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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1998
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 No. 0-14719
SKYWEST, INC.
Incorporated under the Laws of Utah 87-0292166
(IRS Employer ID No.)
444 South River Road
St. George, Utah 84790
(435) 634-3000
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
Indicate by check mark whether the registrant (1) has filed all
documents and reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or 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
----- -----
The aggregate market value of Common Stock held by non-affiliates (based
upon the closing sale price of the Common Stock on the NASDAQ National Market
System) on June 16, 1998, was approximately $431,886,095.
As of June 16, 1998, there were 24,141,320 shares of Common Stock
outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended March 31, 1998, are incorporated by reference in Part II as
specified.
Portions of the Registrant's Proxy Statement to be used in connection
with the solicitation of proxies to be voted at the Registrant's 1998 Annual
Meeting of Shareholders, to be filed with the Commission, are incorporated by
reference in Part III as specified.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in the definitive proxy statement
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. [X]
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SKYWEST, INC.
FISCAL 1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Page No.
--------
Item 1. Business.....................................................................1
Item 2. Properties...................................................................6
Item 3. Legal Proceedings............................................................7
Item 4. Submission of Matters to a Vote of Security Holders..........................7
PART II
Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters................................................7
Item 6. Selected Financial Data......................................................8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................8
Item 8. Financial Statements and Supplementary Data..................................8
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure..........8
PART III
Item 10. Directors and Executive Officers of the Registrant...........................8
Item 11. Executive Compensation.......................................................8
Item 12. Security Ownership of Certain Beneficial
Owners and Management......................................................8
Item 13. Certain Relationships and Related Transactions...............................8
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K........................................................9
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PART I
ITEM 1. BUSINESS
GENERAL
SkyWest, Inc. (the "Company"), through its wholly-owned subsidiary, SkyWest
Airlines, Inc. ("SkyWest"), operates one of the larger regional airlines in the
United States. SkyWest provides passenger and air freight service and completes
over 880 daily flights. Pursuant to a joint marketing and code sharing agreement
with Delta Airlines, Inc. ("Delta"), SkyWest operates as a Delta Connection in
certain SkyWest markets. In October 1995, SkyWest entered into a marketing and
code sharing agreement with Continental Airlines, Inc. ("Continental") which
allows SkyWest to operate as a Continental Connection in certain markets in and
out of Los Angeles. Effective October 1, 1997, SkyWest entered into a new
code-sharing agreement ("United Express Agreement") with United Airlines, Inc.
("United") and began operating as United Express in Los Angeles, California. On
January 19, 1998, SkyWest executed an addendum to the United Express Agreement
to provide service as United Express in San Francisco, California, which began
June 1, 1998. On February 9, 1998, SkyWest executed an addendum to the United
Express Agreement to provide service as United Express in United's Portland and
Seattle/Tacoma markets and in additional Los Angeles markets, which began April
23, 1998. Prior to October 1, 1998, 97 percent of SkyWest's traffic was carried
under the DL code and 3 percent was carried under the CO code. In addition, all
of SkyWest's flights operated under the DL code and certain flights operating in
and out of Los Angeles operated under both DL and CO codes. As of May 31, 1998,
42 percent of SkyWest's traffic was carried under the DL code, 57 percent was
carried under the UA code and 1 percent was carried under the CO code.
Additionally, 42 percent of SkyWest's flights operated under the DL and CO codes
and 58 percent operated under the UA code. SkyWest will no longer provide
service as a Continental Connection effective July 15, 1998. With principal hubs
located at Los Angeles, Salt Lake City, San Francisco, Portland and
Seattle/Tacoma, SkyWest offers a convenient and frequent flight schedule
designed to maximize connecting and origin-destination traffic for its major
code-sharing partners. SkyWest currently operates a fleet of 69 turboprop
aircraft and 10 regional jet aircraft.
Founded in 1972, the Company has experienced significant growth. During the past
five fiscal years, consolidated operating revenues have increased at a
compounded annual growth rate of 13 percent, from $182.9 million in fiscal 1994
to $297.1 million in fiscal 1998. Total passengers carried by SkyWest have
increased from approximately 1,731,000 to approximately 2,989,000 over the same
period. In fiscal 1998, the Company achieved record levels of passengers
carried, record consolidated operating revenues of $297.1 million, and net
income increased 117 percent to $21.9 million or $1.04 per diluted share. All
references in this Form 10-K give affect to a stock dividend of one share for
each share outstanding declared May 20, 1998.
