0000950149-95-000508.txt : 19950815 0000950149-95-000508.hdr.sgml : 19950815 ACCESSION NUMBER: 0000950149-95-000508 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SKYWEST INC CENTRAL INDEX KEY: 0000793733 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 870292166 STATE OF INCORPORATION: UT FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14719 FILM NUMBER: 95563086 BUSINESS ADDRESS: STREET 1: 444 S RIVER RD CITY: ST GEORGE STATE: UT ZIP: 84770 BUSINESS PHONE: 8016343000 MAIL ADDRESS: STREET 1: 444 SOUTH RIVER ROAD CITY: ST GEORGE STATE: UT ZIP: 84770 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1995 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, 1995 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, 1995 ----- ----------------------------- Common stock, no par value 10,322,132
2 SKYWEST, INC. TABLE OF CONTENTS Part I - Financial Information Item 1. Financial Statements: Condensed Consolidated Balance Sheets As of June 30, 1995 and March 31, 1995 3 Condensed Consolidated Statements of Income For the Three Months Ended June 30, 1995 and 1994 5 Condensed Consolidated Statements of Cash Flows For the Three Months Ended June 30, 1995 and 1994 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 6. Exhibits and Reports on Form 8-K 12
2 3 PART I. FINANCIAL INFORMATION SKYWEST, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited) ASSETS
June 30, March 31, 1995 1995 -------- --------- CURRENT ASSETS: Cash and cash equivalents $ 28,178 $ 27,416 Available-for-sale securities 21,474 21,309 Receivables, net 10,099 7,004 Inventories 7,198 7,179 Other current assets 8,384 8,734 -------- -------- Total current assets 75,333 71,642 -------- -------- PROPERTY AND EQUIPMENT: Aircraft and rotable spares 133,193 127,004 Buildings and ground equipment 30,563 28,866 Deposits on aircraft and rotable spares 6,055 9,265 Rental vehicles 2,294 1,849 -------- -------- 172,105 166,984 Less-accumulated depreciation and amortization (60,237) (56,743) -------- -------- 111,868 110,241 -------- -------- OTHER ASSETS 6,111 6,299 -------- -------- $193,312 $188,182 ======== ========
See notes to condensed consolidated financial statements. 3 4 SKYWEST, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (Dollars in Thousands) (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, March 31, 1995 1995 -------- --------- CURRENT LIABILITIES: Current maturities of long-term debt $ 3,757 $ 3,747 Current portion of deferred credits 803 803 Trade accounts payable 14,910 13,789 Accrued salaries, wages and benefits 3,719 4,647 Taxes other than income taxes 1,982 1,353 Air traffic liability 1,297 1,264 Dividend payable 1,755 - Income taxes payable 1,463 - -------- -------- Total current liabilities 29,686 25,603 -------- -------- LONG-TERM DEBT, less current maturities 28,472 29,553 -------- -------- DEFERRED CREDITS, less current portion 2,104 2,308 -------- -------- DEFERRED INCOME TAXES PAYABLE 13,991 13,034 -------- -------- STOCKHOLDERS' EQUITY: Common stock 87,698 87,658 Retained earnings 47,452 46,177 Treasury stock (16,091) (16,091) --------- -------- Total stockholders' equity 119,059 117,684 -------- -------- $193,312 $188,182 ======== ========
See notes to condensed consolidated financial statements. 4 5 SKYWEST, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Amounts) (Unaudited)
For The Three Months Ended June 30, ----------------------- 1995 1994 ------- ------- OPERATING REVENUES: Passenger $47,402 $46,306 Freight 1,045 963 Public service & other 553 613 Nonairline 11,381 10,989 ------- ------ 60,381 58,871 ------- ------- OPERATING EXPENSES: Flying operations 19,107 16,297 Maintenance 7,054 5,963 Aircraft, traffic and passenger service 7,202 6,854 Promotion and sales 5,549 5,301 General and administrative 2,759 3,320 Depreciation and amortization 3,449 2,580 Nonairline 10,462 10,108 ------- ------- 55,582 50,423 ------- ------- OPERATING INCOME 4,799 8,448 ------- ------- OTHER INCOME AND (EXPENSE): Interest expense (476) (147) Interest income 669 566 Gain on sales of property and equipment 75 4 ------- ------- 268 423 ------- ------- INCOME BEFORE PROVISION FOR INCOME TAXES 5,067 8,871 PROVISION FOR INCOME TAXES (1,978) (3,504) ------- -------- NET INCOME $ 3,089 $ 5,367 ======= ======= NET INCOME PER COMMON SHARE $ .30 $ .47 ======= ======= WEIGHTED AVERAGE SHARES OUTSTANDING 10,318,978 11,456,611 ========== ==========
See notes to condensed consolidated financial statements. 5 6 SKYWEST, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
