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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-14719
SKYWEST, INC.
Incorporated under the laws of Utah 87-0292166
(I.R.S. Employer ID No.)
444 South River Road
St. George, Utah 84790
(801) 634-3000
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 8, 1995
----- -----------------------------
Common stock, no par value 10,322,132
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SKYWEST, INC.
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
As of June 30, 1995 and
March 31, 1995 3
Condensed Consolidated Statements of
Income For the Three Months
Ended June 30, 1995 and 1994 5
Condensed Consolidated Statements of
Cash Flows For the Three Months Ended
June 30, 1995 and 1994 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 12
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PART I. FINANCIAL INFORMATION
SKYWEST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
ASSETS
June 30, March 31,
1995 1995
-------- ---------
CURRENT ASSETS:
Cash and cash equivalents $ 28,178 $ 27,416
Available-for-sale securities 21,474 21,309
Receivables, net 10,099 7,004
Inventories 7,198 7,179
Other current assets 8,384 8,734
-------- --------
Total current assets 75,333 71,642
-------- --------
PROPERTY AND EQUIPMENT:
Aircraft and rotable spares 133,193 127,004
Buildings and ground equipment 30,563 28,866
Deposits on aircraft and rotable spares 6,055 9,265
Rental vehicles 2,294 1,849
-------- --------
172,105 166,984
Less-accumulated depreciation and
amortization (60,237) (56,743)
-------- --------
111,868 110,241
-------- --------
OTHER ASSETS 6,111 6,299
-------- --------
$193,312 $188,182
======== ========
See notes to condensed consolidated financial statements.
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SKYWEST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in Thousands)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, March 31,
1995 1995
-------- ---------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,757 $ 3,747
Current portion of deferred credits 803 803
Trade accounts payable 14,910 13,789
Accrued salaries, wages and benefits 3,719 4,647
Taxes other than income taxes 1,982 1,353
Air traffic liability 1,297 1,264
Dividend payable 1,755 -
Income taxes payable 1,463 -
-------- --------
Total current liabilities 29,686 25,603
-------- --------
LONG-TERM DEBT, less current maturities 28,472 29,553
-------- --------
DEFERRED CREDITS, less current portion 2,104 2,308
-------- --------
DEFERRED INCOME TAXES PAYABLE 13,991 13,034
-------- --------
STOCKHOLDERS' EQUITY:
Common stock 87,698 87,658
Retained earnings 47,452 46,177
Treasury stock (16,091) (16,091)
--------- --------
Total stockholders' equity 119,059 117,684
-------- --------
$193,312 $188,182
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See notes to condensed consolidated financial statements.
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SKYWEST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
For The
Three Months Ended
June 30,
-----------------------
1995 1994
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OPERATING REVENUES:
Passenger $47,402 $46,306
Freight 1,045 963
Public service & other 553 613
Nonairline 11,381 10,989
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60,381 58,871
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OPERATING EXPENSES:
Flying operations 19,107 16,297
Maintenance 7,054 5,963
Aircraft, traffic and passenger service 7,202 6,854
Promotion and sales 5,549 5,301
General and administrative 2,759 3,320
Depreciation and amortization 3,449 2,580
Nonairline 10,462 10,108
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55,582 50,423
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OPERATING INCOME 4,799 8,448
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OTHER INCOME AND (EXPENSE):
Interest expense (476) (147)
Interest income 669 566
Gain on sales of property and equipment 75 4
------- -------
268 423
------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,067 8,871
PROVISION FOR INCOME TAXES (1,978) (3,504)
------- --------
NET INCOME $ 3,089 $ 5,367
======= =======
NET INCOME PER COMMON SHARE $ .30 $ .47
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WEIGHTED AVERAGE SHARES OUTSTANDING 10,318,978 11,456,611
========== ==========
See notes to condensed consolidated financial statements.
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SKYWEST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
For The
Three Months Ended
June 30,
-----------------------
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,089 $ 5,367
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,449 2,580
Gain on sales of property and equipment (75) (4)
Maintenance expense related to disposition of rotable spares 97 71
Increase in deferred income taxes 957 634
Amortization of deferred credits (204) (205)
Nonairline depreciation and amortization 578 475
Changes in operating assets and liabilities:
Increase in receivables, net (3,095) (2,106)
Increase in inventories (19) (807)
Decrease in other current assets 350 174
Increase in trade accounts payable 1,121 666
Increase in other current liabilities 1.197 3,501
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NET CASH PROVIDED BY OPERATING ACTIVITIES 7,445 10,346
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale securities (165) -
Acquisition of property and equipment:
Aircraft and rotable spares (6,570) (4,217)
Buildings and ground equipment (1,697) (1,041)
Deposits on aircraft and rotable spares (1,100) (1,905)
Rental vehicles (845) (696)
Proceeds from sales of property and equipment 408 81
Decrease in deposits on aircraft and rotable spares 4,310 -
Decrease in other assets 7 145
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NET CASH USED IN INVESTING ACTIVITIES (5,652) (7,633)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 40 83
Reduction of long-term debt (1,071) (1,419)
------- -------
NET CASH USED IN FINANCING ACTIVITIES (1,031) (1,336)
------- -------
Increase in cash and cash equivalents 762 1,377
Cash and cash equivalents at beginning of period 27,416 56,402
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $28,178 $57,779
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 524 $ 402
Income taxes - 10
See notes to condensed consolidated financial statements.
