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8-K - 8-K - SKYWEST INCa13-23666_18k.htm

Exhibit 99.1

 

 

NEWS RELEASE

 

For Further Information Contact:

Michael J. Kraupp

Chief Financial Officer and Treasurer

Telephone:  (435) 634-3212

Fax:  (435) 634-3205

 

FOR IMMEDIATE RELEASE:    November 6, 2013

 

SKYWEST, INC. ANNOUNCES THIRD QUARTER AND YTD 2013 RESULTS

 

St. George, Utah—SkyWest, Inc. (“SkyWest”) (NASDAQ: SKYW)  today reported net income of $26.4 million, or $0.50 per diluted share, for the quarter ended September 30, 2013, compared to net income  of  $20.9 million, or $0.40 per diluted share, for the same period last year.

 

SkyWest also reported net income of $50.3 million, or $0.96 per diluted share, for the nine months ended September 30, 2013, compared to $37.2 million, or $0.72 per diluted share, for the same period last year.

 

Quarter Highlights

 

SkyWest experienced improved financial results for the quarter ended September 30, 2013, compared to its financial results for the quarter ended September 30, 2012.  SkyWest generated increased operating revenues (after giving effect to reduced fuel, certain engine overhaul and landing fee pass through amounts) primarily due to additional block hour production from increased aircraft utilization, larger fleet size and rate escalations in SkyWest contracts with its major airline partners.  Following are selected highlights from SkyWest’s quarter ended September 30, 2013, compared to the quarter ended September 30, 2012:

 

·                  Increased pretax income 34.8% to $44.4 million, compared to $32.9 million

·                  Increased fully-diluted EPS 25.0% to $0.50, compared to $0.40

·                  Increased block hour production 2.8% to 613,821 block hours, compared to 596,901 block hours

·                  Increased operating revenues by approximately $32.9 million (net of fuel, certain engine overhaul and landing fee pass through revenues), primarily related to rate escalations under SkyWest’s agreements with its major partners and increased block hour production

·                  Made cash payments of $22.9 million consisting of $11.5 million for the repurchase of 800,000 shares of treasury stock and $11.4 million for deposits on new aircraft

·                  Increased total aircraft fleet to 756 aircraft as of September 30, 2013, compared to 739 aircraft as of September 30, 2012

 

Commenting on the results, Jerry C. Atkin, SkyWest’s Chairman and CEO, said “We are pleased with the improved financial performance for the current quarter. However, in spite of current

 



 

challenges we remain committed to further improvement in meeting our current and long-term operational and financial objectives.”

 

Financial and Operating Results

 

Operating revenues totaled $850.7 million for the quarter ended September 30, 2013, compared to $865.3 million for the same period last year or a decrease of $14.6 million.  The decrease was due primarily to the reduction of approximately $47.5 million in fuel, certain engine overhaul amounts and landing fees which were directly reimbursed by SkyWest’s major partners and recorded as operating revenues.  However, this reduction was mostly offset by recording approximately $32.9 million in additional operating revenues, primarily resulting from rate escalations under SkyWest’s agreements with its major partners and a 2.8% increase in total block hours for the quarter ended September 30, 2013, compared to the quarter ended September 30, 2012.

 

Total airline expenses (consisting of total operating and interest expenses) decreased $18.2 million, or 2.2%, during the quarter ended September 30, 2013, compared to the same period in 2012.  However, after excluding pass-through costs for fuel, certain engine overhaul expenses and landing fees, total airline expenses increased $29.3 million.

 

Under certain of its agreements with its major partners, SkyWest recognizes revenue at fixed hourly rates for mature engine maintenance on regional jet engines and SkyWest recognizes engine maintenance expense on its CRJ200 regional jet engines on an as-incurred basis as maintenance expense.  During the quarter ended September 30, 2013, CRJ200 engine expense under these agreements decreased $4.0 million to $9.1 million, compared to $13.1 million for the quarter ended September 30, 2012, primarily as a result of decreased engine overhaul expense due to the timing of scheduled engine maintenance events.  SkyWest was reimbursed approximately $12.8 million and $10.4 million for engine overhaul expense, under its agreements with its major partners, during the quarters ended September 30, 2013 and 2012, respectively.