For The Three Months Ended June 30, ----------------------- 1995 1994 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,089 $ 5,367 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,449 2,580 Gain on sales of property and equipment (75) (4) Maintenance expense related to disposition of rotable spares 97 71 Increase in deferred income taxes 957 634 Amortization of deferred credits (204) (205) Nonairline depreciation and amortization 578 475 Changes in operating assets and liabilities: Increase in receivables, net (3,095) (2,106) Increase in inventories (19) (807) Decrease in other current assets 350 174 Increase in trade accounts payable 1,121 666 Increase in other current liabilities 1.197 3,501 ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 7,445 10,346 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of available-for-sale securities (165) - Acquisition of property and equipment: Aircraft and rotable spares (6,570) (4,217) Buildings and ground equipment (1,697) (1,041) Deposits on aircraft and rotable spares (1,100) (1,905) Rental vehicles (845) (696) Proceeds from sales of property and equipment 408 81 Decrease in deposits on aircraft and rotable spares 4,310 - Decrease in other assets 7 145 ------- ------- NET CASH USED IN INVESTING ACTIVITIES (5,652) (7,633) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 40 83 Reduction of long-term debt (1,071) (1,419) ------- ------- NET CASH USED IN FINANCING ACTIVITIES (1,031) (1,336) ------- ------- Increase in cash and cash equivalents 762 1,377 Cash and cash equivalents at beginning of period 27,416 56,402 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $28,178 $57,779 ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 524 $ 402 Income taxes - 10
See notes to condensed consolidated financial statements. 6 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, 1995 are not necessarily indicative of the results that may be expected for the year ending March 31, 1996. 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, 1995 and 1994, the Company provided for income taxes based upon the estimated annualized effective tax rate after giving effect to available investment tax credits. Investment tax credits have been accounted for by the flow-through method. Effective April 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). The Company has classified the net current and noncurrent deferred tax assets and liabilities in accordance with SFAS No. 109 which at June 30, 1995 included a current deferred tax asset of approximately $1.5 million and a deferred tax liability of approximately $14.0 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. Note E - Financial Information Relating to Business Segments Nonairline revenues and expenses as included in the Condensed Consolidated Financial Statements primarily represent the operations of Scenic Airlines, Inc. ("Scenic") and National Parks Transportation, Inc. ("NPT"), both wholly-owned subsidiaries of SkyWest, Inc. Scenic provides air tours and general aviation services to the scenic regions of northern Arizona, southern Utah and southern Nevada, commonly referred to as the "Grand Circle". 7 8 The primary aircraft used to accomplish scenic tours are 19 passenger deHavilland Twin Otter VistaLiners. NPT provides car rental services through a fleet of Avis vehicles located at five airports served by SkyWest Airlines, Inc. The following information presents the impact of this segment of business on the accompanying Condensed Consolidated Financial Statements.
For the Three Months Ended June 30, (In Thousands) 1995 1994 ------- ------- Operating revenues $11,381 $10,989 Operating income 919 881 Depreciation and amortization 578 475 Capital expenditures 4,416 1,528
As of June 30, ------------------- 1995 1994 ------- ------- Identifiable assets $26,416 $20,617 ======= =======
8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations: Operating Statistics
For the Three Months Ended June 30, ------------------------------------- 1995 1994 % change ------- ------- ---------- Passengers carried 534,560 536,782 (0.4%) Revenue passenger miles (000s) 135,088 124,763 8.3% Available seat miles (000s) 291,814 246,255 18.5% Passenger load factor 46.3% 50.7% (4.4) pts Passenger breakeven load factor 43.1% 42.8% 0.3 pts Yield per revenue passenger mile $ .351 $ .371 (5.4%) Cost per available seat mile $ .156 $ .164 (4.9%) Average passenger trip (miles) 253 232 9.1%
For the Three Months Ended June 30, 1995 and 1994: For the quarter ended June 30, 1995, the Company experienced continued growth in available seat miles ("ASMs") and revenue passenger miles ("RPMs") due to additional aircraft deliveries. Operating revenues increased to $60.4 million for the quarter ended June 30, 1995, compared to $58.9 million for the quarter ended June 30, 1994. Nonairline revenues increased to $11.4 million for the quarter ended June 30, 1995, compared to $11.0 million for the quarter ended June 30, 1994. Interest expense increased to $.5 million for the quarter ended June 30, 1995, from $.1 million for the quarter ended June 30, 1994. Net income was $3.1 million or $.30 per share for the quarter ended June 30, 1995, compared to $5.4 million or $.47 per share for the quarter ended June 30, 1994. Passenger revenues, which represented 78.5 percent of total operating revenues, increased 2.4 