The Company, through two wholly-owned subsidiaries, is also engaged in various
other transportation related businesses. Scenic Airlines, Inc. ("Scenic")
provides air tours and general aviation services to the scenic regions of
Northern Arizona and Southern Utah and operates 36 aircraft. National Parks
Transportation, Inc. ("NPT") provides car rental services through a fleet of
Avis vehicles located at six airports. In fiscal 1998, Scenic and NPT together
accounted for approximately 11.0 percent of the Company's consolidated operating
revenues.
JOINT MARKETING AND CODE SHARING AGREEMENTS
SkyWest's Code-Sharing Agreements with Delta, United and Continental authorize
SkyWest to use two-letter flight designator codes ("DL," "UA" and "CO,"
respectively) to identify its flights and fares in major central reservation
systems, to paint its aircraft with the colors and/or logos of its code-sharing
partners and to market and advertise its status as the Delta Connection, United
Express or Continental Connection carrier. The Code-Sharing Agreements either
allocate to SkyWest a portion of the total passenger fare on a formula or other
basis, subject to periodic adjustments, or provide for payments for contracted
flying on a per departure basis with incentives related to number of passengers
carried and customer service. SkyWest's passengers participate in the frequent
flyer
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programs of its code-sharing partners. Under the Code-Sharing Agreements, Delta,
United and Continental provide additional services to SkyWest, including
providing reservation services and ticket stock, issuing tickets, providing
ground support services and gate access and coordinating cooperative marketing,
advertising and other promotional efforts. SkyWest pays negotiated fees to its
code-sharing partners for services provided.
The significant terms of each of the Code-Sharing Agreements are as follows:
Delta. SkyWest has operated as the Delta Connection at Delta's Salt Lake City
and Los Angeles hubs since 1987. The Delta Agreement was revised in 1990 and
modified effective April 1, 1997, to facilitate interline connections in Salt
Lake City and Los Angeles, to adjust proration formulas (the portion of the
passenger fare allocated to SkyWest) and to permit SkyWest to seek other
code-sharing relationships in Los Angeles. The Delta Agreement continues until
April 2002, but is subject to earlier termination under various circumstances,
including upon 180 days' advance notice by either party for any or no reason.
The Delta Agreement was modified in April 1997, to be noncancellable (except for
cause) for a two-year period. Delta currently owns approximately 13.0 percent of
the outstanding Common Stock, which was acquired under the Delta Option
Agreement entered into in 1987, concurrently with the Delta Agreement.
United. On October 1, 1998, SkyWest and United entered into a United Express
Agreement pursuant to which SkyWest became a United Express carrier at United's
Los Angeles hub. In January 1998, SkyWest and United also entered into an
addendum to the United Express Agreement, pursuant to which SkyWest would become
the United Express carrier at United's San Francisco hub, which began June 1,
1998. In February 1998, SkyWest and United entered into an amendment to the
United Express Agreement, pursuant to which SkyWest would become the United
Express carrier in United's Portland and Seattle/Tacoma markets and in
additional Los Angeles markets, which began April 23, 1998.
Under the United Express Agreement, SkyWest currently operates flights in Los
Angeles city pairs on a contract basis; i.e., United pays SkyWest a flat rate
per flight departure, an additional amount per passenger and per passenger
incentives based upon on-time performance, flight completion rates and number of
passengers carried measured against agreed upon objectives. United controls
scheduling, ticketing, pricing and seat inventories in these city pairs. SkyWest
also operates as a United Express carrier in certain city pairs where SkyWest
receives no contract payments and United controls scheduling, inventory and
pricing. United must also concur in any marketing or code-sharing relationships
with any other carrier with respect to operations covered by the United Express
Agreement. United has consented to SkyWest's Code-Sharing Agreement with Delta
in designated city pairs in Los Angeles.
The term of the United Express Agreement is for five years ending in September
2002, with respect to operations in Los Angeles and for ten years, ending in May
2008, with respect to operations in San Francisco and the Pacific Northwest,
subject to termination by United upon 180 days' prior notice. United may,
however, terminate the United Express Agreement for cause upon 30 days' written
notice.
