ST. GEORGE, Utah,
May 7 /PRNewswire-FirstCall/ -- SkyWest, Inc.
("SkyWest") (Nasdaq: SKYW) today reported operating revenues of
$868.0 million
for the quarter ended
March 31, 2008, a 10.0% increase, compared to
$789.0 million for the same period last year. SkyWest also reported net
income of
$29.1 million for the quarter ended
March 31, 2008, a decrease of
16.2%, or
$0.47 per diluted share compared to
$34.8 million of net income or
$0.53 per diluted share, for the same period last year. The significant items
affecting SkyWest's financial performance during the first quarter of 2008 are
outlined below:
Total operating revenues for the first quarter of 2008 increased primarily
as a result of increased fuel cost reimbursements by SkyWest's major partners
that are recorded as operating revenues under contract flying arrangements.
Additionally, block hour production increased 4.3% to 353,637 hours compared
to 338,992 hours for the same period last year.
Total operating expenses and interest per available seat mile ("ASM") for
the first quarter of 2008, excluding fuel charges, of $292.4 million or
$0.052 per ASM, decreased approximately 2.0% to $0.097 from $0.099 for the
same quarter of 2007. During the quarter ended March 31, 2008, SkyWest
incurred higher than expected losses of approximately $6.2 million (pretax) on
its pro-rate flying, compared to the same period last year, due primarily to
significantly higher fuel costs, which have risen faster than SkyWest has been
able to increase fares to offset these costs. SkyWest also incurred various
non-overhaul-related maintenance costs of approximately $10.2 million
(pretax), consisting primarily of a higher volume of "C" checks on aircraft,
the purchase of aircraft parts, including one-time costs to repair flap
actuators on CRJ200 regional jet aircraft and damage to aircraft caused by
third parties. As a result of these combined items, SkyWest's pretax profit
was reduced by a total of $11.4 million for the quarter ended March 31, 2008
compared to the quarter ended March 31, 2007.
Total ASMs for the first quarter of 2008 increased 5.4% from the first
quarter of 2007, primarily as a result of SkyWest increasing its fleet size to
440 aircraft as of March 31, 2008, from 425 aircraft as of March 31, 2007. At
March 31, 2008, SkyWest's fleet consisted of 369 regional jets (229 Delta, 119
United and 21 Midwest), 59 EMB-120 aircraft (46 United and 13 Delta) and
12 ATR-72 aircraft (all Delta). During the first quarter of 2008, SkyWest
generated 5.58 billion ASMs, compared to 5.29 billion ASMs during the same
period of 2007.
During the quarter ended March 31, 2008, SkyWest continued repurchasing
outstanding shares of its common stock under a 5.0 million share stock buyback
program previously authorized by its board of directors. At March 31, 2008,
SkyWest had repurchased 3.1 million shares under the program, at an average
cost of $22.04 per share and a total cost of approximately $69.0 million. On
May 6, 2008, SkyWest's board of directors authorized an additional stock
buyback program of 5.0 million shares. As a result of the existing stock
buyback program authorization and this new authorization from its directors,
SkyWest has a combined authorization outstanding to repurchase up to an
additional 6.9 million shares of its common stock. SkyWest currently intends
to continue to purchase shares of its outstanding stock under the authorized
stock buyback program from time to time, as it deems appropriate.
During the quarter ended December 31, 2007, Delta Air Lines notified
SkyWest, SkyWest Airlines, Inc. and Atlantic Southeast Airlines, Inc. ("ASA")
of a dispute under the Delta Connection agreements executed by Delta with
SkyWest Airlines, Inc. and ASA. The dispute related to the allocation of
liability for certain irregular operations ("IROP") expenses that are paid by
SkyWest Airlines, Inc. and ASA to their passengers under certain situations.
As a result, Delta withheld a combined total of approximately $25 million
(pretax) from one of the weekly scheduled wire payments to SkyWest Airlines,
Inc. and ASA during December. Subsequent to year end, SkyWest has filed a
lawsuit in Georgia state court disputing Delta's treatment of the matter.