 

Liquidity

 

At September 30, 2013, SkyWest had $727.8 million in cash and marketable securities, compared to $709.4 million as of December 31, 2012.  The increase in cash and marketable securities of $18.4 million was primarily the result of increased profitability.  Cash and marketable securities increased $62.2 million during the quarter ended September 30, 2013 compared to a balance of $665.6 as of June 30, 2013.  SkyWest’s long-term debt was $1.35 billion as of September 30, 2013, compared to $1.47 billion as of December 31, 2012.  The decrease in long-term debt for the nine-months ended September 30, 2013 was due primarily to SkyWest’s payment of normal recurring debt obligations.  SkyWest has significant long-term lease obligations that are recorded as operating leases and are not reflected as liabilities on SkyWest’s consolidated balance sheets.  At a 4.7% discount rate, the present value of these lease obligations was approximately $1.6 billion as of September 30, 2013.

 



 

Recent Business Developments

 

On August 2, 2012, SkyWest announced the award of 34 additional dual-class aircraft and the removal of 66 CRJ200 aircraft under its Delta Connection Agreements with Delta Airlines, Inc. (“Delta”).  As of May 2013, all 34 of these additional dual-class aircraft had been delivered. As of September 30, 2013 SkyWest had removed 30 (22 placed in contract with another partner; other 8 removed from fleet) of the 66 CRJ200 aircraft from service and currently anticipates removing another 18 CRJ200 aircraft between October 2013 and December 2013.  SkyWest believes the remaining 18 CRJ200 aircraft will be removed at various times through 2014 and early 2015.  Additionally, 41 of the 66 aircraft have been financed by Delta and will be returned to Delta with no further obligation by SkyWest.

 

On May 21, 2013, SkyWest announced it had entered into a Capacity Purchase Agreement (“CPA”) with United Airlines, Inc. (“United”) to operate 40 new Embraer E175 dual-class regional jet aircraft. The CPA is for 12 years and the new aircraft will be operated by SkyWest’s wholly-owned subsidiary, SkyWest Airlines, Inc. (“SkyWest Airlines”). Deliveries for these aircraft are scheduled to begin in March 2014 and continue through August 2015.

 

Additionally, on May 21, 2013 SkyWest announced it reached an agreement with Embraer S.A. (“Embraer”) for the purchase of 100 new E175 dual-class regional jet aircraft, 40 of which are considered firm orders and the remaining 60 aircraft remain conditional upon SkyWest entering into capacity purchase agreements with other major airlines. SkyWest intends to place the 40 new aircraft into service under the terms of the United CPA discussed above.

 

On June 17, 2013, SkyWest and Embraer jointly announced an aircraft purchase agreement covering 100 E175-E2 dual-class regional jet aircraft and an option to purchase an additional 100 of the same aircraft.  Deliveries for these E2 aircraft are tentatively planned to start in 2020.

 

About SkyWest

 

SkyWest is the holding company for two scheduled passenger airline operations and an aircraft leasing company, and is headquartered in St. George, Utah. SkyWest’s scheduled passenger airline operations consist of SkyWest Airlines, also based in St. George, Utah, and ExpressJet Airlines, Inc. (“ExpressJet Airlines”), based in Atlanta, Georgia.  SkyWest Airlines operates as United Express, Delta Connection, American Eagle and US Airways Express carriers under contractual agreements with United, Delta, American Airlines, Inc. (“American”) and US Airways, Inc. (“US Airways”).  SkyWest Airlines also operates flights for Alaska Airlines under a contractual agreement.  ExpressJet Airlines operates as United Express, Delta Connection, and American Eagle carriers under contractual agreements with United, Delta and American. System-wide, SkyWest serves markets in the United States, Canada, Mexico and the Caribbean with approximately 4,100 daily departures and a fleet of approximately 756 regional aircraft.  This press release and additional information regarding SkyWest can be accessed at www.skywest.com.

