Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | Apr. 30, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | SKYWEST INC | |
Entity Central Index Key | 0000793733 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 51,233,435 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 290,885 | $ 328,384 |
Marketable Securities | 253,397 | 360,945 |
Income tax receivable | 21,255 | 25,936 |
Receivables, net | 78,370 | 64,194 |
Inventories, net | 112,566 | 127,690 |
Prepaid aircraft rents | 87,031 | |
Other current assets | 24,921 | 26,614 |
Total current assets | 781,394 | 1,020,794 |
PROPERTY AND EQUIPMENT: | ||
Aircraft and rotable spares | 6,696,982 | 6,433,916 |
Deposits on aircraft | 37,602 | 42,012 |
Buildings and ground equipment | 270,665 | 291,544 |
Total property and equipment, gross | 7,005,249 | 6,767,472 |
Less-accumulated depreciation and amortization | (1,730,681) | (1,761,728) |
Total property and equipment, net | 5,274,568 | 5,005,744 |
OTHER ASSETS: | ||
Operating lease right-of-use assets | 341,898 | |
Long-term prepaid assets | 181,830 | |
Other assets | 146,672 | 104,844 |
Total other assets | 488,570 | 286,674 |
Total assets | 6,544,532 | 6,313,212 |
CURRENT LIABILITIES: | ||
Current maturities of long-term debt | 362,797 | 350,206 |
Accounts payable | 340,195 | 331,982 |
Accrued salaries, wages and benefits | 118,074 | 161,606 |
Taxes other than income taxes | 13,901 | 16,024 |
Current maturities of operating lease liabilities | 73,524 | |
Other current liabilities | 36,836 | 65,008 |
Total current liabilities | 945,327 | 924,826 |
LONG-TERM DEBT, net of current maturities | 2,734,317 | 2,809,768 |
DEFERRED INCOME TAXES PAYABLE | 541,196 | 518,159 |
DEFERRED AIRCRAFT CREDITS | 29,308 | |
NONCURRENT OPERATING LEASES | 275,088 | |
OTHER LONG-TERM LIABILITIES | 48,037 | 66,870 |
COMMITMENTS AND CONTINGENCIES (Note 6) | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock, 5,000,000 shares authorized; none issued | ||
Common stock, no par value, 120,000,000 shares authorized; 81,798,773 and 81,239,289 shares issued, respectively | 692,593 | 690,910 |
Retained earnings | 1,845,467 | 1,776,585 |
Treasury stock, at cost, 30,500,393 and 29,850,999 shares, respectively | (537,493) | (503,182) |
Accumulated other comprehensive loss | (32) | |
Total stockholders' equity | 2,000,567 | 1,964,281 |
Total liabilities and stockholders' equity | $ 6,544,532 | $ 6,313,212 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
CONSOLIDATED BALANCE SHEETS | ||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 120,000,000 | 120,000,000 |
Common stock, shares issued | 81,798,773 | 81,239,289 |
Treasury stock, at cost, shares | 30,500,393 | 29,850,999 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
OPERATING REVENUES: | ||
Total operating revenues | $ 723,694 | $ 783,400 |
OPERATING EXPENSES: | ||
Salaries, wages and benefits | 257,588 | 306,719 |
Depreciation and amortization | 89,986 | 77,585 |
Special items | 21,869 | |
Other operating expenses | 63,109 | 68,389 |
Total operating expenses | 627,275 | 695,225 |
OPERATING INCOME | 96,419 | 88,175 |
OTHER INCOME (EXPENSE): | ||
Interest income | 3,807 | 1,705 |
Interest expense | (32,507) | (26,234) |
Other income (expense), net | 46,725 | 3,558 |
Total other expense, net | 18,025 | (20,971) |
INCOME BEFORE INCOME TAXES | 114,444 | 67,204 |
PROVISION FOR INCOME TAXES | 26,263 | 12,842 |
NET INCOME | $ 88,181 | $ 54,362 |
BASIC EARNINGS PER SHARE (in dollars per share) | $ 1.71 | $ 1.05 |
DILUTED EARNINGS PER SHARE (in dollars per share) | $ 1.69 | $ 1.03 |
Weighted average common shares: | ||
Basic (in shares) | 51,440 | 51,921 |
Diluted (in shares) | 52,098 | 53,033 |
COMPREHENSIVE INCOME: | ||
Net income | $ 88,181 | $ 54,362 |
Net unrealized appreciation (depreciation) on debt securities, net of taxes | 32 | (50) |
TOTAL COMPREHENSIVE INCOME | 88,213 | 54,312 |
Flying agreements | ||
OPERATING REVENUES: | ||
Total operating revenues | 700,001 | 767,964 |
Airport customer service and other | ||
OPERATING REVENUES: | ||
Total operating revenues | 23,693 | 15,436 |
Aircraft maintenance, materials and repairs | ||
OPERATING EXPENSES: | ||
Total operating expenses | 118,262 | 141,606 |
Airport related expenses | ||
OPERATING EXPENSES: | ||
Total operating expenses | 30,647 | 29,307 |
Aircraft fuel | ||
OPERATING EXPENSES: | ||
Total operating expenses | 25,656 | 26,939 |
Aircraft rentals | ||
OPERATING REVENUES: | ||
Total operating revenues | 207,381 | 189,068 |
OPERATING EXPENSES: | ||
Total operating expenses | $ 20,158 | $ 44,680 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total |
Balance at Dec. 31, 2017 | $ 672,593 | $ 1,516,957 | $ (435,178) | $ (50) | $ 1,754,322 |
Balance (in shares) at Dec. 31, 2017 | 80,398 | (28,644) | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net income | 54,362 | 54,362 | |||
Net unrealized depreciation on marketable securities, net of taxes | (50) | (50) | |||
Exercise of common stock options and stock issued under equity award plan | $ 836 | 836 | |||
Exercise of common stock options and stock issued under equity award plan (in shares) | 677 | ||||
Stock-based compensation expense (forfeiture credit) associated with equity awards, net | $ 4,854 | 4,854 | |||
Sale of common stock under employee stock purchase plan | $ 1,485 | 1,485 | |||
Sale of common stock under employee stock purchase plan (in shares) | 30 | ||||
Treasury shares acquired from vested employee stock awards for income tax withholdings | $ (10,003) | (10,003) | |||
Treasury shares acquired from vested employee stock awards for income tax withholdings (in shares) | (238) | ||||
Treasury stock purchases | $ (13,464) | (13,464) | |||
Treasury stock purchases (in shares) | (177) | ||||
Cash dividends declared (per share) | (5,205) | (5,205) | |||
Balance at Mar. 31, 2018 | $ 679,768 | 1,566,114 | $ (458,645) | (100) | 1,787,137 |
Balance (in shares) at Mar. 31, 2018 | 81,105 | (29,059) | |||
Increase (Decrease) in Stockholders' Equity | |||||
Change in accounting principle and other (see Note 6) | (13,141) | (13,141) | |||
Balance at December 31, 2018, as adjusted | $ 690,910 | 1,763,444 | $ (503,182) | (32) | 1,951,140 |
Balance at Dec. 31, 2018 | $ 690,910 | 1,776,585 | $ (503,182) | (32) | 1,964,281 |
Balance (in shares) at Dec. 31, 2018 | 81,239 | (29,851) | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net income | 88,181 | 88,181 | |||
Net unrealized depreciation on marketable securities, net of taxes | $ 32 | 32 | |||
Exercise of common stock options and stock issued under equity award plan | $ 641 | 641 | |||
Exercise of common stock options and stock issued under equity award plan (in shares) | 521 | ||||
Stock-based compensation expense (forfeiture credit) associated with equity awards, net | $ (578) | (578) | |||
Sale of common stock under employee stock purchase plan | $ 1,620 | 1,620 | |||
Sale of common stock under employee stock purchase plan (in shares) | 39 | ||||
Treasury shares acquired from vested employee stock awards for income tax withholdings | $ (9,311) | (9,311) | |||
Treasury shares acquired from vested employee stock awards for income tax withholdings (in shares) | (173) | ||||
Treasury stock purchases | $ (25,000) | (25,000) | |||
Treasury stock purchases (in shares) | (476) | ||||
Cash dividends declared (per share) | (6,158) | (6,158) | |||
Balance at Mar. 31, 2019 | $ 692,593 | $ 1,845,467 | $ (537,493) | $ 2,000,567 | |
Balance (in shares) at Mar. 31, 2019 | 81,799 | (30,500) |
CONSOLIDATED STATEMENTS OF ST_2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | ||
Net unrealized appreciation on marketable securities, tax | $ 10 | $ 16 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
NET CASH PROVIDED BY OPERATING ACTIVITIES | $ 154,914 | $ 165,895 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of marketable securities | (498,113) | (387,572) |
Sales of marketable securities | 605,693 | 496,945 |
Proceeds from the sale of aircraft, property and equipment | 43 | |
Acquisition of property and equipment: | ||
Aircraft and rotable spare parts | (197,341) | (198,777) |
Buildings and ground equipment | (52,075) | (9,305) |
Aircraft deposits applied towards acquired aircraft | 4,660 | |
Net cash received from sale of ExpressJet subsidiary | 53,200 | |
Decrease (increase) in other assets | 7,028 | (1,364) |
NET CASH USED IN INVESTING ACTIVITIES | (76,905) | (100,073) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from issuance of long-term debt | 19,940 | 101,317 |
Principal payments on long-term debt | (98,204) | (71,587) |
Net proceeds from issuance of common stock | 2,261 | 2,320 |
