1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to ________ Commission file number 0-14719 SKYWEST, INC. Incorporated under the laws of Utah 87-0292166 (I.R.S. Employer ID No.) 444 South River Road St. George, Utah 84790 (801) 634-3000 Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at November 11, 1996 ----- -------------------------------- Common stock, no par value 10,095,650
2 SKYWEST, INC. TABLE OF CONTENTS Part I - Financial Information Item 1. Financial Statements: Condensed Consolidated Balance Sheets As of September 30, 1996 and March 31, 1996 3 Condensed Consolidated Statements of Income For the Three Months and Six Months Ended September 30, 1996 and 1995 5 Condensed Consolidated Statements of Cash Flows For the Six Months Ended September 30, 1996 and 1995 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II - Other Information Item 4. Submission of Matters to a Vote of Security 12 Holders Item 6. Exhibits and Reports on Form 8-K 12 2
3 PART I. FINANCIAL INFORMATION SKYWEST, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited) - -------------------------------------------------------------------------------- ASSETS <TABLE> <CAPTION> September 30, March 31, 1996 1996 ------------- --------- CURRENT ASSETS: <S> <C> <C> Cash and cash equivalents $ 40,866 $ 24,529 Available-for-sale securities 16,016 19,097 Receivables, net 10,785 12,893 Inventories 9,439 8,923 Other current assets 10,980 11,020 --------- --------- Total current assets 88,086 76,462 --------- --------- PROPERTY AND EQUIPMENT: Flight equipment 176,805 171,840 Buildings and ground equipment 41,609 39,092 Deposits on flight equipment 3,603 3,603 Rental vehicles 3,738 2,237 --------- --------- 225,755 216,772 Less-accumulated depreciation and amortization (81,368) (71,701) --------- --------- 144,387 145,071 --------- --------- OTHER ASSETS 5,717 6,017 --------- --------- $ 238,190 $ 227,550 ========= ========= </TABLE> See notes to condensed consolidated financial statements. 3
4 SKYWEST, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (Dollars in Thousands) (Unaudited) - -------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY <TABLE> <CAPTION> September 30, March 31, 1996 1996 ------------- --------- CURRENT LIABILITIES: <S> <C> <C> Current maturities of long-term debt $ 6,212 $ 6,236 Current portion of deferred credits 282 1,614 Trade accounts payable 28,969 23,740 Accrued payroll 6,277 5,451 Taxes other than income taxes 2,371 1,330 Air traffic liability 1,370 1,485 Fleet restructuring accrual 1,345 3,788 --------- --------- Total current liabilities 46,826 43,644 --------- --------- LONG-TERM DEBT, net of current maturities 50,661 53,736 --------- --------- DEFERRED INCOME TAXES PAYABLE 15,921 14,370 --------- --------- STOCKHOLDERS' EQUITY: Common stock 88,649 88,183 Retained earnings 56,418 47,902 Treasury stock (20,285) (20,285) --------- --------- Total stockholders' equity 124,782 115,800 --------- --------- $ 238,190 $ 227,550 ========= ========= </TABLE> See notes to condensed consolidated financial statements. 4
5 SKYWEST, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Amounts) (Unaudited) - -------------------------------------------------------------------------------- <TABLE> <CAPTION> For the For the Three Months Ended Six Months Ended September 30, September 30, --------------------------------- --------------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ OPERATING REVENUES: <S> <C> <C> <C> <C> Passenger $ 62,423 $ 53,334 $ 122,084 $ 100,736 Freight 1,060 1,118 2,070 2,163 Public service and other 362 562 672 1,115 Nonairline 13,885 14,161 25,029 25,542 ------------ ------------ ------------ ------------ 77,730 69,175 149,855 129,556 ------------ ------------ ------------ ------------ OPERATING EXPENSES: Flying operations 25,764 21,961 48,949 41,068 Aircraft, traffic and passenger service 9,080 8,238 17,671 15,440 Maintenance 7,048 7,025 14,790 14,079 Promotion and sales 7,713 6,262 15,036 11,811 General and administrative 3,306 3,156 6,745 5,915 Depreciation and amortization 4,523 3,620 8,902 7,069 Nonairline 12,297 12,348 22,085 22,810 ------------ ------------ ------------ ------------ 69,731 62,610 134,178 118,192 ------------ ------------ ------------ ------------ OPERATING INCOME 7,999 6,565 15,677 11,364 ------------ ------------ ------------ ------------ OTHER INCOME (EXPENSE): Interest expense (666) (524) (1,196) (1,000) Interest income 738 644 1,239 1,313 Gain on sales of property and equipment 38 58 241 133 ------------ ------------ ------------ ------------ 110 178 284 446 ------------ ------------ ------------ ------------ INCOME BEFORE PROVISION FOR INCOME TAXES 8,109 6,743 15,961 11,810 PROVISION FOR INCOME TAXES (3,119) (2,634) (6,137) (4,612) ------------ ------------ ------------ ------------ NET INCOME $ 4,990 $ 4,109 $ 9,824 $ 7,198 ============ ============ ============ ============ NET INCOME PER COMMON SHARE $ .50 $ .40 $ .98 $ .70 ============ ============ ============ ============ WEIGHTED AVERAGE SHARES OUTSTANDING 10,076,041 10,323,311 10,061,703 10,321,156 ============ ============ ============ ============ </TABLE> See notes to condensed consolidated financial statements. 5