percent to $47.4 million for the quarter ended June 30, 1995, compared to $46.3 million or 78.7 percent of total operating revenues for the quarter ended June 30, 1994. The increase is attributable to an 8.3 percent increase in RPMs which was offset by a 5.4 percent decrease in yield per RPM. The increase in RPMs is due to four additional regional jets which are serving new SkyWest destinations such as Eugene and Portland, Oregon, Tucson, Arizona and Albuquerque, New Mexico and from the acquisition of four new cabin-class Brasilia aircraft which are being used to replace Metro aircraft as their leases terminate. Yield per RPM decreased 5.4 percent to $.351 for the quarter ended June 30, 1995, compared to $.371 for the quarter ended June 30, 1994, primarily due to a 9.1 percent increase in the average passenger trip length due to the utilization of the Canadair Regional Jet where the average trip length is 470 miles. In addition, the dilution which is related to the use of the regional jets has been somewhat offset by the strengthening of tuboprop yields. These yields have increased based on some fare increases in the Los Angeles, California markets. As a result of indirect competition from low-fare carriers and lingering negative publicity regarding regional airlines, passenger load factor decreased 4.4 points to 46.3 percent for the quarter ended June 30, 1995, compared to 50.7 percent for the quarter ended June 30, 1994. Due to passenger enplanements being lower than expected which resulted in lower revenues, the positive spread between actual and breakeven load factor decreased to 3.2 points for the quarter ended June 30, 1995, compared to 7.9 points for the quarter ended June 30, 1994. 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Total operating expenses and interest increased 10.9 percent to $56.1 million for the quarter ended June 30, 1995, compared to $50.6 million for the quarter ended June 30, 1994. As a percentage of consolidated operating revenues, total operating expenses and interest increased to 92.8 percent for the quarter ended June 30, 1995, from 85.9 percent for the comparable quarter ended June 30, 1994. For the quarter ended June 30, 1995, total airline operating expenses and interest (excluding nonairline expenses) were 93.0 percent of operating revenues compared to 84.5 percent for the comparable quarter ended June 30, 1994. The declining margin was due to decreased passenger enplanements which created a revenue shortfall and was not due to the Company experiencing unexpected or unusual cost increases relative to the ASM production. As a result of the new regional jet operations together with continued cost reduction measures, airline operating costs per ASM (including interest expense) decreased to 15.6c. for the quarter ended June 30, 1995 from 16.4c. for the comparable quarter ended June 30, 1994. Factors relating to the increase in operating expenses and interest are discussed below. Salaries, wages and employee benefits increased as a percentage of airline operating revenues to 26.1 percent for the quarter ended June 30, 1995, from 25.6 percent for the quarter ended June 30, 1993. This percentage increased as a result of decreased passenger traffic which created a revenue shortfall. The average number of full-time equivalent employees for the quarter ended June 30, 1995 was 2,013, compared to 1,800 for the quarter ended June 30, 1994. The increase in number of personnel was due to hiring pilots, flight attendants and customer service personnel to support new regional jet operations. Salaries, wages and employee benefits per ASM decreased to 4.4c. for the quarter ended June 30, 1995, compared to 5.0c. for the quarter ended June 30, 1994, primarily due to the increased ASMs generated from regional jet operations. Aircraft costs, including aircraft rent and depreciation, increased as a percentage of airline operating revenues to 20.9 percent for the quarter ended June 30, 1995 from 17.5 percent for the quarter ended June 30, 1994. Aircraft costs per ASM increased slightly to 3.5c. for the quarter ended June 30, 1995, compared to 3.4c. for the quarter ended June 30, 1994. The increase is due to higher rent amounts on the regional jets as well as additional Brasilia aircraft. Maintenance expense increased as a percentage of airline operating revenues to 10.6 percent for the quarter ended June 30, 1995, compared to 8.9 percent for the quarter ended June 30, 1994. The slight increase is due to the use of the accrual method in accounting for jet engine overhauls. This increase was somewhat offset by the utilization of more Brasilia aircraft which are more efficient than Metroliner aircraft. Maintenance expense per ASM increased slightly to 1.8c. for the quarter ended June 30, 1995, from 1.7c. for the quarter ended June 30, 1994. Fuel costs increased as a percentage of airline operating revenues to 9.5 percent for the quarter ended June 30, 1995, from 