Purchase of treasury stock and employee income tax paid on equity awards | (34,311) | (23,467) |
Increase in debt issuance cost | (53) | (610) |
Payment of cash dividends | (5,141) | (4,140) |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | (115,508) | 3,833 |
Increase (decrease) in cash and cash equivalents | (37,499) | 69,655 |
Cash and cash equivalents at beginning of period | 328,384 | 181,792 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 290,885 | 251,447 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Acquisition of rotable spare parts | 574 | |
Debt assumed on aircraft acquired under operating leases | 14,475 | 59,132 |
Right of use assets applied to aircraft acquired under operating leases | 150,688 | |
Lease liability arising from the recognition of right-of-use asset | 456,472 | |
Cash paid during the period for: | ||
Interest, net of capitalized amounts | 34,288 | 26,481 |
Income taxes | 1,653 | $ 486 |
DETAILS OF SALES OF SUBSIDIARIES: | ||
Decrease in carrying amount of assets | (101,448) | |
Decrease in carrying amount of liabilities | 68,341 | |
Cash received from buyers | 79,632 | |
Gain on sale of subsidiaries | $ 46,525 |
Condensed Consolidated Financia
Condensed Consolidated Financial Statements | 3 Months Ended |
Mar. 31, 2019 | |
Condensed Consolidated Financial Statements | |
Condensed Consolidated Financial Statements | Note 1 — Condensed Consolidated Financial Statements Basis of Presentation The condensed consolidated financial statements of SkyWest, Inc. (“SkyWest” or the “Company”) and its operating subsidiary SkyWest Airlines, Inc. (“SkyWest Airlines”) and its leasing subsidiary SkyWest Leasing, Inc. (“SkyWest Leasing”) included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). On January 22, 2019, the Company completed the sale of its former wholly-owned subsidiary, ExpressJet Airlines, Inc. (“ExpressJet”). The Company’s financial and operating results presented in this Report include the financial results of ExpressJet for the period of time ExpressJet was operating as a subsidiary of the Company. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) 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. These condensed consolidated financial statements reflect all adjustments that, 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, unless otherwise disclosed. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results will likely differ, and may differ materially, from those estimates and assumptions. Recent Accounting Pronouncements Recently Adopted Standards In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2016-02, “Leases (Topic 842)” (“Topic 842”). Topic 842 and subsequently issued amendments require certain leases with durations longer than 12 months to be recognized on the balance sheet. The Company adopted Topic 842 effective January 1, 2019 and elected the package of transition practical expedients for expired or existing contracts, which does not require reassessment of: (1) whether any of the Company’s contracts are or contain leases, (2) lease classification and (3) initial direct costs . In July 2018, the FASB issued ASU No. 2018-11, "Targeted Improvements - Leases (Topic 842)." This update provides an optional transition method that allows entities to elect to apply the standard using the modified retrospective approach at its effective date, versus recasting the prior years presented. If this adoption method is elected, an entity would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. The Company elected this adoption method and recognized a cumulative-effect adjustment to the opening balance of retained earnings on January 1, 2019. Additionally, the Company’s adoption of Topic 842 did not have a significant impact on the recognition, measurement or presentation of lease revenue and lease expenses within the condensed consolidated statements of operations and comprehensive income or the condensed consolidated statements of cash flows. The Company’s adoption of Topic 842 did not have a material impact on the timing or amount of the Company’s lease revenue as a lessor. The Company’s prepaid aircraft rents, accrued aircraft rents and deferred rent credits that were separately stated in the Company’s December 31, 2018 balance sheet have been classified as a component of the Company’s right-of-use assets effective January 1, 2019. The consolidated financial statements for the three months ended March 31, 2019 are presented under the new standard, while comparative years presented are not adjusted and continue to be reported in accordance with the Company’s historical accounting policy. See Note 6, "Leases, Commitments and Contingencies," for more information. |
Flying Agreements Revenue and A
Flying Agreements Revenue and Airport Customer Service and Other Revenue | 3 Months Ended |
Mar. 31, 2019 | |
Flying Agreements Revenue and Airport Customer Service and Other Revenue | |
Flying Agreements Revenue and Airport Customer Service and Other Revenue | Note 2 — Flying Agreements Revenue and Airport Customer Service and Other Revenues The Company recognizes flying agreements revenue and airport customer service and other revenues when the service is provided under its code-share agreements. Under the Company’s fixed-fee arrangements (referred to as “fixed-fee arrangements,” “fixed-fee contracts” or “capacity purchase agreements”) with Delta Air Lines, Inc. (“Delta”), United Airlines, Inc. (“United”), American Airlines, Inc. (“American”) and Alaska Airlines, Inc. (“Alaska”) (each, a “major airline partner”), the major airline partner generally pays the Company a fixed-fee for each departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi time) incurred, and an amount per aircraft in service each month with additional incentives based on flight completion and on-time performance. The major airline partner also directly reimburses the Company for certain direct expenses incurred under the fixed-fee arrangement, such as airport landing fees and airport rents. Under the fixed-fee arrangements, the Company’s performance obligation is met when each flight is completed and is reflected in flying agreements revenue. The transaction price for the fixed-fee agreements is determined from the fixed-fee consideration, incentive consideration and directly reimbursed expenses earned as flights are completed over the agreement term. For the three months ended March 31, 2019, fixed-fee arrangements represented approximately 84.8% of the Company’s flying agreements revenue. Under the Company’s revenue-sharing arrangements (referred to as a “revenue-sharing” or “prorate” arrangement), the major airline partner and the Company negotiate a passenger fare proration formula, pursuant to which the Company receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on a Company airline and the other portion of their trip on the major airline partner. Under the Company’s prorate flying agreements, the performance obligation is met and revenue is recognized when each flight is completed based upon the portion of the prorate passenger fare the Company anticipates that it will receive for each completed flight. The transaction price for the prorate agreements is determined from the proration formula derived from each passenger ticket amount on each completed flight over the agreement term. For the three months ended March 31, 2019, prorate flying arrangements represented approximately 15.2% of the Company’s flying agreements revenue. Airport customer service and other revenues primarily consist of ground handling functions, such as gate and ramp agent services at applicable airports where the Company provides such services. The transaction price for airport customer service agreements is determined from an agreed-upon rate by location applied to the applicable number of flights handled by the Company over the agreement term. Additionally, airport customer service and other revenues includes revenue generated from aircraft and spare engines leased to third parties. As of March 31, 2019, the Company leased regional jet aircraft and spare engines to third parties. Of the Company’s $5.3 billion of property and equipment, net, $23.2 million was leased to third parties under operating leases as of March 31, 2019. The Company mitigates the residual asset risks of these assets by leasing aircraft and engine types that can be operated by the Company in the event of a default. Additionally, the operating leases typically have specified lease return condition requirements paid by the lessee to the Company and the Company typically maintains inspection rights under the leases. The following table summarizes future minimum rental income under