Continental. SkyWest entered into a Code-Sharing Agreement with Continental in
October 1996, which provided for service to selected California markets. The
Continental agreement expired in October 1997. SkyWest has continued to operate
as the Continental Connection without an agreement, but on the same terms as
provided in the expired agreement. SkyWest will no longer provide service as a
Continental Connection effective July 15, 1998.
ROUTES
Operating from its hubs in Los Angeles, Salt Lake City, San Francisco, Portland
and Seattle/Tacoma, SkyWest serves approximately 64 cities in 13 states and
Canada with approximately 880 scheduled daily flights.
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The following table identifies the cities served by SkyWest as of June 16, 1998:
ARIZONA: Santa Rosa Portland
Tucson Visalia Redmond
Yuma COLORADO: SOUTH DAKOTA:
CALIFORNIA: Colorado Springs Rapid City
Bakersfield Grand Junction UTAH:
Burbank IDAHO: Cedar City
Carlsbad Boise Salt Lake City
Chico Idaho Falls St. George
Cresent City Pocatello Vernal
Eureka/Arcata Sun Valley WASHINGTON:
Fresno Twin Falls Bellingham
Imperial/El Centro MONTANA: Pasco
Inyokern Billings Seattle
Los Angeles Bozeman Yakima
Merced Butte WYOMING:
Modesto Helena Casper
Monterey Missoula Cody
Ontario West Yellowstone Jackson Hole
Orange County NEBRASKA: CANADA:
Oxnard Omaha Vancouver B.C.
Palm Springs NEW MEXICO:
Redding Albuquerque
Sacramento NEVADA:
San Diego Elko
San Francisco Las Vegas
San Jose Reno
San Luis Obispo OREGON:
Santa Barbara Eugene
Santa Maria Medford
GOVERNMENT REGULATION
All interstate air carriers, including SkyWest and Scenic, are subject to
regulation by the DOT, the FAA and certain other governmental agencies.
Regulations promulgated by the DOT primarily relate to economic aspects of air
service. The FAA requires operating, air worthiness and other certificates,
approval of personnel who may engage in flight, maintenance or operations
activities, record keeping procedures in accordance with FAA requirements, and
FAA approval of flight training and retraining programs. The DOT and the FAA, as
well as other governmental agencies regulating SkyWest and Scenic, enforce their
regulations through, among other mechanisms, (i) certifications, which are
necessary for SkyWest's and Scenic's continued operations, and (ii) proceedings,
which can result in civil or criminal penalties or revocation of operating
authority. The FAA can also issue maintenance directives and other mandatory
orders relating to, among other things, inspection of aircraft, installation of
new safety-related items and the mandatory removal and replacement of aircraft
parts that the FAA believes might present a safety hazard.
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SkyWest and Scenic management believe they are operating in compliance with FAA
regulations and holds all necessary operating and air worthiness certificates
and licenses. SkyWest and Scenic incur substantial costs in maintaining its
current certifications and otherwise complying with laws, rules and regulations
to which they are subject. SkyWest and Scenic flight operations, maintenance
programs, record keeping and training programs are conducted under FAA approved
procedures. SkyWest and Scenic do not operate at any airports where landing
slots are restricted.
All air carriers are required to comply with federal law and regulations
pertaining to noise abatement and engine emissions. All air carriers are also
subject to certain provisions of the Federal Communications Act of 1934, as
amended, because of their extensive use of radio and other communication
facilities. SkyWest and Scenic are also subject to certain other federal and
state laws relating to protection of the environment, labor relations and equal
employment opportunity. Management believes that SkyWest and Scenic are in
compliance in all material respects with these laws and regulations.
COMPETITION AND ECONOMIC CONDITIONS
The airline industry is highly competitive. SkyWest not only competes with other
regional airlines, some of which are owned by or are operated as code-sharing
partners of major airlines, but also faces competition from major airlines on
certain routes. SkyWest is the dominant regional airline operating out of the
Salt Lake City International Airport; however, Southwest Airlines Co., a
national low fare airline, also operates out of the Salt Lake City International
Airport, which results in significant price competition at the Salt Lake City
hub. Competition in the Southern California markets, which are serviced by
SkyWest from its hub in Los Angeles, is particularly intense, with a large
number of carriers in these markets. In its markets serviced from LAX, SkyWest's
principle competitors include Wings West, Inc. (operating as "American Eagle"),
Trans States Airlines, Inc. (operating as "US Air Express" and "Trans World
Express"). SkyWest believes its principle competitor in San Francisco will be
Trans States Airlines, Inc. (operating as "US Air Express"). In its Pacific
Northwest markets, SkyWest's principal competitor is Horizon Air Industries,
Inc. (operating as "Horizon Airlines").