6 SKYWEST, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) - -------------------------------------------------------------------------------- <TABLE> <CAPTION> For the Six Months Ended September 30, ------------------------- 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: <S> <C> <C> Net income $ 9,824 $ 7,198 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,902 7,069 Gain on sales of property and equipment (241) (136) Maintenance expense related to disposition of rotable spares 59 113 Increase in deferred income taxes 1,551 1,787 Amortization of deferred credits (1,332) (409) Nonairline depreciation and amortization 1,703 1,265 Tax benefit from exercise of common stock options 56 -- Changes in operating assets and liabilities: Decrease (increase) in receivables, net 2,108 (4,121) Increase in inventories (516) (1,153) Decrease in other current assets 40 880 Increase in trade accounts payable 2,281 4,215 Increase in other current liabilities 1,752 1,874 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 26,187 18,582 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Sale of available-for-sale securities 3,081 55 Acquisition of property and equipment: Aircraft and rotable spares (5,349) (8,909) Deposits on flight equipment -- (3,053) Buildings and ground equipment (2,720) (2,609) Rental vehicles (2,168) (2,012) Proceeds from sales of property and equipment 868 893 Decrease in deposits on aircraft and rotable spares -- 4,310 Increase in other assets (70) (48) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (6,358) (11,373) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 410 75 Payment of cash dividends (803) (1,754) Reduction of long-term debt (3,099) (1,872) -------- -------- NET CASH USED IN FINANCING ACTIVITIES (3,492) (3,551) -------- -------- Increase in cash and cash equivalents 16,337 3,658 Cash and cash equivalents at beginning of period 24,529 27,416 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 40,866 $ 31,074 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 1,186 $ 964 Income taxes 3,277 2,524 </TABLE> See notes to condensed consolidated financial statements. 6
7 SKYWEST, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Consolidated Financial Statements The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary to present fairly the results of operations for the interim periods presented. All adjustments are of a normal recurring nature. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. The results of operations for the three and six months ended September 30, 1996, are not necessarily indicative of the results that may be expected for the year ending March 31, 1997. Note B - Available-for-Sale Securities Available-for-sale securities are recorded at fair market value. Note C - Income Taxes For the six months ended September 30, 1996 and 1995, the Company provided for income taxes based upon the estimated annualized effective tax rate. Under the provisions of the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", the Company has classified the net current and noncurrent deferred tax assets and liabilities which at September 30, 1996, included a current deferred tax asset of approximately $2.3 million and a deferred tax liability of approximately $15.9 million. Note D - Net Income Per Common Share Net income per common share is calculated based upon the weighted average shares outstanding during the periods. No material dilution results from common stock equivalents which are outstanding options to purchase common stock. 7