operating leases primarily related to leased aircraft that had remaining non-cancelable lease terms as of March 31, 2019 (in thousands): April 2019 through December 2019 $ 18,495 2020 13,034 2021 7,956 2022 3,125 2023 185 Thereafter — $ 42,795 Other ancillary revenues commonly associated with airlines, such as baggage fee revenue, ticket change fee revenue and the marketing component of the sale of mileage credits, are retained by the Company’s major airline partners on flights that the Company operates under its code‑share agreements. The following table represents the Company’s flying agreements revenue by type for the three-month period ended March 31, 2019 and 2018 (in thousands): For the three months ended March 31, 2019 2018 Capacity purchase agreements revenue: flight operations $ 386,545 $ 469,025 Capacity purchase agreements revenue: aircraft lease revenue 207,381 189,068 Prorate agreements revenue 106,075 109,871 Flying agreements revenue $ 700,001 $ 767,964 A portion of the Company’s compensation under its fixed-fee agreements is designed to reimburse the Company for certain aircraft ownership costs. The consideration for aircraft ownership costs varies by agreement, but is intended to cover either the Company’s aircraft principal and interest debt service costs, its aircraft depreciation and interest expense or its aircraft lease expense costs while the aircraft is under contract. The consideration received for the use of the aircraft under the Company’s fixed-fee agreements is reflected as lease revenue, inasmuch as the agreements identify the “right of use” of a specific type and number of aircraft over a stated period of time. The lease revenue associated with the Company’s fixed-fee agreements is accounted for as an operating lease and is reflected as flying agreements revenue on the Company’s consolidated statements of comprehensive income. The Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statement of comprehensive income since the use of the aircraft is not a separate activity of the total service provided. The Company’s fixed-fee and prorate agreements include weekly provisional cash payments from the respective major airline partner based on a projected level of flying each month. The Company and each major airline partner subsequently reconcile these payments to the actual completed flight activity on a monthly or quarterly basis. In the event a flying agreement includes a mid-term rate reset to adjust rates prospectively and the contractual rates under the Company’s flying agreements have not been finalized at quarterly or annual financial statement dates, the Company applies the variable constraint guidance under Accounting Standards Update No. 2014‑09, “Revenue from Contracts with Customers, (Topic 606)” (“Topic 606”), where the Company records revenue to the extent it believes that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. In several of the Company’s agreements, the Company is eligible to receive incentive compensation upon the achievement of certain performance criteria. The incentives are defined in the agreements and are measured and determined on a monthly, quarterly or semi‑annual basis. At the end of each period during the term of an agreement, the Company calculates the incentives achieved during that period and recognizes revenue attributable to that agreement accordingly, subject to the variable constraint guidance under Topic 606. The following table summarizes the significant provisions of each code-share agreement SkyWest Airlines has with each major airline partner: Delta Connection Agreements Agreement Aircraft type Number of Term / Termination Delta Connection Agreement (fixed-fee arrangement) • • • • 58 18 43 50 • Delta Connection Prorate Agreement (revenue-sharing arrangement) • 29 • United Express Agreements Agreement Aircraft type Number of Term / Termination United Express Agreements (fixed-fee arrangement) • • • 6 8 19 65 • United Express Prorate Agreement (revenue-sharing arrangement) • 25 • American Agreements Agreement Aircraft type Number of Term / Termination American Agreement (fixed-fee arrangement) • 62 • American Prorate Agreement (revenue-sharing arrangement) • 7 • Alaska Capacity Purchase Agreement Agreement Aircraft type Number of Term / Termination Alaska Agreement (fixed-fee arrangement) • 32 • In addition to the contractual arrangements described above, SkyWest Airlines has entered into fixed-fee agreements with Alaska and Delta to place additional Embraer E175 dual-class regional jet aircraft (“E175”) into service. As of March 31, 2019, the Company was scheduled to take delivery of eight E175 aircraft in connection with its agreement with Delta (four aircraft in 2019 and four aircraft in 2020) and three E175 aircraft in 2021 in connection with its agreement with Alaska. Final delivery dates may be adjusted based on various factors. SkyWest Airlines also entered into an agreement with Delta in the second quarter of 2018 to operate 20 Canadair CRJ900 regional jet aircraft (“CRJ900”) aircraft under a fixed-fee agreement. As of March 31, 2019, SkyWest Airlines had placed eight of these CRJ900 aircraft into service with Delta. The delivery dates for the remaining 12 aircraft are expected to continue through the end of 2020. The remaining 12 new CRJ900 aircraft will replace 12 Canadair CRJ700 regional jet aircraft (“CRJ700”) scheduled to expire under SkyWest’s flying contracts with Delta. When an aircraft is scheduled to be removed from a fixed-fee arrangement, the Company may, as practical under the circumstances, negotiate an extension with the respective major airline partner, negotiate the placement of the aircraft with another major airline partner, return the aircraft to the lessor if the aircraft is leased and the lease is expiring, place owned aircraft for sale, or pursue other uses for the aircraft. Other uses for the aircraft may include placing the aircraft in a prorate arrangement, leasing the aircraft to a third party or parting out the aircraft to use the engines and parts as spare inventory or to lease the engines to a third party. The Company’s operating revenues could be impacted by a number of factors, including changes to the Company’s code-share agreements with its major airline partners, contract modifications resulting from contract renegotiations, the Company’s ability to earn incentive payments contemplated under the Company’s code-share agreements and settlement of reimbursement disputes with the Company’s major airline partners. |
Share-Based Compensation and St
Share-Based Compensation and Stock Repurchases | 3 Months Ended |
Mar. 31, 2019 | |
Share-Based Compensation and Stock Repurchases | |
Share-Based Compensation and Stock Repurchases | Note 3 — Share-Based Compensation and Stock Repurchases During the three months ended March 31, 2019, the Company granted 101,400 restricted stock units and 83,784 performance shares to certain employees of the Company and its subsidiaries under the SkyWest, Inc. 2010 Long-Term Incentive Plan. Both the restricted stock units and performance shares have a three-year vesting period, during which the recipient must remain employed with the Company or one of the Company’s subsidiaries. The number of performance shares awardable from the 2019 grants can range from 0% to 200% of the original amount granted depending on the Company’s performance over the three-year vesting period against the pre-established targets. Upon vesting, each restricted stock unit and performance share will be replaced with one share of common stock. The fair value of the restricted stock units and performance shares on the date of grant was $48.45 per share. During the three months ended March 31, 2019, the Company did not grant any options to purchase shares of common stock. Additionally, during the three months ended March 31, 2019, the Company granted 18,576 fully-vested shares of common stock to the Company’s directors at a grant date fair value of $48.45. The Company accounts for forfeitures of stock options, restricted stock units and performance share grants in 2019 when forfeitures occur. The estimated fair value of the stock options, restricted stock units and performance shares is amortized over the applicable vesting periods. During the three months ended March 31, 2019 and 2018, the Company recorded pre-tax share-based compensation expense of $3.9 million and $4.9 million, respectively. Additionally, the Company incurred $7.9 million of employee severance related costs associated with the sale of ExpressJet, partially offset by a forfeiture credit of $4.5 million, primarily resulting from stock-based compensation awards that terminated upon the sale of ExpressJet during the three months ended March 31, 2019. The Company repurchased 476,277 shares of its common stock for $25.0 million, and paid $9.3 million for the income tax obligation on vested employee equity awards and issued the net, after-tax shares to employees during the three months ended March 31, 2019. The Company repurchased 177,580 shares of its common stock for $10.0 million and paid $13.5 million for the income tax obligation on vested employee equity awards and issued the net, after-tax shares to employees during the three months ended March 31, 2018. |