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SKYWEST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Consolidated Financial Statements
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. These condensed consolidated
financial statements reflect all adjustments which, in the opinion of
management, are necessary to present fairly the results of operations for the
interim periods presented. All adjustments are of a normal recurring nature.
Certain information and disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the following disclosures are adequate to make the
information presented not misleading. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's latest
annual report on Form 10-K. The results of operations for the three months
ended June 30, 1995 are not necessarily indicative of the results that may be
expected for the year ending March 31, 1996.
Note B - Available-for-Sale Securities
Available-for-sale securities are recorded at fair market value.
Note C - Income Taxes
For the three months ended June 30, 1995 and 1994, the Company provided for
income taxes based upon the estimated annualized effective tax rate after
giving effect to available investment tax credits. Investment tax credits have
been accounted for by the flow-through method. Effective April 1, 1993, the
Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS No. 109). The Company has classified the
net current and noncurrent deferred tax assets and liabilities in accordance
with SFAS No. 109 which at June 30, 1995 included a current deferred tax asset
of approximately $1.5 million and a deferred tax liability of approximately
$14.0 million.
Note D - Net Income Per Common Share
Net income per common share is calculated based upon the weighted average
shares outstanding during the period. No material dilution results from common
stock equivalents which are outstanding options to purchase common stock.
Note E - Financial Information Relating to Business Segments
Nonairline revenues and expenses as included in the Condensed Consolidated
Financial Statements primarily represent the operations of Scenic
Airlines, Inc. ("Scenic") and National Parks Transportation, Inc. ("NPT"),
both wholly-owned subsidiaries of SkyWest, Inc. Scenic provides air tours and
general aviation services to the scenic regions of northern Arizona, southern
Utah and southern Nevada, commonly referred to as the "Grand Circle".
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The primary aircraft used to accomplish scenic tours are 19 passenger
deHavilland Twin Otter VistaLiners. NPT provides car rental services through a
fleet of Avis vehicles located at five airports served by SkyWest Airlines,
Inc.
The following information presents the impact of this segment of business on
the accompanying Condensed Consolidated Financial Statements.
For the
Three Months Ended
June 30,
(In Thousands)
1995 1994
------- -------
Operating revenues $11,381 $10,989
Operating income 919 881
Depreciation and amortization 578 475
Capital expenditures 4,416 1,528
As of June 30,
-------------------
1995 1994
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Identifiable assets $26,416 $20,617
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Operating Statistics
For the
Three Months Ended
June 30,
-------------------------------------
1995 1994 % change
------- ------- ----------
Passengers carried 534,560 536,782 (0.4%)
Revenue passenger miles (000s) 135,088 124,763 8.3%
Available seat miles (000s) 291,814 246,255 18.5%
Passenger load factor 46.3% 50.7% (4.4) pts
Passenger breakeven load factor 43.1% 42.8% 0.3 pts
Yield per revenue passenger mile $ .351 $ .371 (5.4%)
Cost per available seat mile $ .156 $ .164 (4.9%)
Average passenger trip (miles) 253 232 9.1%
For the Three Months Ended June 30, 1995 and 1994:
For the quarter ended June 30, 1995, the Company experienced continued growth
in available seat miles ("ASMs") and revenue passenger miles ("RPMs") due to
additional aircraft deliveries. Operating revenues increased to $60.4 million
for the quarter ended June 30, 1995, compared to $58.9 million for the quarter
ended June 30, 1994. Nonairline revenues increased to $11.4 million for the
quarter ended June 30, 1995, compared to $11.0 million for the quarter ended
June 30, 1994. Interest expense increased to $.5 million for the quarter ended
June 30, 1995, from $.1 million for the quarter ended June 30, 1994. Net
income was $3.1 million or $.30 per share for the quarter ended June 30, 1995,
compared to $5.4 million or $.47 per share for the quarter ended June 30, 1994.