8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations <TABLE> <CAPTION> Operating Statistics ------------------------------------------------------------------------------------ For the For the Three Months Ended Six Months Ended September 30, September 30, ------------------------------------- ----------------------------------------- 1996 1995 % Change 1996 1995 % Change --------- -------- -------- ---------- ------------ ---------- <S> <C> <C> <C> <C> <C> <C> Passengers carried 683,067 608,003 12.3% 1,346,772 1,142,563 17.9% Revenue passenger miles (000s) 188,161 165,870 13.4% 367,808 300,958 22.2% Available seat miles (000s) 358,437 333,683 7.4% 702,891 625,497 12.4% Passenger load factor 52.5% 49.7% 2.8 pts 52.3% 48.1% 4.2 pts Passenger breakeven load factor 47.8% 45.9% 1.9 pts 47.5% 44.6% 2.9 pts Yield per revenue passenger mile $ .332 $ .322 3.1% $ .332 $ .335 (.9%) Revenue per available seat mile $ .178 $ .165 7.9% $ .178 $ .166 7.2% Cost per available seat mile $ .162 $ .152 6.6% $ .161 $ .154 4.5% Average passenger trip (miles) 275 273 .7% 273 263 3.8% </TABLE> For the Three Months Ended September 30, 1996 and 1995 For the quarter ended September 30, 1996, the Company experienced record levels of passenger enplanements and operating revenues. Revenue passenger miles ("RPMs") increased 13.4 percent while available seat miles ("ASMs") increased 7.4 percent due to additional aircraft deliveries related to its equipment transition program. Operating revenues increased to $77.7 million for the quarter ended September 30, 1996, compared to $69.2 million for the quarter ended September 30, 1995. Nonairline revenues decreased slightly to $13.9 million for the quarter ended September 30, 1996, compared to $14.2 million for the quarter ended September 30, 1995. Net income was $5.0 million or $.50 per share for the quarter ended September 30, 1996, compared to $4.1 million or $.40 per share for the quarter ended September 30, 1995. Passenger revenues, which represented 80.3 percent of total operating revenues, increased 17.0 percent to $62.4 million for the quarter ended September 30, 1996, compared to $53.3 million or 77.1 percent of total operating revenues for the quarter ended September 30, 1995. The increase is attributable to a 13.4 percent increase in RPMs as well as a 3.1 percent increase in yield per RPM. The increase in RPMs is due to higher load factors on regional jets which are serving new SkyWest destinations such as San Francisco, California, Pasco, Washington and Colorado Springs, Colorado. The Company has also upgraded service, with regional jets, to previously served destinations in California such as Ontario, Palm Springs and Orange County, as well as Tucson, Arizona. In addition, the Company has acquired 14 new cabin-class Brasilia aircraft which are being used to replace Metroliner aircraft as their leases terminate. The RPMs have also increased as a result of higher passenger acceptance and due to better equipment dispatch reliability for these new aircraft. Yield per RPM increased 3.1 percent to $.332 for the quarter ended September 30, 1996, compared to $.322 for the quarter ended September 30, 1995, primarily due to slight fare increases on the west coast. As a result, revenue per ASM increased 7.9 percent to $.178 for the quarter ended September 30, 1996, compared to $.165 for the quarter ended September 30, 1995. As a result of a general traffic increase system wide and due to the Company's transition program whereby Metroliner aircraft are being replaced by cabin-class aircraft, load factor increased 2.8 points to 52.5 percent for the quarter ended September 30, 1996, compared to 49.7 percent for the quarter ended September 30, 1995. In addition, the increased passenger enplanements resulted in a positive spread between actual and breakeven load factor of 4.7 points for the quarter ended September 30, 1996, compared to 3.8 points for the quarter ended September 30, 1995. Total operating expenses and interest increased 11.5 percent to $70.4 million for the quarter ended September 30, 1996, compared to $63.1 million for the quarter ended September 30, 1995. As a percentage of consolidated operating revenues, total operating expenses and interest decreased to 90.6 percent for the quarter ended September 30, 1996, from 91.3 percent for the comparable quarter ended September 30, 1995. For the quarter ended September 30, 1996, total airline operating expenses and interest (excluding nonairline expenses) were 91.0 8