Net Income Per Common Share
Net Income Per Common Share | 3 Months Ended |
Mar. 31, 2019 | |
Net Income Per Common Share | |
Net Income Per Common Share | Note 4 — Net Income Per Common Share Basic net income per common share (“Basic EPS”) excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net income per common share. During the three months ended March 31, 2019, 241,000 performance shares (at target performance) were excluded from the computation of Diluted EPS since the Company had not achieved the minimum target thresholds as of March 31, 2019. During the three months ended March 31, 2018, 372,600 performance shares (at target performance) were excluded from the computation of Diluted EPS since the Company had not achieved the minimum target thresholds as of March 31, 2018. The calculation of the weighted average number of shares of common stock outstanding for Basic EPS and Diluted EPS for the periods indicated (in thousands, except per share data) is as follows: Three Months Ended March 31, 2019 2018 Numerator: Net Income $ 88,181 $ 54,362 Denominator: Weighted average number of common shares outstanding 51,440 51,921 Effect of outstanding share-based awards 658 1,112 Weighted average number of shares for diluted net income per common share 52,098 53,033 Basic earnings per share $ $ 1.05 Diluted earnings per share $ $ 1.03 |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2019 | |
Segment Reporting | |
Segment Reporting | Note 5 - Segment Reporting The Company’s three reporting segments consisted of the operations of SkyWest Airlines, ExpressJet and SkyWest Leasing activities. The Company sold ExpressJet on January 22, 2019. The segment information for ExpressJet reflects the period of time ExpressJet was operating as a subsidiary of the Company. The Company concluded that the sale of ExpressJet did not meet the criteria for a discontinued operation. The Company’s chief operating decision maker analyzes the profitability of operating new aircraft financed through the issuance of debt, including the Company’s E175 fleet, separately from the profitability of the Company’s capital deployed for ownership and financing of such aircraft. The SkyWest Leasing segment includes applicable revenue earned under the applicable fixed-fee contracts attributed to the ownership of new aircraft acquired through the issuance of debt and the respective depreciation and interest expense of such aircraft. The SkyWest Airlines segment includes revenue earned under the applicable fixed-fee contracts attributed to operating such aircraft and the respective operating costs. The SkyWest Leasing segment includes the activity of leasing regional jet aircraft and spare engines to third parties. The SkyWest Leasing segment’s total assets and capital expenditures include new aircraft acquired through the issuance of debt and assets leased to third parties. The following represents the Company’s segment data for the three-month periods ended March 31, 2019 and 2018 (in thousands): Three months ended March 31, 2019 SkyWest SkyWest Airlines ExpressJet Leasing Consolidated Operating revenues (1) $ 585,768 $ 24,050 $ 113,876 $ 723,694 Operating expense 545,901 28,690 52,684 627,275 Depreciation and amortization expense 40,053 971 48,962 89,986 Special Items 18,508 3,361 — 21,869 Interest expense 3,818 — 28,689 32,507 Segment profit (loss) (2) 36,049 (4,640) 32,503 63,912 Total assets (as of March 31, 2019) 2,738,248 — 3,806,284 6,544,532 Capital expenditures (including non-cash) 68,650 — 345,929 414,579 Three months ended March 31, 2018 SkyWest SkyWest Airlines ExpressJet Leasing Consolidated Operating revenues (1) $ 556,294 $ 161,081 $ 66,025 $ 783,400 Operating expense 498,875 166,824 29,526 695,225 Depreciation and amortization expense 37,487 11,161 28,937 77,585 Interest expense 4,476 827 20,931 26,234 Segment profit (loss) (2) 52,943 (6,570) 15,568 61,941 Identifiable intangible assets, other than goodwill — 3,672 — 3,672 Total assets (as of March 31, 2018) 2,184,306 581,722 2,834,159 5,600,187 Capital expenditures (including non-cash) 36,283 1,338 230,167 267,788 (1) Prorate revenue, Airport customer service and other revenues is primarily reflected in the SkyWest Airlines segment. (2) Segment profit (loss) is equal to operating income less interest expense. |
Leases, Commitments and Conting
Leases, Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Leases, Commitments and Contingencies | |
Leases, Commitments and Contingencies | Note 6 — Leases, Commitments and Contingencies Effective January 1, 2019, the Company adopted Topic 842. The Company leases property and equipment under operating leases. For leases with durations longer than 12 months, the Company recorded the related asset and obligation at the present value of lease payments over the term. The Company used its incremental borrowing rate to discount the lease payments based on information available at lease commencement. Aircraft During the three months ended March 31, 2019, the Company acquired 52 CRJ aircraft under an early lease buyout arrangement with the lessor for $111.7 million. As of March 31, 2019, the Company had 89 aircraft under operating leases with remaining terms ranging from less than one year to nine years. With the adoption of Topic 842, the Company evaluated whether leased aircraft asset groups within the Company’s fleet were impaired. Under the transition guidance for Topic 842, a company is permitted to recognize a previously unrecognized impairment related to a right-of-use asset in the period prior to the adoption date of Topic 842 if the event giving rise to the impairment occurred before the adoption date. In 2016, the Company recorded an impairment on certain of its long-lived assets, which included the Company’s 50-seat Bombardier CRJ200 regional jet aircraft (“CRJ200”) . In 2016, the market lease rate was less than the contractual lease rate on the Company’s CRJ200 leased aircraft. The Company recorded an impairment of $13.1 million (net of tax) as an adjustment to the Company’s January 1, 2019 retained earnings related to the previously unrecognized impairment of these leased CRJ200s. Airport facilities The Company has operating leases for facility space including airport terminals, office space, cargo warehouses and maintenance facilities. The Company generally leases this space from government agencies that control the use of the airport. The remaining lease terms vary from one month to 37 years. The Company’s operating leases with lease rates that are variable based on airport operating costs, use of the facilities or other variable factors are excluded from the Company’s right-of-use assets and operating lease liabilities in accordance with accounting guidance. Leases As of March 31, 2019, the Company’s right-of-use assets were $341.9 million, the Company’s current maturities of operating lease liabilities were $73.5 million, and the Company’s noncurrent lease liabilities were $275.1 million. During the three months ended March 31, 2019, the Company had operating cash flows from operating leases of $19.7 million. The table below presents lease related terms and discount rates as of March 31, 2019. March 31, 2019 Weighted-average remaining lease term Operating leases 7.0 years Weighted-average discount rate Operating leases The Company’s lease costs for the periods indicated included the following components (in thousands): For the three months ended March 31, 2019 2018 $ Change % Change Operating lease cost $ 27,221 $ 52,833 $ (25,612) % Variable and short-term lease cost 1,475 1,419 56 3.9 % Total lease cost $ 28,696 $ 54,252 $ (25,556) % As of March 31, 2019, the Company leased aircraft, airport facilities, office space, and other property and equipment under non-cancelable operating leases which are generally on a long-term, triple net lease basis pursuant to which the Company pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased property. The Company expects that, in the normal course of business, such operating leases that expire will be renewed or