8.3 percent for the quarter ended June 30, 1994, primarily due to a increase in the average fuel price per gallon to $.73 from $.70. Fuel costs per ASM remained constant at 1.6c. for the quarters ended June 30, 1995 and 1994 due to the operation of additional Brasilia aircraft which are more fuel efficient, on a cost per ASM basis, than Metroliners, as well as from the increased ASMs generated from regional jet operations. Interest expense increased as a percentage of airline operating revenues to .1 percent for the quarter ended June 30, 1995, from .03 percent for the quarter ended June 30, 1994. The increase was primarily due to interest expense charges on interim short-term loans on regional jets which was offset by lower aircraft rents. Subsequently, the interim loans were replaced with long-term operating leases. 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 25.1 percent for the quarter ended June 30, 1995, from 23.9 percent for the quarter ended June 30, 1994. The increase is due primarily to significant rate increases in customer reservation system boarding fees. 10 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Nonairline expenses increased 3.5 percent to $10.5 million for the quarter ended June 30, 1995, compared to $10.1 million for the quarter ended June 30, 1994, due to an increased volume of activity. Additionally, the average number of full-time equivalent employees was 303 for the quarter ended June 30, 1995, compared to 260 at June 30, 1994. Liquidity and Capital Resources The Company had working capital of $45.6 million and a current ratio of 2.5:1 at June 30, 1995, compared to working capital of $46.0 million and a current ratio of 2.8:1 at March 31, 1995. During the first quarter of fiscal 1996, the Company invested $7.7 million in flight equipment, $2.5 million in buildings, ground equipment and other fixed assets and reduced long-term debt by $1.1 million. The principal sources of cash during the first quarter of fiscal 1996 were $7.4 million provided by operating activities and $4.3 million in deposits returned on aircraft. These factors resulted in a $.8 million cash and cash equivalents increase. At June 30, 1995, the Company's long-term debt to equity position was 19 percent debt and 81 percent equity compared to 20 percent debt and 80 percent equity at March 31, 1995. SkyWest took delivery of one new Brasilia aircraft during the first quarter of fiscal 1996 and has agreed to purchase 21 additional Brasilia aircraft and related spare parts inventory and support equipment at a future aggregate cost of approximately $158 million, including estimated cost escalations. Six are scheduled for delivery in fiscal 1996, and the remaining 15 aircraft are scheduled for delivery in fiscal 1997. The Company took delivery of two new Canadair Regional Jets during the first quarter of fiscal 1996 and has agreed to acquire two Canadair Regional Jets and related spare parts inventory and support equipment at an aggregate cost of approximately $36 million, including estimated cost escalations. These aircraft are scheduled for delivery later in fiscal 1996. 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 these Brasilia and Canadair Regional Jet 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 secured; five are exercisable through September 1995 and five are exercisable through July 1996. As required by an FAA directive, all aircraft with 30 seats or more are to be equipped with traffic alert and collision avoidance systems by December, 1995. The Company estimates the cost to be approximately $1.4 million for the existing aircraft fleet. The Company will fund these expenditures from cash reserves and internally generated funds. 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 8.5 percent at June 30, 1995. In addition, the Company has available $1.5 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 $1.0 million on December 1, 1995, and will be reduced by an additional $500,000 on the 1st day of December on each year thereafter until December 1, 1997, at which time the facility expires. There were no amounts outstanding on either of the facilities as of June 30, 1995. 11 12 PART II. OTHER INFORMATION SKYWEST, INC. Item 6: Exhibits and Reports on Form 8-K a. Exhibits - None b. Reports on Form 8-K - There were no reports on Form 8-K filed during the quarter ended June 30, 1995. 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 10, 1995 BY: /s/ Bradford R. Rich ------------------------------------- Bradford R. Rich Executive Vice President - Finance, Chief Financial Officer and Treasurer 12 13 EXHIBIT INDEX Exhibit 27 Financial Data Schedule 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000793733 SKY WEST, INC. 1,000 3-MOS MAR-31-1996 APR-01-1995 JUN-30-1995 28,178 21,474 10,314 215 7,198 8,384 172,105 60,237 193,312 29,686 28,472 71,607 0 0 47,452 193,312 60,381 60,381 0 55,582 0 0 476 5,067 1,978 3,089 0 0 0 3,089 .30 .30