9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) percent of airline operating revenues compared to 92.3 percent for the quarter ended September 30, 1995. The improved margin is the result of increased passenger enplanements and operating revenue which has outpaced the increase in operating expenses. Primarily, as a result of increased fuel and passenger handling expenses, airline operating costs per ASM (including interest expense) increased to 16.2(cent) for the quarter ended September 30, 1996, from 15.2(cent) for the comparable quarter ended September 30, 1995. Factors relating to the change in operating expenses are discussed below. Salaries, wages and employee benefits decreased as a percentage of airline operating revenues to 24.2 percent for the quarter ended September 30, 1996, from 26.1 percent for the quarter ended September 30, 1995. The average number of full-time equivalent employees for the quarter ended September 30, 1996 was 2,175, compared to 2,058 for the quarter ended September 30, 1995. The increase in number of personnel was due to hiring flight attendants and customer service personnel to support increased operations. Salaries, wages and employee benefits per ASM was 4.3(cent) in each of the quarters ended September 30, 1996 and 1995. Aircraft costs, including aircraft rent and depreciation, decreased as a percentage of airline operating revenues to 19.2 percent for the quarter ended September 30, 1996, from 20.0 percent for the quarter ended September 30, 1995. Aircraft costs per ASM increased slightly to 3.4(cent) for the quarter ended September 30, 1996, compared to 3.3(cent) for the quarter ended September 30, 1995. The increase is due primarily to a decrease in aircraft utilization. Maintenance expense decreased as a percentage of airline operating revenues to 7.8 percent for the quarter ended September 30, 1996, compared to 9.2 percent for the quarter ended September 30, 1995. This decrease was the result of the utilization of more Brasilia aircraft which are more efficient than Metroliner aircraft. Maintenance expense per ASM decreased slightly to 1.4(cent) for the quarter ended September 30, 1996, from 1.5(cent) for the quarter ended September 30, 1995. Fuel costs increased as a percentage of airline operating revenues to 12.1 percent for the quarter ended September 30, 1996, from 10.9 percent for the quarter ended September 30, 1995, primarily due to an increase in the average fuel price per gallon to $.93 from $.78. Included in the increased fuel price per gallon is a charge of 4.3(cent) per gallon for federal excise tax. As a result of this increase in tax, the Company's management estimates an additional annual operating cost of approximately $1.3 million for fuel expenses. Fuel costs per ASM increased to 2.2(cent) for the quarter ended September 30, 1996, compared to 1.8(cent) for the quarter ended September 30, 1995, as a result of these increased charges. 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 26.6 percent for the quarter ended September 30, 1996, from 25.1 percent for the quarter ended September 30, 1995. The increase is due primarily to significant rate increases in customer reservation system boarding fees and related passenger handling charges. Nonairline expenses were consistent at $12.3 million in each of the quarters ended September 30, 1996 and 1995, due to a decreased volume of activity. Additionally, the average number of full-time equivalent employees was 316 for the quarter ended September 30, 1996, compared to 308 at September 30, 1995. For the Six Months Ended September 30, 1996 and 1995 For the six months ended September 30, 1996, the Company experienced record levels of passenger enplanements and operating revenues. Revenue passenger miles increased 22.2 percent while available seat miles increased 12.4 percent due to additional aircraft deliveries related to its equipment transition program. Operating revenues increased to $149.9 million for the six months ended September 30, 1996, compared to $129.6 million for the six months ended September 30, 1995. Nonairline revenues decreased slightly to $25.0 million for the six months ended September 30, 1996, compared to $25.5 million for the six months ended September 30, 1995. Net income was $9.8 million or $.98 per share for the six months ended September 30, 1996, compared to $7.2 million or $.70 per share for the six months ended September 30, 1995. 9