replaced by other leases, or the property may be purchased rather than leased. The following table summarizes future minimum rental payments primarily related to leased aircraft required under operating leases that had initial or remaining non-cancelable lease terms as of March 31, 2019 (in thousands): April 2019 through December 2019 $ 54,799 2020 93,640 2021 75,898 2022 67,668 2023 62,498 Thereafter 87,591 $ 442,094 As of March 31, 2019, the Company had a firm purchase commitment for eleven E175 aircraft from Embraer, S.A. with scheduled delivery dates through 2021. The following table summarizes the Company’s commitments and obligations as noted for each of the next five years and thereafter (in thousands): Total Apr - Dec 2019 2020 2021 2022 2023 Thereafter Operating lease payments for aircraft and facility obligations $ 442,094 $ 54,799 $ 93,640 $ 75,898 $ 67,668 $ 62,498 $ 87,591 Firm aircraft and spare engine commitments 329,327 139,974 131,657 57,696 — — — Interest commitments (1) 628,528 95,377 114,048 98,884 84,754 68,950 166,515 Principal maturities on long-term debt 3,121,661 279,873 357,228 339,297 352,717 361,215 1,431,331 Total commitments and obligations $ 4,521,610 $ 570,023 $ 696,573 $ 571,775 $ 505,139 $ 492,663 $ 1,685,437 (1) At March 31, 2019, the Company had variable rate notes representing only 0.2% of its total long-term debt. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value Measurements | |
Fair Value Measurements | Note 7 — Fair Value Measurements The Company holds certain assets that are required to be measured at fair value in accordance with GAAP. The Compa ny determined the fair value of these assets based on the following three levels of inputs: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Some of the Company’s marketable securities primarily utilize broker quotes in a non-active market for valuation of these securities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, therefore requiring an entity to develop its own assumptions. As of March 31, 2019 and December 31, 2018, the Company held certain assets that are required to be measured at fair value on a recurring basis. Assets measured at fair value on a recurring basis are summarized below (in thousands): Fair Value Measurements as of March 31, 2019 Total Level 1 Level 2 Level 3 Cash, Cash Equivalents $ $ $ — $ — Marketable Securities Bonds and bond funds $ $ — $ $ — Commercial paper 98,990 — 98,990 — — — Total Assets Measured at Fair Value $ $ $ $ — Fair Value Measurements as of December 31, 2018 Total Level 1 Level 2 Level 3 Cash, Cash Equivalents $ 328,384 $ $ — $ — Marketable Securities Bonds and bond funds $ $ — $ $ — Commercial paper — — — — Total Assets Measured at Fair Value $ $ $ $ — The Company’s “marketable securities” classified as Level 2 securities primarily utilize broker quotes in a non-active market for valuation of these securities. The Company did not make any significant transfers of securities between Level 1, Level 2 and Level 3 during the three months ended March 31, 2019. The Company’s policy regarding the recording of transfers between levels is to record any such transfers at the end of the reporting period. As of March 31, 2019 and December 31, 2018, the Company classified $253.4 million and $360.9 million of marketable securities, respectively, as short-term since it had the intent to maintain a liquid portfolio and the ability to redeem the securities within one year. As of March 31, 2019 and December 31, 2018, the cost of the Company’s total cash and cash equivalents and available for sale securities was $544.2 million and $689.4 million, respectively. The fair value of the Company’s long-term debt classified as Level 2 debt was estimated using discounted cash flow analyses, based on the Company’s current estimated incremental borrowing rates for similar types of borrowing arrangements. The fair value of the Company’s long-term debt is estimated based on current rates offered to the Company for similar debt and was estimated to be $3.10 billion as of March 31, 2019 and $3.16 billion as of December 31, 2018, as compared to the carrying amount of $3.12 billion as of March 31, 2019 and $3.19 billion as of December 31, 2018. |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2019 | |
Long-Term Debt | |
Long-Term Debt | Note 8 — Long-Term Debt Long-term debt consisted of the following as of March 31, 2019 and December 31, 2018 (in thousands): March 31, 2019 December 31, 2018 Current portion of long-term debt $ 366,583 $ 354,072 Current portion of unamortized debt issue cost, net (3,786) (3,866) Current portion of long-term debt, net of debt issue costs $ 362,797 $ 350,206 Long-term debt, net of current maturities $ 2,755,078 $ 2,831,366 Long-term portion of unamortized debt issue cost, net (20,761) (21,598) Long-term debt, net of current maturities and debt issue costs $ 2,734,317 $ 2,809,768 Total long-term debt (including current portion) $ 3,121,661 $ 3,185,438 Total unamortized debt issue cost, net (24,547) (25,464) Total long-term debt, net of debt issue costs $ 3,097,114 $ 3,159,974 During the three months ended March 31, 2019, the Company took delivery of one E175 aircraft that the Company financed through $19.9 million of long-term debt. Additionally, the Company purchased two previously-leased aircraft, for which the Company assumed $14.5 million of long-term debt. The debt associated with the one E175 aircraft has a 12-year term, is due in quarterly installments with a fixed annual interest rate of 3.9% and is secured by the E175 aircraft. The Company acquired two aircraft pursuant to the acquisition of debt under the existing leases during the three months ended March 31, 2019 . The debt associated with the two previously-leased aircraft has a term of 18 months with monthly interest only payments with a fixed annual interest rate of 2.0% and is secured by the previously-leased aircraft. As of March 31, 2019 and December 31, 2018, the Company had $80.0 million and $78.7 million, respectively, in letters of credit and surety bonds outstanding with various banks and surety institutions. |
Gain on Sale
Gain on Sale | 3 Months Ended |
Mar. 31, 2019 | |
Gain on Sale | |
Gain on Sale | Note 9 — Gain on Sale ExpressJet Sale On January 22, 2019, the Company completed the sale of its former wholly-owned subsidiary ExpressJet. The Company recorded a gain of $46.6 million (pre-tax) from the sale of ExpressJet. The closing of the transaction was completed in two parts, through an asset sale and stock sale, as further described below. Asset Sale On January 11, 2019, pursuant to the terms and conditions of the Asset Purchase Agreement, dated as of December 17, 2018, by and among the Company, ExpressJet and United, United acquired certain specified assets and liabilities of ExpressJet, including, among other things, aircraft engines, auxiliary power units, rotable spare parts, ground support equipment and flight training equipment for $60.8 million in cash, subject to certain purchase price adjustments (the “Asset Sale”). Certain assets and liabilities of ExpressJet were expressly excluded from the Asset Sale. Stock Sale Additionally, on January 22, 2019, pursuant to the terms and conditions of the Stock Purchase Agreement, dated as of December 17, 2018, by and among the Company and ManaAir, LLC, a company in which United owns a minority interest (the “Buyer”), the Buyer acquired all of the outstanding shares of capital stock of ExpressJet from the Company for $18.8 million in cash, subject to certain purchase price adjustments (the “Stock Sale,”). To facilitate payment of the purchase price for the Stock Sale, at the closing of the Stock Sale, the Company loaned $26 million to Kair Enterprises, Inc. (the “Borrower”), the majority owner of the Buyer. Such loan accrues interest at the rate of 6.85% per annum, matures on the last business day of the last month immediately preceding the two-year anniversary of the closing of the Stock Sale and is secured by, among other things, the Borrower’s ownership interests in the Buyer. The Company also agreed to lease 16 CRJ200 aircraft to ExpressJet for up to a five-year term as part of the transaction. |
Special Items
Special Items | 3 Months Ended |
Mar. 31, 2019 | |
Special Items | |