 

FORWARD-LOOKING STATEMENTS

 

In addition to historical information, this release contains forward-looking statements.  SkyWest may, from time to time, make written or oral forward-looking statements within the meaning of

 



 

the Private Securities Litigation Reform Act of 1995.  Such statements encompass SkyWest’s beliefs, expectations, hopes or intentions regarding future events.  Words such as “forecasts”, “expects,” “intends,” “believes,” “anticipates,” “should,” “likely” and similar expressions identify forward-looking statements.  All forward-looking statements included in this release are made as of the date hereof and are based on information available to SkyWest as of such date.  SkyWest assumes no obligation to update any forward-looking statement.  Readers should note that many factors could affect the future operating and financial results of SkyWest, SkyWest Airlines or ExpressJet Airlines, and could cause actual results to vary materially from those expressed in forward-looking statements set forth in this release.  These factors include, but are not limited to, the prospects of entering into agreements with other carriers to fly new aircraft, uncertainties regarding operation of the aircraft, the ability to obtain certain regulatory approvals to operate the aircraft under SkyWest Airlines’ and ExpressJet Airlines’ operating certificates and the ability to obtaining financing for the aircraft.

 

Actual operational and financial results of SkyWest, SkyWest Airlines and ExpressJet Airlines will also vary, and may vary materially, from those anticipated, estimated, projected or expected for a number of other reasons, including, in addition to those identified above: the ability of ExpressJet Airlines to realize potential synergies and other anticipated financial impacts of the consolidation of its operations, the possibility that future financial and operating results of ExpressJet Airlines may not meet SkyWest’s forecasts and the timing of ongoing consolidation of the operations of ExpressJet Airlines, if achieved.  The challenges of competing successfully in a highly competitive and rapidly changing industry; developments associated with fluctuations in the economy and the demand for air travel; ongoing negotiations between SkyWest, SkyWest Airlines and ExpressJet Airlines and their major partners regarding their contractual obligations; the financial stability of those major partners and any potential impact of their financial condition on the operations of  SkyWest, SkyWest Airlines, or ExpressJet Airlines; the resolution of current litigation with a major airline partner of SkyWest Airlines and ExpressJet Airlines; fluctuations in flight schedules, which are determined by the major partners for whom SkyWest’s operating airlines conduct flight operations; variations in market and economic conditions; labor relationships; the impact of global instability; rapidly fluctuating fuel costs; the degree and nature of competition; potential fuel shortages; the impact of weather-related or other natural disasters on air travel and airline costs; aircraft deliveries; and other unanticipated factors.  Risk factors, cautionary statements and other conditions which could cause SkyWest’s actual results to differ from management’s current expectations are contained in SkyWest’s filings with the Securities and Exchange Commission; including the section of SkyWest’s Annual Report on Form 10-K for the year ended December 31, 2012, entitled “Risk Factors.”

 

(more)

 



 

SKYWEST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars and Shares in Thousands, Except per Share Amounts)

(Unaudited)

 

 

 

Three Months Ended
 September 30,

 

Nine Months Ended
 September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

OPERATING REVENUES:

 

 

 

 

 

 

 

 

 

Passenger

 

$

836,890

 

$

848,578

 

$

2,448,883

 

$

2,671,568

 

Ground handling and other

 

13,850

 

16,681

 

44,474

 

52,079

 

Total operating revenues

 

850,740

 

865,259

 

2,493,357

 

2,723,647

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

306,887

 

297,106

 

904,625

 

878,596

 

Aircraft maintenance, materials and repairs

 

176,822

 

163,825

 

515,506

 

510,610

 

Aircraft fuel

 

49,656

 

71,477

 

146,139

 

372,471

 

Aircraft rentals

 

80,928

 

82,592

 

245,330

 

251,438

 

Depreciation and amortization

 

61,135

 

62,703

 

183,309

 

191,200

 

Station rentals and landing fees

 

29,473

 

45,336

 

100,559

 

133,523

 

Ground handling services

 

30,541

 

28,414

 

98,235

 