Passenger revenues, which represented 78.5 percent of total operating revenues,
increased 2.4 percent to $47.4 million for the quarter ended June 30, 1995,
compared to $46.3 million or 78.7 percent of total operating revenues for the
quarter ended June 30, 1994. The increase is attributable to an 8.3 percent
increase in RPMs which was offset by a 5.4 percent decrease in yield per RPM.
The increase in RPMs is due to four additional regional jets which are serving
new SkyWest destinations such as Eugene and Portland, Oregon, Tucson, Arizona
and Albuquerque, New Mexico and from the acquisition of four new cabin-class
Brasilia aircraft which are being used to replace Metro aircraft as their
leases terminate. Yield per RPM decreased 5.4 percent to $.351 for the quarter
ended June 30, 1995, compared to $.371 for the quarter ended June 30, 1994,
primarily due to a 9.1 percent increase in the average passenger trip length
due to the utilization of the Canadair Regional Jet where the average trip
length is 470 miles. In addition, the dilution which is related to the use of
the regional jets has been somewhat offset by the strengthening of tuboprop
yields. These yields have increased based on some fare increases in the Los
Angeles, California markets.
As a result of indirect competition from low-fare carriers and lingering
negative publicity regarding regional airlines, passenger load factor decreased
4.4 points to 46.3 percent for the quarter ended June 30, 1995, compared to
50.7 percent for the quarter ended June 30, 1994. Due to passenger
enplanements being lower than expected which resulted in lower revenues, the
positive spread between actual and breakeven load factor decreased to 3.2
points for the quarter ended June 30, 1995, compared to 7.9 points for the
quarter ended June 30, 1994.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Total operating expenses and interest increased 10.9 percent to $56.1 million
for the quarter ended June 30, 1995, compared to $50.6 million for the quarter
ended June 30, 1994. As a percentage of consolidated operating revenues, total
operating expenses and interest increased to 92.8 percent for the quarter ended
June 30, 1995, from 85.9 percent for the comparable quarter ended June 30,
1994. For the quarter ended June 30, 1995, total airline operating expenses and
interest (excluding nonairline expenses) were 93.0 percent of operating
revenues compared to 84.5 percent for the comparable quarter ended June 30,
1994. The declining margin was due to decreased passenger enplanements which
created a revenue shortfall and was not due to the Company experiencing
unexpected or unusual cost increases relative to the ASM production. As a
result of the new regional jet operations together with continued cost
reduction measures, airline operating costs per ASM (including interest
expense) decreased to 15.6c. for the quarter ended June 30, 1995 from 16.4c.
for the comparable quarter ended June 30, 1994. Factors relating to the
increase in operating expenses and interest are discussed below.
Salaries, wages and employee benefits increased as a percentage of airline
operating revenues to 26.1 percent for the quarter ended June 30, 1995, from
25.6 percent for the quarter ended June 30, 1993. This percentage increased as
a result of decreased passenger traffic which created a revenue shortfall. The
average number of full-time equivalent employees for the quarter ended June 30,
1995 was 2,013, compared to 1,800 for the quarter ended June 30, 1994. The
increase in number of personnel was due to hiring pilots, flight attendants and
customer service personnel to support new regional jet operations. Salaries,
wages and employee benefits per ASM decreased to 4.4c. for the quarter ended
June 30, 1995, compared to 5.0c. for the quarter ended June 30, 1994,
primarily due to the increased ASMs generated from regional jet operations.
Aircraft costs, including aircraft rent and depreciation, increased as a
percentage of airline operating revenues to 20.9 percent for the quarter ended
June 30, 1995 from 17.5 percent for the quarter ended June 30, 1994. Aircraft
costs per ASM increased slightly to 3.5c. for the quarter ended June 30, 1995,
compared to 3.4c. for the quarter ended June 30, 1994. The increase is due to
higher rent amounts on the regional jets as well as additional Brasilia
aircraft.
Maintenance expense increased as a percentage of airline operating revenues to
10.6 percent for the quarter ended June 30, 1995, compared to 8.9 percent for
the quarter ended June 30, 1994. The slight increase is due to the use of the
accrual method in accounting for jet engine overhauls. This increase was
somewhat offset by the utilization of more Brasilia aircraft which are more
efficient than Metroliner aircraft. Maintenance expense per ASM increased
slightly to 1.8c. for the quarter ended June 30, 1995, from 1.7c. for the
quarter ended June 30, 1994.
Fuel costs increased as a percentage of airline operating revenues to 9.5
percent for the quarter ended June 30, 1995, from 8.3 percent for the quarter
ended June 30, 1994, primarily due to a increase in the average fuel price per
gallon to $.73 from $.70. Fuel costs per ASM remained constant at 1.6c. for
the quarters ended June 30, 1995 and 1994 due to the operation of additional
Brasilia aircraft which are more fuel efficient, on a cost per ASM basis, than
Metroliners, as well as from the increased ASMs generated from regional jet
operations.