10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Passenger revenues, which represented 81.5 percent of total operating revenues, increased 21.2 percent to $122.1 million for the six months ended September 30, 1996, compared to $100.7 million or 77.8 percent of total operating revenues for the six months ended September 30, 1995. The increase is attributable to a 22.2 percent increase in RPMs which was offset by a .9 percent decrease in yield per RPM. The increase in RPMs is due to the addition of two regional jets which are serving new SkyWest destinations such as San Francisco, California, Pasco, Washington and Colorado Springs, Colorado. The Company has also upgraded service, with regional jets, to previously served destinations in California such as Ontario and Palm Springs, Orange County, as well as Tucson, Arizona. In addition, the Company has acquired 14 new cabin-class Brasilia aircraft which are being used to replace Metro aircraft as their leases terminate. The RPMs have also increased as a result of higher passenger acceptance and due to better equipment dispatch reliability for these new aircraft. Yield per RPM decreased only .9 percent to $.332 for the six months ended September 30, 1996, compared to $.335 for the six months ended September 30, 1995, primarily due to a 3.8 percent increase in the average passenger trip length resulting from the operation of more Canadair Regional Jets where the average trip length is approximately 460 miles. Although yield per RPM decreased .9 percent , revenue per ASM increased 7.2 percent to $.178 for the six months ended September 30, 1996, compared to $.166 for the six months ended September 30, 1995. As a result of a general traffic increase system wide and due the the Company's transition program whereby Metroliner aircraft are being replaced by cabin-class aircraft, load factor increased 4.2 points to 52.3 percent for the six months ended September 30, 1996, compared to 48.1 percent for the six months ended September 30, 1995. In addition, the increased passenger enplanements resulted in a positive spread between actual and breakeven load factor of 4.8 points for the six months ended September 30, 1996, compared to 3.5 points for the six months ended September 30, 1995. Total operating expenses and interest increased 13.6 percent to $135.4 million for the six months ended September 30, 1996, compared to $119.2 for the six months ended September 30, 1995. As a percentage of consolidated operating revenues, total operating expenses and interest decreased to 90.3 percent for the six months ended September 30, 1996, from 92.0 percent for the comparable six months ended September 30, 1995. For the six months ended September 30, 1996, total airline operating expenses and interest (excluding nonairline expenses) were 90.8 percent of airline operating revenues compared to 92.7 percent for the six months ended September 30, 1995. The improved margin is the result of increased passenger enplanements and operating revenue which has outpaced the increase in operating expenses. Primarily, as a result of increased fuel and passenger handling expenses, airline operating costs per ASM (including interest expense) increased to 16.1(cent) for the six months ended September 30, 1996, from 15.4(cent) for the comparable six months ended September 30, 1995. Factors relating to the change in operating expenses are discussed below. Salaries, wages and employee benefits decreased as a percentage of airline operating revenues to 24.3 percent for the six months ended September 30, 1996, from 26.1 percent for the six months ended September 30, 1995. The average number of full-time equivalent employees for the six months ended September 30, 1996, was 2,152 compared to 2,036 for the six months ended September 30, 1995. The increase in number of personnel was due to hiring flight attendants and customer service personnel to support increased operations. Salaries, wages and employee benefits per ASM was 4.3(cent) in each of the six month periods ended September 30, 1996 and 1995. Aircraft costs, including aircraft rent and depreciation, decreased as a percentage of airline operating revenues to 19.0 percent for the six months ended September 30, 1996, from 20.4 percent for the six months ended September 30, 1995. Aircraft costs per ASM were 3.4(cent) in each of the six month periods ended September 30, 1996 and 1995. Maintenance expense decreased as a percentage of airline operating revenues to 8.6 percent for the six months ended September 30, 1996, from 9.8 percent for the six months ended September 30, 1995. This decrease was the result of the utilization of more Brasilia aircraft which are more efficient than Metroliner aircraft. Maintenance expense per ASM decreased slightly to 1.4(cent) for the six months ended September 30, 1996, from 1.6(cent) for the six months ended September 30, 1995. Fuel costs increased as a percentage of airline operating revenues to 11.7 percent for the six months ended September 30, 1996, from 10.2 percent for the six months ended September 30, 1995, primarily due to an increase in the average fuel price per gallon to $.91 from $.76. Included in the increased fuel price per gallon is a charge of 4.3(cent) per gallon for federal excise tax. As a result of this increase in tax, the Company's management estimates an additional annual operating cost of approximately $1.3 million for fuel expenses. Fuel costs per ASM increased to 2.1(cent) for the six months ended September 30, 1996, from 1.7(cent) for the six months ended September 30, 1995, as a result of these increased charges. 10