93,344

 

Other

 

59,124

 

58,832

 

177,363

 

170,228

 

Total operating expenses

 

794,566

 

810,285

 

2,371,066

 

2,601,410

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

56,174

 

54,974

 

122,291

 

122,237

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

Interest income

 

567

 

2,053

 

3,164

 

6,049

 

Interest expense

 

(16,999

)

(19,474

)

(52,490

)

(58,641

)

Other, net

 

4,625

 

(4,638

)

10,477

 

(9,305

)

Total other (expense), net

 

(11,807

)

(22,059

)

(38,849

)

61,897

)

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

44,367

 

32,915

 

83,442

 

60,340

 

PROVISION FOR INCOME TAXES

 

17,973

 

11,982

 

33,094

 

23,129

 

NET INCOME

 

$

26,394

 

$

20,933

 

$

50,348

 

$

37,211

 

 

 

 

 

 

 

 

 

 

 

BASIC EARNINGS PER SHARE

 

$

0.51

 

$

0.41

 

$

0.97

 

$

0.73

 

DILUTED EARNINGS PER SHARE

 

$

0.50

 

$

0.40

 

$

0.96

 

$

0.72

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares:

 

 

 

 

 

 

 

 

 

Basic

 

51,881

 

51,241

 

51,841

 

51,022

 

Diluted

 

52,610

 

52,153

 

52,551

 

51,608

 

 

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SKYWEST, INC.

SUMMARY OF CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)

 

 

 

September 30,
2013

 

December 31,
2012

 

Cash, restricted cash, and marketable securities

 

$

727,773

 

$

709,442

 

Other current assets

 

751,829

 

724,598

 

Total current assets

 

$

1,479,602

 

$

1,434,040

 

 

 

 

 

 

 

Property and equipment

 

2,664,252

 

2,710,996

 

Other long term assets

 

121,540

 

109,601

 

Total assets

 

$

4,265,394

 

$

4,254,637

 

 

 

 

 

 

 

Current liabilities

 

$

604,157

 

$

591,425

 

Long-term liabilities

 

2,233,785

 

2,276,037

 

Stockholders’ equity

 

1,427,452

 

1,387,175

 

Total liabilities and stockholder’s equity

 

$

4,265,394

 

$

4,254,637

 

 

Unaudited Operating Highlights

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

Operating Highlights

 

2013

 

2012

 

% Change

 

2013

 

2012

 

% Change

 

Passengers carried

 

15,929,930

 

15,687,908

 

1.5

%

45,752,380

 

44,068,191

 

3.8

%

Revenue passenger miles (000)

 

8,384,129

 

7,968,623

 

5.2

%

23,903,670

 

22,597,109

 

5.8

%

Available seat miles (000)

 

10,256,027

 

9,695,079

 

5.8

%

29,515,445

 

28,042,968

 

5.3

%

Passenger load factor

 

81.7

%

82.2

%

(0.50

)pts

81.0

%

80.6

%

0.40

pts

Passenger breakeven load factor

 

77.9

%

78.8

%

(0.90

)pts

78.7

%

78.7

%

0.00

pts

Yield per revenue passenger mile

 

$

0.100

 

$

0.106

 

(5.7

)%

$

0.102

 

$

0.118

 

(13.6

)%

Revenue per available seat mile

 

$

0.083

 

$

0.089

 

(6.7

)%

$

0.084

 

$

0.097

 

(13.4

)%

Cost per available seat mile

 

$

0.079

 

$

0.086

 

(8.1

)%

$

0.082

 

$

0.095

 

(13.7

)%

Fuel cost per available seat mile

 

$

0.005

 

$

0.007

 

(28.6

)%

$

0.005

 

$

0.013

 

(61.5

)%

Average passenger trip length

 

526

 

508

 

3.5

%

522

 

513

 

1.8

%

Block hours

 

613,821

 

596,901

 

2.8

%

1,795,523

 

1,728,206

 

3.9

%

Departures

 

378,063

 

378,013

 

0.0

%

1,102,801

 

1,079,886

 

2.1

%