Interest expense increased as a percentage of airline operating revenues to .1
percent for the quarter ended June 30, 1995, from .03 percent for the quarter
ended June 30, 1994. The increase was primarily due to interest expense
charges on interim short-term loans on regional jets which was offset by lower
aircraft rents. Subsequently, the interim loans were replaced with long-term
operating leases.
Other expenses, primarily consisting of commissions, landing fees, station
rentals, computer reservation system fees and hull and liability insurance,
increased as a percentage of airline operating revenues to 25.1 percent for the
quarter ended June 30, 1995, from 23.9 percent for the quarter ended June 30,
1994. The increase is due primarily to significant rate increases in customer
reservation system boarding fees.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Nonairline expenses increased 3.5 percent to $10.5 million for the quarter
ended June 30, 1995, compared to $10.1 million for the quarter ended June 30,
1994, due to an increased volume of activity. Additionally, the average number
of full-time equivalent employees was 303 for the quarter ended June 30, 1995,
compared to 260 at June 30, 1994.
Liquidity and Capital Resources
The Company had working capital of $45.6 million and a current ratio of 2.5:1
at June 30, 1995, compared to working capital of $46.0 million and a current
ratio of 2.8:1 at March 31, 1995. During the first quarter of fiscal 1996, the
Company invested $7.7 million in flight equipment, $2.5 million in buildings,
ground equipment and other fixed assets and reduced long-term debt by $1.1
million. The principal sources of cash during the first quarter of fiscal 1996
were $7.4 million provided by operating activities and $4.3 million in deposits
returned on aircraft. These factors resulted in a $.8 million cash and cash
equivalents increase.
At June 30, 1995, the Company's long-term debt to equity position was 19
percent debt and 81 percent equity compared to 20 percent debt and 80 percent
equity at March 31, 1995.
SkyWest took delivery of one new Brasilia aircraft during the first quarter of
fiscal 1996 and has agreed to purchase 21 additional Brasilia aircraft and
related spare parts inventory and support equipment at a future aggregate cost
of approximately $158 million, including estimated cost escalations. Six are
scheduled for delivery in fiscal 1996, and the remaining 15 aircraft are
scheduled for delivery in fiscal 1997.
The Company took delivery of two new Canadair Regional Jets during the first
quarter of fiscal 1996 and has agreed to acquire two Canadair Regional Jets and
related spare parts inventory and support equipment at an aggregate cost of
approximately $36 million, including estimated cost escalations. These
aircraft are scheduled for delivery later in fiscal 1996.
Depending in large part upon the state of the aircraft financing market and
general economic conditions at the time, management will determine whether to
purchase these Brasilia and Canadair Regional Jet aircraft with available cash
or acquire the aircraft through third-party, long-term loans or lease
arrangements. The Company also has options to acquire 10 additional Brasilia
aircraft at fixed prices (subject to cost escalation and delivery schedules)
exercisable through fiscal 1999. Options to acquire an additional ten Canadair
Regional Jets have been secured; five are exercisable through September 1995
and five are exercisable through July 1996.
As required by an FAA directive, all aircraft with 30 seats or more are to be
equipped with traffic alert and collision avoidance systems by December, 1995.
The Company estimates the cost to be approximately $1.4 million for the
existing aircraft fleet. The Company will fund these expenditures from cash
reserves and internally generated funds.
The Company has available $5.0 million in an unsecured bank line of credit with
interest payable at the bank's base rate less one-quarter percent, which was
8.5 percent at June 30, 1995. In addition, the Company has available $1.5
million in an unused reducing revolving credit facility bearing interest at the
bank's base rate plus one half percent. The amount available under the
facility reduces to $1.0 million on December 1, 1995, and will be reduced by an
additional $500,000 on the 1st day of December on each year thereafter until
December 1, 1997, at which time the facility expires. There were no amounts
outstanding on either of the facilities as of June 30, 1995.
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PART II. OTHER INFORMATION
SKYWEST, INC.
Item 6: Exhibits and Reports on Form 8-K
a. Exhibits - None
b. Reports on Form 8-K - There were no reports on Form 8-K filed during the
quarter ended June 30, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SKYWEST, INC.
August 10, 1995 BY: /s/ Bradford R. Rich
-------------------------------------
Bradford R. Rich
Executive Vice President - Finance,
Chief Financial Officer and Treasurer
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EXHIBIT INDEX
Exhibit 27 Financial Data Schedule
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