Additionally, Delta continues to withhold an average of approximately
$900,000 per month from their wire payments in relation to this ongoing
dispute. SkyWest has evaluated the Delta dispute in accordance with the
provisions of Financial Accounting Standards Board No. 5, Accounting for
Contingencies ("FASB No. 5"). Based on the provisions of FASB No. 5, an
estimated loss is accrued if the loss is probable and reasonable estimable.
Because these conditions have not been satisfied, SkyWest has not recorded a
loss in the condensed consolidated financial statements as of March 31, 2008.
SkyWest recorded stock-based compensation expense of approximately
$3.4 million pretax ($2.2 million after-tax) for the quarter ended March 31,
2008. Future stock-based compensation expense will be contingent upon the
amount of future option or stock grants that are made by SkyWest's Board of
Directors.
On October 12, 2007, SkyWest announced plans to acquire 22 additional
regional jet aircraft allowing for the retirement of 23 EMB-120 turboprop
aircraft. SkyWest intends to operate these additional jet aircraft under
existing capacity purchase agreements for both United and Delta with 18 of the
aircraft operating under its United Express banner and 4 of the aircraft
operating under its Delta Connection banner, with all of the aircraft being
allocated to its wholly-owned subsidiary, SkyWest Airlines. Subsequently in
the fourth quarter of 2007, SkyWest selected Bombardier as the supplier of
these regional jet aircraft with deliveries scheduled to begin in the fourth
quarter of 2008 and continue through 2009.
At March 31, 2008, SkyWest had approximately $617.6 million in cash and
marketable securities, compared to $660.4 million as of December 31, 2007.
The reduction in cash and marketable securities was primarily the result of
SkyWest repurchasing $69.0 million (3.1 million shares) of its common stock
under a Board-approved stock repurchase program during the quarter ended
March 31, 2008.
SkyWest's long-term debt was $1.71 billion as of March 31, 2008, compared
to $1.73 billion at December 31, 2007, consistent with SkyWest's making normal
recurring debt payments. 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 7.39% discount rate, the present
value of these lease obligations was approximately $2.0 billion as of
March 31, 2008.
Under SkyWest Airlines' United Express agreement, specific amounts are
included in the rates charged for mature maintenance on regional jet aircraft
engines that SkyWest records as revenue. However, consistent with the time
and material maintenance policy, as more fully described in SkyWest's Annual
Report on Form 10-K for the year ended December 31, 2007, SkyWest records
maintenance expense on its CRJ200 regional jet aircraft engines as the
maintenance events occur. As a result, during the first quarter of 2008,
SkyWest collected and recorded as revenue approximately $8.1 million (pretax)
under the United Express agreement which is net of any regional jet engine
maintenance overhauls.
On April 25, 2008, SkyWest issued a press release confirming that it had
made a proposal to acquire all of the outstanding shares of common stock of
ExpressJet Holdings, Inc. ("ExpressJet") for $3.50 per share in cash.
ExpressJet also announced on the same day that it had rejected SkyWest's offer
as outlined and indicated that it would start a process of exploring options
or alternatives, including entertaining additional discussions with SkyWest.
At this point, SkyWest intends to review its alternatives with respect to its
proposal to acquire ExpressJet, which could include, among other things,
altering or withdrawing its proposal.
SkyWest Airlines, based in St. George, Utah, and Atlantic Southeast
Airlines ("ASA"), based in Atlanta, Georgia, are wholly owned subsidiaries of
SkyWest. SkyWest Airlines operates as United Express, Delta Connection and
Midwest Connect carriers under contractual agreements with United Airlines,
Delta Air Lines and Midwest Airlines. ASA operates as a Delta Connection
carrier under a contractual agreement with Delta Air Lines. System-wide,
SkyWest serves a total of approximately 229 cities in the United States,
Canada, Mexico and the Caribbean, with approximately 2,585 daily departures.
This press release and additional information regarding SkyWest, Inc. can be
accessed at http://www.skywest.com.