Certain of SkyWest's competitors are larger and have significantly greater
financial and other resources than SkyWest. Moreover, federal deregulation of
the industry allows competitors to rapidly enter SkyWest's markets and to
quickly discount and restructure fares. The airline industry is particularly
susceptible to price discounting because airlines incur only nominal costs to
provide service to passengers occupying otherwise unsold seats.
Generally, the airline industry is highly sensitive to general economic
conditions, in large part due to the discretionary nature of a substantial
percentage of both business and leisure travel. In the past, many airlines have
reported decreased earnings or substantial losses resulting from periods of
economic recession, heavy fare discounting and other factors. Economic downturns
combined with competitive pressures have contributed to a number of bankruptcies
and liquidations among major and regional carriers. Negative economic conditions
may have a material adverse affect on regional airlines, including SkyWest.
EMPLOYEES
As of June 16, 1998, the Company employed 2,966 full-time equivalent employees
consisting of 1,063 pilots and flight attendants, 360 maintenance personnel,
1,234 customer service personnel, 74 reservation and marketing personnel, and
235 employees engaged in accounting, administration and other functions. The
Company's employees are not represented by any union. The Company is aware,
however, that collective bargaining group organization efforts among its
employees occur from time to time and are expected to continue in the future.
The Company has never experienced any work stoppages and considers its
relationship with its employees to be very good.
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YEAR 2000 COMPLIANCE
The Company is currently modifying computer systems and application programs for
year 2000 compliance, with project completion scheduled for March 31, 1999. The
Company believes that the cost to modify its systems or applications will not
have a material effect on its financial position or results of operations. Any
expenditures will be funded through operating cash flows while any costs for new
software will be capitalized and amortized over the software's useful life.
Although the Company is working cooperatively with third parties with systems
upon which the Company must rely, the Company can not give any assurances that
the systems of other parties will be year 2000 compliant on a timely basis.
Systems operated by others which the Company would use and/or rely on would
include: Federal Aviation Administration Air Traffic Control, computer
reservation systems for travel agent sales as well as Delta and United
reservation, passenger check-in and ticketing systems. The Company's business,
financial condition and/or results of operations could be materially adversely
affected by the failure of its system and applications or those operated by
others.
SEASONALITY
As is common in the airline industry, SkyWest's operations are favorably
affected by increased travel, historically occurring in the summer months and
are unfavorably affected by decreased business travel during the months from
November through January and by inclement weather which occasionally results in
cancelled flights, principally during the winter months. However, SkyWest does
expect some mitigation of the historical seasonal trends due to an increase in
the portion of its operations in contract flying with United. Scenic's business
is also seasonal in nature. A large percentage of Scenic's passengers are
tourists visiting the Las Vegas and Grand Canyon areas during the summer months.
FORWARD-LOOKING STATEMENTS
This Form 10-K contains various forward-looking statements and information that
are based on management's belief, as well as assumptions made by and information
currently available to management. When used in this document, the words
"anticipate," "estimate," "project," "expect," and similar expressions are
intended to identify forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, projected or expected. Among the
key factors that may have a direct bearing on the Company's operating results
include, among other things, changes in SkyWest's code-sharing relationships,
fluctuations in the economy and the demand for air travel, the degree and nature
of competition and SkyWest's ability to expand services in new and existing
markets and to maintain profit margins in the face of pricing pressures.
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ITEM 2. PROPERTIES
FLIGHT EQUIPMENT
As of June 16, 1998, SkyWest owned or leased the following types of aircraft:
NUMBER OF SCHEDULED AVERAGE
AIRCRAFT FLIGHT CRUISING AVERAGE
---------------- PASSENGER RANGE SPEED AGE
TYPE OF AIRCRAFT OWNED LEASED CAPACITY (MILES) (MPH) (YEARS)
- - ---------------- ----- ------ --------- ------- ----- -------
Brasilia................... 16 53 30 300 300 5.1
Canadair Regional Jet...... - 10 50 850 530 3.6
SkyWest's aircraft are turboprop and jet pressurized aircraft designed to
operate more economically over short-haul routes with lower passenger load
factors than larger jet aircraft. These factors make it economically feasible
for SkyWest to provide high frequency service in markets with relatively low
volumes of passenger traffic. Passenger comfort features of these aircraft
include stand-up headroom, a lavatory, overhead baggage compartments and flight
attendant service. Fiscal year 1995 marked the introduction of the Canadair
Regional Jet. SkyWest operates ten of these aircraft on stage lengths up to 850
miles.