11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Other expenses, primarily consisting of commissions, landing fees, station rentals, computer reservation system fees and hull and liability insurance, increased as a percentage of airline operating revenues to 26.2 percent for the six months ended September 30, 1996, from 25.1 percent for the six months ended September 30, 1995. The increase is due primarily to significant rate increases in customer reservation system boarding fees and related passenger handling charges. Nonairline expenses decreased 3.2 percent to $22.1 million for the six months ended September 30, 1996, compared to $22.8 million for the six months ended September 30, 1995, due to a decreased volume of activity. Additionally, the average number of full-time equivalent employees was 311 for the six months ended September 30, 1996, compared to 304 for the six months ended September 30, 1995. Liquidity and Capital Resources The Company had working capital of $41.3 million and a current ratio of 1.9:1 at September 30, 1996, compared to working capital of $32.8 million and a current ratio of 1.8:1 at March 31, 1996. During the first six months of fiscal 1997, the Company invested $5.3 million in flight equipment, $5.0 million in buildings, ground equipment and other fixed assets, reduced long-term debt by $3.1 million and paid cash dividends of $.8 million. The principal sources of cash during the first six months of fiscal 1997 were $26.2 million provided by operating activities and $4.3 million from the sale of securities, property and equipment, and the issuance of common stock. These factors resulted in a $16.3 million cash and cash equivalents increase. At September 30, 1996, the Company's long-term debt to equity position was 29 percent debt and 71 percent equity compared to 32 percent debt and 68 percent equity at March 31, 1996. SkyWest took delivery of eight new Brasilia aircraft during the first six months of fiscal 1997 and has agreed to purchase seven additional Brasilia aircraft and related spare parts inventory and support equipment at a future aggregate cost of approximately $56 million, including estimated cost escalations. These aircraft are scheduled for delivery during the remainder of fiscal 1997. 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 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 obtained and are exercisable at any time with no expiration. The Company has available $5.0 million in an unsecured bank line of credit with interest payable at the bank's base rate less one-quarter percent, which was 8.0 percent at September 30, 1996. In addition, the Company has available $1.0 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 $0.5 million on December 1, 1996, and will expire December 1, 1997. There were no amounts outstanding on either of the facilities as of September 30, 1996. 11
12 PART II. OTHER INFORMATION SKYWEST, INC. Item 4: Submission of Matters to a Vote of Security Holders The registrant held its Annual Meeting of Shareholders on August 13, 1996. The shareholders elected the following Board of Directors to serve for one year: <TABLE> <CAPTION> Name Shares Voted For ---- ---------------- <S> <C> Jerry C. Atkin 8,254,692 Sidney J. Atkin 8,254,879 J. Ralph Atkin 8,254,534 Mervyn K. Cox 8,256,439 W. Martin Braham 8,257,914 Ian M. Cumming 8,257,764 Steven F. Udvar-Hazy 8,257,514 Hyrum W. Smith 8,255,074 Henry J. Eyring 8,254,859 </TABLE> The shareholders also ratified the appointment of Arthur Andersen LLP as independent auditors for fiscal year 1997 by a vote of 8,250,796 shares for and 7,152 against. Item 6: a. Exhibits - Financial Data Schedule Exhibit 27 b. Reports on Form 8-K - There were no reports on Form 8-K filed during the quarter ended September 30, 1996. 12
13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SKYWEST, INC. Registrant November 11, 1996 BY: /s/ Bradford R. Rich ----------------------- Bradford R. Rich Executive Vice President - Finance, Chief Financial Officer and Treasurer 13