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
"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. Actual results will vary,
and may vary materially, from those anticipated, estimated, projected or
expected for a number of reasons, including, among others: the willingness of
ExpressJet to engage in negotiations regarding a prospective transaction, and
the results of those negotiations, if conducted; the content of information
obtained by SkyWest in the course of conducting due diligence with respect to
a prospective transaction, or the inability of SkyWest to obtain the
opportunity to conduct due diligence as requested; the ability of SkyWest and
ExpressJet to negotiate and enter into definitive agreements with respect to
the prospective transaction, and the terms and conditions of such an
agreement, if executed; the inability to obtain amendments to existing
collective bargaining agreements between ExpressJet and its pilots and other
personnel; satisfaction of closing conditions, to the extent that a
transaction can be negotiated; and the challenges of competing successfully in
a highly competitive and rapidly changing industry. Other factors that may
cause actual results to vary from SkyWest's expectations include developments
associated with fluctuations in the economy and the demand for air travel;
ongoing negotiations between SkyWest and its major partners regarding their
contractual relationships; variations in market and economic conditions; the
impact of global instability; rapidly escalating 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 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, entitled "Risk Factors."
With respect to any potential transaction involving ExpressJet Holdings,
Inc., SkyWest has not made any determination as to whether to make an offer to
purchase any shares of ExpressJet stock. This release is for informational
purposes only and is not an offer to buy, or the solicitation of an offer to
sell, any securities. The solicitation and the offer to buy shares of common
stock of ExpressJet, if SkyWest determines to do so, will only be made
pursuant to an offer to purchase and related materials that would be filed by
SkyWest with the Securities and Exchange Commission and would contain the full
details of any offer. If an offer to purchase is made, these materials should
be carefully read by the stockholders of ExpressJet prior to making any
decisions with respect to the offer because the materials would contain
important information, including the terms and conditions of the offer and the
manner in which stockholders may tender shares. If an offer to purchase is
made, the stockholders of ExpressJet will be able to obtain the offer to
purchase and related materials with respect to the offer free of charge from
the SEC's website at http://www.sec.gov, from the information agent named in
the tender offer materials or from SkyWest.
(more)
SKYWEST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars and Shares in Thousands, Except per Share Amounts)
(Unaudited)
Three Months Ended
March 31,
2008 2007
Operating revenues:
Passenger $859,159 $780,567
Ground handling and other 8,864 8,401
868,023 788,968
Operating expenses:
Flying operations 494,925 410,061
Customer service 101,446 117,453
Maintenance 110,325 94,489
Depreciation and amortization 54,616 50,278
General and administrative 38,489 37,112
799,801 709,393
Operating income 68,222 79,575
Other income (expense):
Interest income 6,762 7,110
Interest expense (30,295) (30,571)
Gain (loss) on sale of property and
equipment -- 189
Total other (expense), net (23,533) (23,272)
Income before income taxes 44,689 56,303
Provision for income taxes 15,549 21,515
Net income $29,140 $34,788
Basic earnings per share $0.49 $0.54
Diluted earnings per share $0.47 $0.53
Weighted average common shares:
Basic 60,013 64,279
Diluted 61,351 65,837
Unaudited Operating Highlights
Three Months Ended
Operating Highlights March 31,
2008 2007 % Change
Passengers carried 8,076,331 7,823,106 3.2
Revenue passenger miles (000) 4,194,329 4,024,557 4.2
Available seat miles (000) 5,578,579 5,293,902 5.4
Passenger load factor 75.2% 76.0% (.8)pts
Passenger breakeven load factor 71.9% 71.3% .6pts
Yield per revenue passenger mile $0.205 $0.194 5.7
Revenue per available seat mile $0.156 $0.149 4.7
Cost per available seat mile $0.149 $0.140 6.4
Fuel cost per available seat mile $0.052 $0.041 26.8
Average passenger trip length 519 514 1.0
Block Hours 353,637 338,992 4.3
Departures 217,510 214,286 1.5
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