During fiscal 1998 SkyWest entered into an agreement to purchase 20 new Brasilia
aircraft, related spare parts inventory and support equipment. Two of these
aircraft were delivered prior to March 31, 1998. At March 31, 1998, SkyWest had
agreed to purchase 18 Brasilia aircraft, related spare parts and support
equipment at an aggregate cost of approximately $144.0 million, including
estimated cost escalations. SkyWest also has options to acquire 40 additional
Brasilia aircraft at fixed prices (subject to cost escalation and delivery
schedules) exercisable through fiscal 2000 and options to acquire an additional
ten CRJs, exercisable at any time. In connection with SkyWest's expansion in Los
Angeles, San Francisco and the Pacific Northwest, SkyWest expects to acquire an
additional 14 used Brasilias for a total of 34 new and used aircraft. SkyWest
also anticipates that it will incur costs of approximately $24.0 million
associated with the acquisition of additional ground and maintenance facilities,
support equipment and spare parts inventory related to its expansion.
GROUND FACILITIES
Employees of SkyWest perform substantially all routine airframe and engine
maintenance and periodic inspection of equipment. Maintenance is performed
primarily at facilities in Palm Springs, California, Salt Lake City, Utah, and
Fresno, California. SkyWest owns a 56,600 square foot maintenance facility in
Palm Springs, California and leases a 90,000 square foot aircraft maintenance
and training facility at the Salt Lake International Airport. The facility
consists of a 40,000 square foot maintenance hangar and 50,000 square feet of
training and other facilities to support SkyWest's growing hub operations. The
facility was constructed and is owned by the Salt Lake City Airport Authority.
SkyWest is leasing the facility under an operating lease arrangement over a
36-year term. SkyWest also leases, under an operating lease arrangement over a
five year term, a 90,000 square foot maintenance hanger and 15,000 square foot
office facility in Fresno, California. SkyWest leases ticket counters, check-in,
and boarding and other facilities in the passenger terminal areas in the
majority of the airports it serves and staffs these facilities with SkyWest
personnel. Delta and United provide ticket handling and/or ground support
services for SkyWest in 27 of the 64 airports it serves.
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Scenic owns a new terminal and hangar facility in Page, Arizona consisting of
11,500 square feet of office and terminal space and 22,000 square feet of
maintenance hangar space. Scenic also leases, under an operating lease
arrangement over a five year term, a new terminal and hanger facility in Las
Vegas, Nevada consisting of 39,500 square feet of office and terminal space and
28,500 square feet of maintenance hanger space.
The Company's corporate headquarters are located in a 63,000 square foot
building in St. George, Utah. Management deems the Company's facilities as being
suitable and necessary to support existing operations and facilities are
adequate for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine legal proceedings incident to its business. In
the opinion of management, none of such proceedings are expected to have a
material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded over-the-counter and quoted in the NASDAQ
National Market System under the symbol "SKYW." At June 16, 1997, there were
approximately 1,051 stockholders of record. Securities held of record do not
include shares held in securities position listings. The following table sets
forth the range of high and low closing sales prices for the Company's Common
Stock.
Fiscal 1998 Fiscal 1997
----------- -----------
Quarter High Low High Low
------- ------ ------ ----- -----
First $ 8.50 $ 6.00 $9.88 $6.63
Second 10.32 7.69 9.13 7.06
Third 14.81 10.13 7.82 6.32
Fourth 21.06 14.75 7.19 6.00
The transfer agent for the Company's Common Stock is Zions First National Bank,
Salt Lake City, Utah. On May 5, 1998, the Company's Board of Directors declared
a 100 percent stock dividend (one share for each share outstanding) payable to
stockholders of record on May 20, 1998. The dividend was distributed on June 8,
1998. The Company paid cash in lieu of issuing fractional shares. All common
shares and per share information included and incorporated by reference in this
Form 10-K have been retroactively adjusted to reflect this stock dividend.