Special Items | Note 10 — Special Items During the three months ended March 31, 2019, the Company terminated an agreement with an aircraft manufacturer that obligated the Company to future aircraft lease return conditions on aircraft the Company leased. In conjunction with the terminated agreement, the aircraft manufacturer released the Company from the future aircraft lease return obligations and the Company agreed to terminate aircraft part credits previously issued by the manufacturer to the Company. As a result of the terminated agreement, the Company recorded a non-cash expense of $18.5 million (pre-tax) during the three months ended March 31, 2019 to write-off the terminated aircraft part credits, which was reflected as a special items operating expense in the consolidated statement of comprehensive income. Additionally, during the three months ended March 31, 2019, the Company incurred $3.4 million of employee severance related costs associated with the sale of ExpressJet that are also reflected in special items. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2019 | |
Income Taxes | |
Income Taxes | Note 11 — Income Taxes The Company’s effective tax rate for the three months ended March 31, 2019 was 23.0%. The Company’s effective tax rate for the three months ended March 31, 2019 varied from the federal statutory rate of 21.0% primarily due to the provision for state income taxes and the impact of non-deductible expenses, partially offset by a $2.3 million discrete tax benefit from excess tax deductions generated from employee equity transactions that occurred during the three months ended March 31, 2019. |
Legal Matters
Legal Matters | 3 Months Ended |
Mar. 31, 2019 | |
Legal Matters | |
Legal Matters | Note 12 — Legal Matters The Company is subject to certain legal actions which it considers routine to its business activities. As of March 31, 2019, the Company’s management believed, after consultation with legal counsel, that the ultimate outcome of such legal matters was not likely to have a material adverse effect on the Company’s financial position, liquidity or results of operations. |
Flying Agreements Revenue and_2
Flying Agreements Revenue and Airport Customer Service and Other Revenue (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Agreements with other airlines | |
Schedule of future minimum rental payments for operating leases | The following table summarizes future minimum rental payments primarily related to leased aircraft required under operating leases that had initial or remaining non-cancelable lease terms as of March 31, 2019 (in thousands): April 2019 through December 2019 $ 54,799 2020 93,640 2021 75,898 2022 67,668 2023 62,498 Thereafter 87,591 $ 442,094 |
Schedule of flying agreement revenue data | The following table represents the Company’s flying agreements revenue by type for the three-month period ended March 31, 2019 and 2018 (in thousands): For the three months ended March 31, 2019 2018 Capacity purchase agreements revenue: flight operations $ 386,545 $ 469,025 Capacity purchase agreements revenue: aircraft lease revenue 207,381 189,068 Prorate agreements revenue 106,075 109,871 Flying agreements revenue $ 700,001 $ 767,964 |
Schedule of details of agreements with other airlines | The following table summarizes the significant provisions of each code-share agreement SkyWest Airlines has with each major airline partner: Delta Connection Agreements Agreement Aircraft type Number of Term / Termination Delta Connection Agreement (fixed-fee arrangement) • • • • 58 18 43 50 • Delta Connection Prorate Agreement (revenue-sharing arrangement) • 29 • United Express Agreements Agreement Aircraft type Number of Term / Termination United Express Agreements (fixed-fee arrangement) • • • 6 8 19 65 • United Express Prorate Agreement (revenue-sharing arrangement) • 25 • American Agreements Agreement Aircraft type Number of Term / Termination American Agreement (fixed-fee arrangement) • 62 • American Prorate Agreement (revenue-sharing arrangement) • 7 • Alaska Capacity Purchase Agreement Agreement Aircraft type Number of Term / Termination Alaska Agreement (fixed-fee arrangement) • 32 • |
Aircraft | |
Agreements with other airlines | |
Schedule of future minimum rental payments for operating leases | The following table summarizes future minimum rental income under operating leases primarily related to leased aircraft that had remaining non-cancelable lease terms as of March 31, 2019 (in thousands): April 2019 through December 2019 $ 18,495 2020 13,034 2021 7,956 2022 3,125 2023 185 Thereafter — $ 42,795 |
Net Income Per Common Share (Ta
Net Income Per Common Share (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Net Income Per Common Share | |
Schedule of net income per common share | The calculation of the weighted average number of shares of common stock outstanding for Basic EPS and Diluted EPS for the periods indicated (in thousands, except per share data) is as follows: Three Months Ended March 31, 2019 2018 Numerator: Net Income $ 88,181 $ 54,362 Denominator: Weighted average number of common shares outstanding 51,440 51,921 Effect of outstanding share-based awards 658 1,112 Weighted average number of shares for diluted net income per common share 52,098 53,033 Basic earnings per share $ $ 1.05 Diluted earnings per share $ $ 1.03 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Segment Reporting | |
Schedule of Company's segment data | The following represents the Company’s segment data for the three-month periods ended March 31, 2019 and 2018 (in thousands): Three months ended March 31, 2019 SkyWest SkyWest Airlines ExpressJet Leasing Consolidated Operating revenues (1) $ 585,768 $ 24,050 $ 113,876 $ 723,694 Operating expense 545,901 28,690 52,684 627,275 Depreciation and amortization expense 40,053 971 48,962 89,986 Special Items 18,508 3,361 — 21,869 Interest expense 3,818 — 28,689 32,507 Segment profit (loss) (2) 36,049 (4,640) 32,503 63,912 Total assets (as of March 31, 2019) 2,738,248 — 3,806,284 6,544,532 Capital expenditures (including non-cash) 68,650 — 345,929 414,579 Three months ended March 31, 2018 SkyWest SkyWest Airlines ExpressJet Leasing Consolidated Operating revenues (1) $ 556,294 $ 161,081 $ 66,025 $ 783,400 Operating expense 498,875 166,824 29,526 695,225 Depreciation and amortization expense 37,487 11,161 28,937 77,585 Interest expense 4,476 827 20,931 26,234 Segment profit (loss) (2) 52,943 (6,570) 15,568 61,941 Identifiable intangible assets, other than goodwill — 3,672 — 3,672 Total assets (as of March 31, 2018) 2,184,306 581,722 2,834,159 5,600,187 Capital expenditures (including non-cash) 36,283 1,338 230,167 267,788 (1) Prorate revenue, Airport customer service and other revenues is primarily reflected in the SkyWest Airlines segment. Segment profit (loss) is equal to operating income less interest expense. |
Leases, Commitments and Conti_2
Leases, Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Leases, Commitments and Contingencies | |
Summary of related terms and discount rates | The table below presents lease related terms and discount rates as of March 31, 2019. March 31, 2019 Weighted-average remaining lease term Operating leases 7.0 years Weighted-average discount rate Operating leases |
Summary of lease costs | The Company’s lease costs for the periods indicated included the following components (in thousands): For the three months ended March 31, 2019 2018 $ Change % Change Operating lease cost $ 27,221 $ 52,833 $ (25,612) % Variable and short-term lease cost 1,475 1,419 56 3.9 % Total lease cost $ 28,696 $ 54,252 $ (25,556) % |
Schedule of future minimum rental payments for operating leases | The following table summarizes future minimum rental payments primarily related to leased aircraft required under operating leases that had initial or remaining non-cancelable lease terms as of March 31, 2019 (in thousands): April 2019 through December 2019 $ 54,799 2020 93,640 2021 75,898 2022 67,668 2023 62,498 Thereafter 87,591 $ 442,094 |
Summary of commitments and obligations | The following table summarizes the Company’s commitments and obligations as noted for each of the next five years and thereafter (in thousands): Total Apr - Dec 2019 2020 2021 2022 2023 Thereafter Operating lease payments for aircraft and facility obligations $ 442,094 $ 54,799 $ 93,640 $ 75,898 $ 67,668 $ 62,498 $ 87,591 Firm aircraft and spare engine commitments 329,327 139,974 131,657 57,696 — — — Interest commitments (1) 628,528 95,377 114,048 98,884 84,754 68,950 166,515 Principal maturities on long-term debt 3,121,661 279,873 357,228 339,297 352,717 361,215 1,431,331 Total commitments and obligations $ 4,521,610 $ 570,023 $ 696,573 $ 571,775 $ 505,139 $ 492,663 $ 1,685,437 (1) At March 31, 2019, the Company had variable rate notes representing only 0.2% of its total long-term debt. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value Measurements | |
