ended June 30, 1997.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Passenger load factor increased 4.1 points to 54.8 percent for the quarter ended
June 30, 1998 from 50.7 percent for the quarter ended June 30, 1997. The
increase in load factor is due primarily to the new code-sharing relationship
with United whereby SkyWest has almost a 90 percent share of the San Francisco
regional market and is experiencing high load factors on United flights
connecting to and from San Francisco. SkyWest has also experienced an increase
in load factors in the Los Angeles market place simply as a result of using the
United code. As a result of reallocating regional jets, load factors have also
increased in certain jet markets.
Total operating expenses and interest increased 17.9 percent to $77.8 million
for the quarter ended June 30, 1998 from $65.9 million for the quarter ended
June 30, 1997. As a percentage of consolidated operating revenues, total
operating expenses and interest decreased to 84.8 percent for the quarter ended
June 30, 1998 from 91.4 percent for the comparable quarter ended June 30, 1997.
For the quarter ended June 30, 1998, total airline operating expenses and
interest (excluding nonairline expenses) were 83.8 percent of airline operating
revenues compared to 91.4 percent for the comparable quarter ended June 30,
1997. Primarily as a result of decreasing stage lengths, airline operating costs
per ASM (including interest expense) increased to 17.3(cent) for the quarter
ended June 30, 1998 from 15.4(cent) for the comparable quarter ended June 30,
1997. Factors relating to the changes in operating expenses and interest are
discussed below.
Salaries, wages and employee benefits increased as a percentage of airline
operating revenues to 26.3 percent for the quarter ended June 30, 1998 from 24.9
percent for the quarter ended June 30, 1997. The average number of full-time
equivalent employees for the quarter ended June 30, 1998 was 2,341, compared to
2,170 for the quarter ended June 30, 1997. The increase in number of personnel
was due to the United Express expansion. Salaries, wages and employee benefits
per ASM increased to 5.4(cent) for the quarter ended June 30, 1998 from
4.2(cent) for the quarter ended June 30, 1997, primarily due to incentive
payments to airline employees which are based on the airline's profitability and
the decrease in average passenger trip lengths.
Aircraft costs, including aircraft rent and depreciation, decreased as a
percentage of airline operating revenues to 18.5 percent for the quarter ended
June 30, 1998 from 20.9 percent for the quarter ended June 30, 1997. The
decrease is due to airline operating revenues increasing at a faster rate than
aircraft costs. Aircraft costs per ASM increased slightly to 3.8(cent) for the
quarter ended June 30, 1998 from 3.5(cent) for the quarter ended June 30, 1997.
Maintenance expense increased as a percentage of airline operating revenues to
8.4 percent for the quarter ended June 30, 1998 from 7.5 percent for the quarter
ended June 30, 1997. The increase was the result of an increase in flight
hours, which results in higher maintenance expense as well as maintenance
expenses incurred on used Brasilia aircraft which were acquired in connection
with the United Express expansion. Maintenance expense per ASM increased to
1.7(cent) for the quarter ended June 30, 1998 from 1.3(cent) for the quarter
ended June 30, 1997.
Fuel costs decreased as a percentage of airline operating revenues to 7.6
percent for the quarter ended June 30, 1998 from 12.0 percent for the quarter
ended June 30, 1997 primarily due to a decrease in the average fuel price per
gallon. The average fuel price per gallon was $.66 for the quarter ended June
30, 1998 compared to $.87 per gallon for the quarter ended June 30, 1997. Fuel
cost per ASM decreased to 1.6(cent) for the quarter ended June 30, 1998 from
2.0(cent) for the quarter ended June 30, 1997.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
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 22.6 percent for the
quarter ended June 30, 1998 from 25.7 percent for the quarter ended June 30,
1997. The decrease is primarily the result of the airline not incurring
commissions on United Express contract related passenger revenues.
Nonairline revenues increased 10.8 percent to $10.2 million for the quarter
ended June 30, 1998 from $9.2 million for the quarter ended June 30, 1997. The
increase is primarily due to selling a higher volume of lower priced tour
packages, as part of a competitive strategy, rather than lower volumes of higher
priced premium tour packages as had been sold in the past. Nonairline expenses
increased 13.6 percent to $9.3 million for the quarter ended June 30, 1998 from
$8.2 million for the quarter ended June 30, 1997 due to higher passenger
volumes. Additionally, the average number of full-time equivalent employees was
270 for the quarter ended June 30, 1998 compared to 256 for the quarter ended
June 30, 1997.
Liquidity and Capital Resources
The Company had working capital of $112.0 million and a current ratio of 2.7:1
at June 30, 1998 compared to working capital of $143.1 million and a current
ratio of 3.9:1 at March 31, 1998. The decrease in working capital is primarily
due to the interim financing on four Brasilia aircraft, delivered for the United
Express expansion, using internal funds. Subsequent to June 30, 1998, the
interim financing has been replaced by long-term financing arrangements. During
the quarter ended June 30, 1998, the principal sources of funds were $25.0
million generated from operations, $1.4 million from the issuance of common
stock and $.5 million of proceeds from the sale of property and equipment.
During the quarter ended June 30, 1998, the Company invested $34.2 million in
flight equipment, $5.8 million in aircraft deposits, $3.4 million in buildings
and ground equipment, $2.1 million in rental vehicles, reduced long-term debt by
$2.1 million and paid cash dividends of $.6 million. These factors resulted in a
decrease of $21.3 million in cash and cash equivalents.