On May 5, 1998, the Company's Board of Directors declared a regular quarterly
cash dividend of $.03 per share payable to stockholders of record on June 30,
1998, distributable July 15, 1998.
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During fiscal 1997, the Board of Directors declared a special dividend of $.04
per share. Thereafter the Board of Directors declared three regular quarterly
dividends of $.025 each quarter.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference to
page one of the Company's Annual Report to Shareholders for the fiscal year
ended March 31, 1998, furnished herewith to the Commission as Exhibit 13.1 to
this report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated herein by reference to
pages 12 through 16 of the Company's Annual Report to Shareholders for the
fiscal year ended March 31, 1998, furnished herewith to the Commission as
Exhibit 13.1 to this report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company included on pages 17
through 30 of the Company's Annual Report to Shareholders for the fiscal year
ended March 31, 1998, furnished herewith to the Commission as Exhibit 13.1 to
this report on Form 10-K, are incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
All items in Part III are incorporated by reference to the Company's Proxy
Statement for its 1998 annual stockholders meeting to be held August 11, 1998,
to be filed with the Commission.
Headings in
Proxy Statement
---------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS "Election of Directors" and
OF THE REGISTRANT. "Executive Officers"
ITEM 11. EXECUTIVE COMPENSATION. "Executive Officers" and
"Executive Compensation" and
"Report of the Compensation
Committee"
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL "Election of Directors" and
OWNERS AND MANAGEMENT. "Security Ownership of Certain
Beneficial Owners and
Management"
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. "Certain Relationships and
Related Transactions"
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed:
1. Financial Statements. The following consolidated financial
statements of SkyWest, Inc., included in the Annual Report to
Shareholders for the year ended March 31, 1998, are incorporated
herein by reference in Item 8 of the Form 10-K.
- Report of independent public accountants
- Consolidated balance sheets as of March 31, 1998 and 1997
- Consolidated statements of income for the years ended March 31,
1998, 1997 and 1996
- Consolidated statements of stockholders' equity for the years
ended March 31, 1998, 1997 and 1996
- Consolidated statements of cash flows for the years ended March
31, 1998, 1997 and 1996
- Notes to consolidated financial statements
2. Financial Statement Schedules. The following consolidated
financial statement schedule of SkyWest, Inc. is included in Item
14(d) hereof.
- Report of independent public accountants on financial statement
schedule
- Schedule II -- Valuation and qualifying accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are not
applicable, and therefore have been omitted.
(b) Reports on Form 8-K.
The Company filed two reports on Form 8-K during the quarter ended
March 31, 1998, dated January 21, 1998 and February 11, 1998.
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(c) Exhibits.
Incorporated by Filed
Number Exhibit Reference Herewith
- - ------ ------- --------- --------
3.1 Restated Articles of Incorporation..............................(1)
3.2 Amended By-Laws.................................................(3)
4.1 Articles IV and VI of Restated Articles of
Incorporation describing the Common Shares
and shareholders rights (included in
Exhibit 3.1)....................................................(1)
4.2 Article II of the Amended By-Laws defining the
rights of Common Shareholders (included in
Exhibit 3.2)....................................................(3)
10.1 SkyWest, Inc. Amended and Combined Incentive and
Non-Statutory Stock Option Plan.................................(3)
10.2 Delta Connection agreement dated January 13, 1987
between Delta Air Lines, Inc. and SkyWest
Airlines, Inc...................................................(2)
10.3 Stock Option agreement dated January 28,
1987 between Delta Air Lines, Inc. and
SkyWest, Inc....................................................(2)
10.4 Lease Agreement dated December 1,1989 between
Salt Lake City Corporation and SkyWest Airlines,
Inc.............................................................(4)
10.5 Purchase Agreement dated July 23,1993 between
Bombardier Regional Aircraft Division and
SkyWest Airlines, Inc...........................................(5)
10.6 SkyWest, Inc. 1995 Employee
Stock Purchase Plan.............................................(6)
10.7 United Express Agreement dated October 1, 1997 and
subsequent amendments dated January 15, 1998 and
February 9, 1998................................................(7)
10.8 Purchase Agreement No. GCT-008/98 dated
March 26, 1998 between Embraer-Empresa
Brasileira de Aeronautica S.A. and SkyWest Airlines, Inc
(portions of this Exhibit 10.8 have been omitted pursuant
to a request for confidential treatment)........................................X
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Incorporated by Filed
Number Exhibit Reference Herewith
- - ------ ------- --------- --------
13.1 Certain portions of the Annual Report to Shareholders
for the year ended March 31, 1998, are incorporated
by reference into this report on Form 10-K......................................X
22.1 Subsidiaries of the Registrant..................................(1)
24.1 Consent of independent public accountants.......................................X
27 Financial Data Schedule.........................................................X
- - ----------------
(1) Incorporated by reference to Registration Statement on Form S-1, File
No. 33-5823.