Schedule of assets measured at fair value on a recurring basis | Assets measured at fair value on a recurring basis are summarized below (in thousands): Fair Value Measurements as of March 31, 2019 Total Level 1 Level 2 Level 3 Cash, Cash Equivalents $ $ $ — $ — Marketable Securities Bonds and bond funds $ $ — $ $ — Commercial paper 98,990 — 98,990 — — — Total Assets Measured at Fair Value $ $ $ $ — Fair Value Measurements as of December 31, 2018 Total Level 1 Level 2 Level 3 Cash, Cash Equivalents $ 328,384 $ $ — $ — Marketable Securities Bonds and bond funds $ $ — $ $ — Commercial paper — — — — Total Assets Measured at Fair Value $ $ $ $ — |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Long-Term Debt | |
Schedule of long-term debt | Long-term debt consisted of the following as of March 31, 2019 and December 31, 2018 (in thousands): March 31, 2019 December 31, 2018 Current portion of long-term debt $ 366,583 $ 354,072 Current portion of unamortized debt issue cost, net (3,786) (3,866) Current portion of long-term debt, net of debt issue costs $ 362,797 $ 350,206 Long-term debt, net of current maturities $ 2,755,078 $ 2,831,366 Long-term portion of unamortized debt issue cost, net (20,761) (21,598) Long-term debt, net of current maturities and debt issue costs $ 2,734,317 $ 2,809,768 Total long-term debt (including current portion) $ 3,121,661 $ 3,185,438 Total unamortized debt issue cost, net (24,547) (25,464) Total long-term debt, net of debt issue costs $ 3,097,114 $ 3,159,974 |
Flying Agreements and Airport C
Flying Agreements and Airport Customer Service and Other Revenues (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | 21 Months Ended | |||
Mar. 31, 2019USD ($)aircraft | Jun. 30, 2018aircraft | Mar. 31, 2018USD ($) | Dec. 31, 2016item | Dec. 31, 2020aircraft | Dec. 31, 2018USD ($) | |
Agreements with other airlines | ||||||
Percentage of ASMs flown under fixed-fee arrangements | 84.80% | |||||
Percentage of ASMs flown under pro-rate arrangements | 15.20% | |||||
Revenues [Abstract] | ||||||
Operating revenues | $ | $ 723,694 | $ 783,400 | ||||
future minimum rental income | ||||||
April 2019 through December 2019 | $ | 18,495 | |||||
2020 | $ | 13,034 | |||||
2021 | $ | 7,956 | |||||
2022 | $ | 3,125 | |||||
2023 | $ | 185 | |||||
Total | $ | 42,795 | |||||
Property and equipment and related assets | $ | $ 5,274,568 | $ 5,005,744 | ||||
Sky West Airlines Inc | Delta Connection Prorate Agreement | ||||||
future minimum rental income | ||||||
Number of aircraft | 29 | |||||
Term of agreement | 30 days | |||||
Sky West Airlines Inc | United Express Prorate Agreement | ||||||
future minimum rental income | ||||||
Number of aircraft | 25 | |||||
Term of agreement | 120 days | |||||
Sky West Airlines Inc | American Capacity Purchase Agreement | ||||||
future minimum rental income | ||||||
Number of aircraft | 62 | |||||
Sky West Airlines Inc | American Prorate Agreement | ||||||
future minimum rental income | ||||||
Term of agreement | 120 days | |||||
Third Party Lease | ||||||
future minimum rental income | ||||||
Property and equipment and related assets | $ | $ 23,200 | |||||
CRJ 200 | ||||||
future minimum rental income | ||||||
Number of seats on aircraft | item | 50 | |||||
CRJ 200 | Sky West Airlines Inc | Delta Connection Agreement | ||||||
future minimum rental income | ||||||
Number of aircraft | 58 | |||||
CRJ 200 | Sky West Airlines Inc | United Express Agreements | ||||||
future minimum rental income | ||||||
Number of aircraft | 68 | |||||
CRJ 200 | Sky West Airlines Inc | American Prorate Agreement | ||||||
future minimum rental income | ||||||
Number of aircraft | 7 | |||||
CRJ 700 | Sky West Airlines Inc | Delta Connection Agreement | ||||||
future minimum rental income | ||||||
Number of aircraft | 18 | |||||
CRJ 700 | Sky West Airlines Inc | United Express Agreements | ||||||
future minimum rental income | ||||||
Number of aircraft | 19 | |||||
CRJ 700 | Sky West Airlines Inc | American Capacity Purchase Agreement | ||||||
future minimum rental income | ||||||
Number of aircraft | 62 | |||||
CRJ 900 | Delta Connection Agreement | ||||||
future minimum rental income | ||||||
Number of aircraft | 8 | 20 | ||||
CRJ 900 | Forecast | Delta Connection Agreement | ||||||
future minimum rental income | ||||||
Number of aircraft | 12 | |||||
CRJ 900 | Sky West Airlines Inc | Delta Connection Agreement | ||||||
future minimum rental income | ||||||
Number of aircraft | 43 | |||||
E 175 | Sky West Airlines Inc | ||||||
future minimum rental income | ||||||
Number of aircraft within one year 2019 | 4 | |||||
Number of aircraft within two year 2020 | 4 | |||||
E 175 | Sky West Airlines Inc | Delta Connection Agreement | ||||||
future minimum rental income | ||||||
Number of aircraft | 50 | |||||
Number of aircrafts to be placed in service | 8 | |||||
E 175 | Sky West Airlines Inc | United Express Agreements | ||||||
future minimum rental income | ||||||
Number of aircraft | 65 | |||||
E 175 | Sky West Airlines Inc | Alaska Capacity Purchase Agreement | ||||||
future minimum rental income | ||||||
Number of aircraft | 32 | |||||
Number of aircrafts to be placed in service | 3 | |||||
Flying agreements | ||||||
Revenues [Abstract] | ||||||
Operating revenues | $ | $ 700,001 | 767,964 | ||||
Flight operations | ||||||
Revenues [Abstract] | ||||||
Operating revenues | $ | 386,545 | 469,025 | ||||
Aircraft rentals | ||||||
Revenues [Abstract] | ||||||
Operating revenues | $ | 207,381 | 189,068 | ||||
Prorate agreements | ||||||
Revenues [Abstract] | ||||||
Operating revenues | $ | $ 106,075 | $ 109,871 |
Share-Based Compensation and _2
Share-Based Compensation and Stock Repurchases (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Share-Based Compensation | ||
Upon vesting, each restricted stock unit and performance share replaced with common stock | 1.00% | |
Stock based compensation expense | $ 3.9 | $ 4.9 |
Employee severance related costs | 7.9 | |
Forfeiture credit | $ 4.5 | |
Common stock repurchased (in shares) | 476,277 | 177,580 |
Common stock repurchased, value | $ 25 | $ 10 |
Payment of income tax obligation on employee equity awards | $ 9.3 | $ 13.5 |
Restricted stock units | ||
Share-Based Compensation | ||
Granted (in dollars per share) | $ 48.45 | |
Restricted stock units | Long Term Incentive Plan 2010 | ||
Share-Based Compensation | ||
Granted (in shares) | 101,400 | |
Vesting period | 3 years | |
Performance stock units | Long Term Incentive Plan 2010 | ||
Share-Based Compensation | ||
Granted (in shares) | 83,784 | |
Vesting period | 3 years | |
Performance stock units | Minimum | Long Term Incentive Plan 2010 | ||
Share-Based Compensation | ||
Percentage number of performance shares awarded | 0.00% | |
Performance stock units | Maximum | Long Term Incentive Plan 2010 | ||
Share-Based Compensation | ||
Percentage number of performance shares awarded | 200.00% | |
Director | ||
Share-Based Compensation | ||
Granted (in shares) | 18,576 | |
Granted (in dollars per share) | $ 48.45 |
Net Income Per Common Share (De
Net Income Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Net Income Per Common Share | ||
Number of outstanding units not included in computation of Diluted EPS (in shares) | 241,000 | 372,600 |
Numerator | ||
Net Income | $ 88,181 | $ 54,362 |
Denominator | ||
Weighted average number of common shares outstanding | 51,440,000 | 51,921,000 |
Effect of outstanding share-based awards | 658,000 | 1,112,000 |
Weighted average number of shares for diluted net income per common share | 52,098,000 | 53,033,000 |
Basic earnings per share (in dollars per share) | $ 1.71 | $ 1.05 |
Diluted earnings per share (in dollars per share) | $ 1.69 | $ 1.03 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019USD ($)segment | Mar. 31, 2018USD ($) | Dec. 31, 2018USD ($) | |
Segment Reporting | |||
Number of operating segments | segment | 3 | ||
Operating revenues | $ 723,694 | $ 783,400 | |
Operating expense | 627,275 | 695,225 | |
Depreciation and amortization expense | 89,986 | 77,585 | |
Special items | 21,869 | ||
Interest expense | 32,507 | 26,234 | |
Segment profit (loss) | 114,444 | 67,204 | |
Identifiable intangible assets, other than goodwill | 3,672 | ||
Total assets | 6,544,532 | 5,600,187 | $ 6,313,212 |
Capital expenditures (including non-cash) | 414,579 | 267,788 | |
Segments | |||
Segment Reporting | |||
Segment profit (loss) | 63,912 | 61,941 | |
SkyWest Airlines | |||
Segment Reporting | |||
Operating revenues | 585,768 | 556,294 | |
Operating expense | 545,901 | 498,875 | |
Depreciation and amortization expense | 40,053 | 37,487 | |
Special items | 18,508 | ||
Interest expense | 3,818 | 4,476 | |
Total assets | 2,738,248 | 2,184,306 | |
Capital expenditures (including non-cash) | 68,650 | 36,283 | |