At June 30, 1998, the Company's long-term debt to equity position was 18 percent
debt and 82 percent equity compared to 19 percent debt and 81 percent equity at
March 31, 1998.
During the quarter ended June 30, 1998, SkyWest took delivery of 20 Brasilia
aircraft consisting of four new and 16 used. As of June 30, 1998, SkyWest had
agreed to purchase 14 Brasilia aircraft and related spare parts and support
equipment at an aggregate cost of approximately $112.0 million, including
estimated cost escalations. SkyWest has also agreed to acquire seven used
Brasilia aircraft. SkyWest also has options to acquire 30 additional Brasilia
aircraft at fixed prices (subject to cost escalation and delivery schedules)
exercisable through fiscal 2000 and options to acquire an additional ten CRJs,
exercisable at any time.
As of June 30, 1998, in connection with SkyWest's expansion in Los Angeles, San
Francisco and the Pacific Northwest, SkyWest has acquired 24 Brasilia aircraft.
The remaining aircraft, required for the expansion, are expected to be delivered
prior to October 1, 1998. Depending on the state of the aircraft financing
market at the time of delivery of these aircraft, management will determine
whether to purchase these Brasilia aircraft or acquire them through third-party,
long-term loans or lease arrangements.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
SkyWest originally anticipated that the United Express expansion would require
capital expenditures of approximately $24.0 million consisting of additional
ground and maintenance facilities, support equipment and spare parts inventory.
As of June 30, 1998, SkyWest had expended $12.5 million associated with these
items and anticipates that an additional $3.0 million will be expended related
to the expansion.
The Company 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. As of June 30, 1998, SkyWest leased 67 aircraft and Scenic Airlines,
Inc. ("Scenic") leased nine aircraft under leases with an average remaining term
of approximately 9.3 years. Future minimum lease payments due under all
long-term operating leases were approximately $522.9 million at June 30, 1998.
At June 30, 1998, the Company had outstanding long-term debt, including current
maturities, of approximately $55.6 million. Of the long-term debt, $45.7 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 $6.8 million of the $45.7 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 $45.7 million of
long-term debt to an average effective rate of approximately 4.0 percent as of
June 30, 1998. The debt is payable in either monthly or quarterly installments
through 2003. The remaining $9.9 million of long-term debt was incurred to
purchase ten VistaLiner aircraft operated by Scenic.
The Company spent approximately $5.7 million for nonaircraft capital
expenditures during the quarter ended June 30, 1998, consisting primarily of
aircraft engine overhauls, 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 at June 30, 1998. 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 expenditures,
lease payment and debt service requirements for at least the next 12 months.
Forward-Looking Statements
This Form 10-Q contains forward-looking statements and information that are
based on management's belief, as well as assumptions made by and information
currently available to management. When used in this document, the words
"anticipate," "estimate," "project," "expect," and similar expressions are
intended to identify forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties and
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, projected or expected. Among the
key factors that may have a direct bearing on the Company's operating results
include, among other things, changes in SkyWest's code-sharing relationships,
fluctuations in the economy and the demand for air travel, the degree and nature
of competition and SkyWest's ability to expand services in new and existing
markets and to maintain profit margins in the face of pricing pressures.
Year 2000 Compliance
The Company is currently modifying computer systems and application programs for
year 2000 compliance, with project completion scheduled for March 31, 1999. The
Company believes that the cost to modify its systems or applications will not
have a material effect on its financial position or results of operations. Any
expenditures will be funded through operating cash flows while any costs for new
software will be capitalized and amortized over the software's useful life.
Although the Company is working cooperatively with third parties with systems
upon which the Company must rely, the Company can not give any assurances that
the systems of other parties will be year 2000 compliant on a timely basis.
Systems operated by others which the Company would use and/or rely on would
include: Federal Aviation Administration Air Traffic Control, computer
reservation systems for travel agent sales as well as Delta and United
reservation, passenger check-in and ticketing systems. The Company's business,
financial condition and/or results of operations could be materially adversely
affected by the failure of its system and applications or those operated by
others.
13
<PAGE> 14
PART II. OTHER INFORMATION
SKYWEST, INC.
Item 5: Other Information.
If a shareholder desiring to raise a proposal at the next annual meeting of
shareholders does not seek inclusion of the proposal in the Company's proxy
statement and fails to notify the Company at least 45 days prior to the month
and day of mailing of the prior year's proxy statement, management proxies will
be allowed to use their discretionary voting authority when the proposal is
raised at the annual meeting, without any discussion of the proposal in the
proxy statement.
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, 1998.
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 4, 1998 BY: /s/ Bradford R. Rich
---------------------------------
Bradford R. Rich
Executive Vice President,
Chief Financial Officer and
Treasurer
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 118,468
<SECURITIES> 14,441
<RECEIVABLES> 15,754
<ALLOWANCES> 112
<INVENTORY> 13,776
<CURRENT-ASSETS> 14,857
<PP&E> 276,452
<DEPRECIATION> 103,394
<TOTAL-ASSETS> 354,197
<CURRENT-LIABILITIES> 65,182
<BONDS> 47,317
0
0
<COMMON> 137,014
<OTHER-SE> 84,518
<TOTAL-LIABILITY-AND-EQUITY> 354,197
<SALES> 91,683
<TOTAL-REVENUES> 91,683
<CGS> 0
<TOTAL-COSTS> 77,321
<OTHER-EXPENSES> 0
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</TABLE>