(2) Incorporated by reference to Registrant's 10-Q filed for the quarter ended
December 31, 1986.
(3) Incorporated by reference to Registration Statement on Form S-8, File
No. 33-41285.
(4) Incorporated by reference to Registrant's Form 10-K filed for the year
ended March 31, 1992.
(5) Incorporated by reference to Registrant's Form 10-K filed for the year
ended March 31, 1994.
(6) Incorporated by reference to Registrant's Form 10-K filed for the year
ended March 31, 1995.
(7) Incorporated by reference to Registrant's Forms 8-K filed on January 21,
1998 and February 11, 1998.
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14
(d) Financial Statement Schedule.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To SkyWest, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in SkyWest, Inc.'s Annual Report to
Shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated May 20, 1998. Our audit was made for the purpose of forming
an opinion on the basic financial statements taken as a whole. The schedule
listed in Item 14 (a)(2) is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Salt Lake City, Utah
May 20, 1998
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15
SKYWEST, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
Additions
Balance at Charged To Balance
Beginning Costs and at End
Description of Year Expenses Deductions of Year
----------- --------- --------- ---------- ---------
Year Ended March 31, 1998:
Allowance for obsolescence $ 280,000 $ -- $ 100,000 $ 180,000
Allowance for doubtful
accounts receivable 103,978 77,728 57,943 123,763
--------- --------- --------- ---------
$ 383,978 $ 77,728 $ 157,943 $ 303,763
========= ========= ========= =========
Year Ended March 31, 1997:
Allowance for obsolescence $ 180,000 $ 100,000 $ -- $ 280,000
Allowance for doubtful
accounts receivable 221,345 44,686 (162,053) 103,978
--------- --------- --------- ---------
$ 401,345 $ 144,686 $(162,053) $ 383,978
========= ========= ========= =========
Year Ended March 31, 1996:
Allowance for obsolescence $ 180,000 $ -- $ -- $ 180,000
Allowance for doubtful
accounts receivable 215,262 150,150 (144,067) 221,345
--------- --------- --------- ---------
$ 395,262 $ 150,150 $(144,067) $ 401,345
========= ========= ========= =========
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16
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SKYWEST, INC.
/s/ JERRY C. ATKIN
By_____________________________
Jerry C. Atkin
Chairman, President and Chief
Executive Officer
Pursuant to the requirement of the Securities Act of 1934, this report has been
signed below by the following persons in the capacities and on the dates
indicated.
Names Capacities Date
----- ---------- ----
/s/ JERRY C. ATKIN Chairman of the Board, President and June 16, 1998
- - ------------------------ Chief Executive Officer
Jerry C. Atkin
/s/ SIDNEY J. ATKIN Vice Chairman of the Board June 16, 1998
- - ------------------------ and Director
Sidney J. Atkin
/s/ BRADFORD R. RICH Executive Vice President, June 16, 1998
- - ------------------------ Chief Financial Officer and Treasurer
Bradford R. Rich (principal financial and
accounting officer)
/s/ J. RALPH ATKIN
- - ------------------------ Director June 16, 1998
J. Ralph Atkin
/s/ MERVYN K. COX
- - ------------------------ Director June 16, 1998
Mervyn K. Cox
/s/ IAN M. CUMMING
- - ------------------------ Director June 16, 1998
Ian M. Cumming
/s/ STEVEN F. UDVAR-HAZY
- - ------------------------ Director June 16, 1998
Steven F. Udvar-Hazy
/s/ HENRY J. EYRING
- - ------------------------ Director June 16, 1998
Henry J. Eyring
/s/ HYRUM W. SMITH
- - ------------------------ Director June 16, 1998
Hyrum W. Smith
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