SkyWest Airlines | Segments | |||
Segment Reporting | |||
Segment profit (loss) | 36,049 | 52,943 | |
ExpressJet Airlines Inc | |||
Segment Reporting | |||
Operating revenues | 24,050 | 161,081 | |
Operating expense | 28,690 | 166,824 | |
Depreciation and amortization expense | 971 | 11,161 | |
Special items | 3,361 | ||
Interest expense | 827 | ||
Identifiable intangible assets, other than goodwill | 3,672 | ||
Total assets | 581,722 | ||
Capital expenditures (including non-cash) | 1,338 | ||
ExpressJet Airlines Inc | Segments | |||
Segment Reporting | |||
Segment profit (loss) | (4,640) | (6,570) | |
SkyWest Leasing | |||
Segment Reporting | |||
Operating revenues | 113,876 | 66,025 | |
Operating expense | 52,684 | 29,526 | |
Depreciation and amortization expense | 48,962 | 28,937 | |
Interest expense | 28,689 | 20,931 | |
Total assets | 3,806,284 | 2,834,159 | |
Capital expenditures (including non-cash) | 345,929 | 230,167 | |
SkyWest Leasing | Segments | |||
Segment Reporting | |||
Segment profit (loss) | $ 32,503 | $ 15,568 |
Leases, Commitments and Conti_3
Leases, Commitments and Contingencies - Leases (Details) $ in Thousands | Jan. 01, 2019USD ($) | Mar. 31, 2019USD ($)aircraft | Mar. 31, 2018USD ($) | Dec. 31, 2016item | Dec. 31, 2018USD ($) |
Lessee, Lease, Description [Line Items] | |||||
Number of aircraft leased | aircraft | 89 | ||||
Transition adjustment, net of tax | $ (13,141) | ||||
Operating lease right-of-use assets | $ 341,898 | ||||
Current maturities of lease liabilities | 73,524 | ||||
Noncurrent operating leases | 275,088 | ||||
Operating leases | $ 19,700 | ||||
Weighted-average remaining lease term: Operating leases | 7 years | ||||
Weighted-average discount rate: Operating leases | 6.40% | ||||
Lease costs | |||||
Operating lease cost | $ 27,221 | $ 52,833 | |||
Variable and short-term lease cost | 1,475 | 1,419 | |||
Lease, Cost, Total | 28,696 | $ 54,252 | |||
Operating Lease Cost, Change | (25,612) | ||||
Variable and short-term lease cost, change | 56 | ||||
Total lease cost, change | $ (25,556) | ||||
Operating lease cost, change (as a percent) | (48.50%) | ||||
Variable and short-term lease cost, change (as a percent) | 3.90% | ||||
Percentage of change in total lease cost. | (47.10%) | ||||
CRJ 200 | |||||
Lessee, Lease, Description [Line Items] | |||||
Number of seats on aircraft | item | 50 | ||||
Aircraft | |||||
Lessee, Lease, Description [Line Items] | |||||
Number of aircraft acquired | aircraft | 52 | ||||
Payments for acquired aircraft | $ 111,700 | ||||
Impairment adjustment on retained earnings | $ 13,100 | ||||
Aircraft | Minimum | |||||
Lessee, Lease, Description [Line Items] | |||||
Remaining lease term | 1 year | ||||
Aircraft | Maximum | |||||
Lessee, Lease, Description [Line Items] | |||||
Remaining lease term | 9 years | ||||
Airport Facilities | Minimum | |||||
Lessee, Lease, Description [Line Items] | |||||
Remaining lease term | 1 month | ||||
Airport Facilities | Maximum | |||||
Lessee, Lease, Description [Line Items] | |||||
Remaining lease term | 37 years |
Leases, Commitments and Conti_4
Leases, Commitments and Contingencies (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2019USD ($)aircraft | |
Future minimum rental payments required under operating leases | |
April 2019 through December 2019 | $ 54,799 |
2020 | 93,640 |
2021 | 75,898 |
2022 | 67,668 |
2023 | 62,498 |
Thereafter | 87,591 |
Total | $ 442,094 |
E 175 | |
Future minimum rental payments required under operating leases | |
Number of aircraft under firm purchase commitment | aircraft | 11 |
Leases, Commitments and Conti_5
Leases, Commitments and Contingencies - Commitments and Obligations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
Operating lease payments for aircraft and facility obligations | ||
April 2019 through December 2019 | $ 54,799 | |
2020 | 93,640 | |
2021 | 75,898 | |
2022 | 67,668 | |
2023 | 62,498 | |
Thereafter | 87,591 | |
Total | 442,094 | |
Firm aircraft and spare engine commitments | ||
Apr - Dec 2019 | 139,974 | |
2020 | 131,657 | |
2021 | 57,696 | |
Total | 329,327 | |
Interest commitments | ||
Apr - Dec 2019 | 95,377 | |
2020 | 114,048 | |
2021 | 98,884 | |
2022 | 84,754 | |
2023 | 68,950 | |
Thereafter | 166,515 | |
Total | 628,528 | |
Principal maturities on long-term debt | ||
Apr - Dec 2019 | 279,873 | |
2020 | 357,228 | |
2021 | 339,297 | |
2022 | 352,717 | |
2023 | 361,215 | |
Thereafter | 1,431,331 | |
Total long-term debt | 3,121,661 | $ 3,185,438 |
Total commitments and obligations | ||
Apr - Dec 2019 | 570,023 | |
2020 | 696,573 | |
2021 | 571,775 | |
2022 | 505,139 | |
2023 | 492,663 | |
Thereafter | 1,685,437 | |
Total | $ 4,521,610 | |
Variable interest rate (as a percent) | 0.20% |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Fair Value Measurements | ||
Marketable Securities | $ 253,397 | $ 360,945 |
Fair Value of Financial Instruments | ||
Carrying amount of long-term debt | 3,097,114 | 3,159,974 |
Recurring | ||
Fair Value Measurements | ||
Cost of cash and cash equivalents and available for sale securities | 544,200 | 689,400 |
Recurring | Fair value | ||
Fair Value Measurements | ||
Cash, Cash Equivalents | 290,885 | 328,384 |
Marketable Securities | 253,397 | 360,945 |
Total Assets Measured at Fair Value | 544,282 | 689,329 |
Recurring | Fair value | Bonds and bond funds | ||
Fair Value Measurements | ||
Marketable Securities | 154,407 | 229,783 |
Recurring | Fair value | Commercial paper | ||
Fair Value Measurements | ||
Marketable Securities | 98,990 | 131,162 |
Recurring | Level 1 | ||
Fair Value Measurements | ||
Cash, Cash Equivalents | 290,885 | 328,384 |
Total Assets Measured at Fair Value | 290,885 | 328,384 |
Recurring | Level 2 | ||
Fair Value Measurements | ||
Marketable Securities | 253,397 | 360,945 |
Total Assets Measured at Fair Value | 253,397 | 360,945 |
Fair Value of Financial Instruments | ||
Fair value of long-term debt | 3,100,000 | 3,160,000 |
Carrying amount of long-term debt | 3,120,000 | 3,190,000 |
Recurring | Level 2 | Bonds and bond funds | ||
Fair Value Measurements | ||
Marketable Securities | 154,407 | 229,783 |
Recurring | Level 2 | Commercial paper | ||
Fair Value Measurements | ||
Marketable Securities | $ 98,990 | $ 131,162 |
Long-term Debt (Details)
Long-term Debt (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019USD ($)aircraft | Dec. 31, 2018USD ($) | |
Debt Instrument [Line Items] | ||
Current portion long-term debt | $ 366,583 | $ 354,072 |
Less current portion of unamortized debt issue cost, net | (3,786) | (3,866) |
Current portion of long-term debt, net of debt issue costs | 362,797 | 350,206 |
Long-term debt, net of current maturities | 2,755,078 | 2,831,366 |
Less long-term portion of unamortized debt issue cost, net | (20,761) | (21,598) |
Long-term debt, net of current maturities and debt issue costs | 2,734,317 | 2,809,768 |
Total long-term debt (including current portion) | 3,121,661 | 3,185,438 |
Total unamortized debt issue cost, net | (24,547) | (25,464) |
Total | $ 3,097,114 | 3,159,974 |
Number of aircraft leased | aircraft | 89 | |
Debt issued to purchase of aircraft | $ 14,500 | |
Letter of credit | ||
Debt Instrument [Line Items] | ||
Amount outstanding | $ 80,000 | $ 78,700 |
E 175 | ||
Debt Instrument [Line Items] | ||
Number of aircraft delivered | aircraft | 1 | |
Purchase of aircraft financed through long-term debt | $ 19,900 | |
Debt instrument, term | 12 years | |
Interest rate (as a percent) | 3.90% | |
Purchased, previously-leased aircraft | ||
Debt Instrument [Line Items] | ||
Number of aircraft purchased | aircraft | 2 | |
Debt instrument, term | 18 months | |
Interest rate (as a percent) | 2.00% |
Gain on Sale (Details)
Gain on Sale (Details) $ in Thousands | Jan. 22, 2019USD ($)aircraft | Jan. 11, 2019USD ($) | Mar. 31, 2019USD ($) |
Gain on sale | $ 46,525 | ||
Interest rate (as a percent) | 6.85% | ||
Asset Purchase Agreement | ExpressJet | |||
Proceeds from sale of equipment | $ 60,800 | ||
Stock Purchase Agreement | ExpressJet | |||
Cash received from stock sale | $ 18,800 | ||
Amount loaned to Kair Enterprises, Inc | $ 26,000 | ||
Number of aircraft in early lease buyout | aircraft | 16 | ||
Lease term (in years) | 5 years |
Special Items (Details)
Special Items (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Special Items | |
Agreement termination non cash expense | $ 18.5 |
Employee severance cost | $ 3.4 |
Income Taxes (Details)
Income Taxes (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Effective tax rate (as a percent) | 23.00% |
Statutory Federal income tax rate (as a percent) | 21.00% |
Accounting Standards Update 2016-09 | |
Discrete tax benefit | $ 2.3 |