-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A9oEevlrmOpGok2HyhrBOYuEHyOF+cp0QFww71pOccW201j8nmFCZ5UVuWUnu3vb n7j7Z2ICGgbOggH9lNqE6A== 0000950149-97-002056.txt : 19971114 0000950149-97-002056.hdr.sgml : 19971114 ACCESSION NUMBER: 0000950149-97-002056 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 000-14719 FILM NUMBER: 97714415 BUSINESS ADDRESS: STREET 1: 444 S RIVER RD CITY: ST GEORGE STATE: UT ZIP: 84790 BUSINESS PHONE: 8016343000 MAIL ADDRESS: STREET 1: 444 SOUTH RIVER ROAD CITY: ST GEORGE STATE: UT ZIP: 84790 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997 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 2 SKYWEST, INC. TABLE OF CONTENTS 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
2 3 PART I. FINANCIAL INFORMATION SKYWEST, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited) ================================================================================ ASSETS
September 30, March 31, 1997 1997 ------------- --------- 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 ========= =========
See notes to condensed consolidated financial statements. 3 4 SKYWEST, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (Dollars in Thousands) (Unaudited) ================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, March 31, 1997 1997 ------------- --------- 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 ========= =========
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 For the Three Months Ended Six Months Ended September 30, September 30, ------------------------------- ------------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============
See notes to condensed consolidated financial statements. 5 6 SKYWEST, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) ================================================================================
For the Six Months Ended September 30, ----------------------- 1997 1996 -------- -------- 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
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 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 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations
Operating Statistics -------------------------------------------------------------------- For the For the Three Months Ended Six Months Ended September 30, September 30, ----------------------------- ---------------------------------- 1997 1996 % Change 1997 1996 % Change ------- ------- -------- --------- --------- -------- 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%)
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 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 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 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 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:
Name Shares Voted For ---- ---------------- 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
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 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 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS MAR-31-1998 JUL-01-1997 SEP-30-1997 55,980 16,201 10,015 70 11,262 105,704 235,632 90,299 255,383 46,975 54,302 0 0 69,341 66,528 255,383 80,302 80,302 0 68,054 0 0 1,050 12,133 4,623 7,510 0 0 0 7,510 .74 .74
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