ST. GEORGE, Utah, Feb. 1, 2018 /PRNewswire/ — SkyWest, Inc. (NASDAQ: SKYW) (“SkyWest”) today reported financial and operating results for Q4 2017, including net income of $290 million, or $5.46 per diluted share, compared to net loss of $270 million, or $5.22 loss per diluted share for Q4 2016. Excluding special items in both periods, adjusted net income was $43 million, or $0.81 per diluted share for Q4 2017, compared to adjusted net income of $29 million, or $0.54 per diluted share for Q4 2016.1  Q4 2017 adjusted earnings per diluted share of $0.81 did not include a $247 million after-tax benefit from the revaluation of our net deferred tax liability that was included in our GAAP results for the quarter.

SkyWest reported net income of $429 million, or $8.08 per diluted share for the 2017 year, compared to a net loss of $162 million, or $3.14 loss per diluted share for the 2016 year.  Excluding special items in both periods, adjusted net income was $182 million, or $3.43 per diluted share for the 2017 year, compared to adjusted net income of $143 million, or $2.73 per diluted share for the 2016 year.2

The improvement in net income from Q4 2016 to Q4 2017, excluding special items, was primarily due to SkyWest’s continued fleet transition over the last year, including the addition of 21 new E175 aircraft and the removal of aircraft operating under unprofitable or less profitable flying agreements, including 65 50-seat jet aircraft and 13 CRJ700/CRJ900 aircraft.

Commenting on the results, Chip Childs, Chief Executive Officer of SkyWest, said, “Our 2017 results reflect solid execution of our plan by our world-class professionals.  Healthy year-over-year improvements came from disciplined investment, risk reduction and strong operating performance.  Our execution of these clear objectives continues to drive results and positive momentum into 2018 and beyond.”   

Q4 2017 Financial Highlights
Revenue was $797 million in Q4 2017, up from $758 million in Q4 2016. The increase in revenue included the net impact of adding 21 new E175 aircraft since Q4 2016, partially offset by the removal of 78 unprofitable or less profitable aircraft over the same period.  Additionally, SkyWest took delivery of 19 E175 aircraft throughout Q4 2016, which had only a partial quarter impact on 2016 revenue for comparability purposes to 2017.

Operating expenses were $704 million in Q4 2017, down from $1.16 billion in Q4 2016. The Q4 2016 operating expenses included $473 million in special charges related to our 50-seat fleet and early lease returns.3  Excluding the Q4 2016 special charges, the Q4 2017 operating expenses were up $14 million from Q4 2016 primarily due to higher fuel costs and an increase in engine maintenance costs as an increasing percentage of our fleet are under long term power-by-the-hour maintenance agreements.

The enactment of the TCJA resulted in $247 million income tax benefit from the revaluation of SkyWest’s net deferred tax liabilities during Q4 2017.  SkyWest anticipates an effective tax rate for 2018 to generally range between 24% and 25%, excluding the impact of any discrete tax items.

Q4 2017 Operational Update
SkyWest Airlines, Inc. (“SkyWest Airlines”) took delivery of three new E175 aircraft during the quarter.  The following summarizes the anticipated delivery dates for the remaining 12 E175 aircraft to be placed under contract with Alaska Airlines (“Alaska“) and 30 E175 SC aircraft to be placed under contract with Delta Air Lines (“Delta”):

Scheduled E175/E175 SC Aircraft Deliveries

In-service
Dec 31, 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Anticipated
in-service
by end of 2018

Total E175/ E175 SCs:

107

5

16

14

7

149

ExpressJet Airlines, Inc. (“ExpressJet”) continued the previously announced wind down of its flying agreement with Delta during the quarter. At the end of 2017, ExpressJet had 16 CRJ900s and 33 CRJ700s remaining in service under the Delta agreement.  ExpressJet anticipates returning 19 leased aircraft to Delta ratably over the next several quarters (16 CRJ900s and three CRJ700s).  ExpressJet also anticipates removing the remaining 30 CRJ700s from service with Delta starting in April 2018.  ExpressJet has reached a previously announced agreement to place eight CRJ700s under a flying contract with American Airlines (“American”) and is pursuing alternative opportunities for the remaining 22 CRJ700s.

Operating Performance:

Flight completion rates at SkyWest Airlines and ExpressJet for Q4 2017 and 2016 are summarized as follows:

SkyWest Airlines

ExpressJet

Q4 2017

Q4 2016

Q4 2017

Q4 2016

Adjusted Completion *

99.9%

99.9%

99.9%

99.8%

Raw Completion

98.8%

98.2%

98.9%

98.4%

* Adjusted Completion excludes weather cancellations. Raw Completion includes weather cancellations.

Q4 2017 Capital and Liquidity
SkyWest had $685 million in cash and marketable securities at December 31, 2017, up $120 million from December 31, 2016 and up $10 million from September 30, 2017. During the fourth quarter of 2017, SkyWest used $15 million in cash toward the purchase of three E175 aircraft. SkyWest also used $10 million to repurchase stock in Q4 2017 under its $100 million share repurchase program, of which $80 million remains authorized.

Total debt was up slightly during the fourth quarter of 2017, with scheduled principal payments largely offsetting the debt issued for new aircraft during the quarter. In Q4 2017, excluding the three E175s purchased, SkyWest used $47 million for other capital investments, including spare engines and aircraft parts.

Reconciliation of non-GAAP financial measures
Although SkyWest’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), SkyWest management believes that certain non-GAAP financial measures may provide investors with useful information regarding the underlying business trends and performance of SkyWest’s ongoing operations and may be useful for period-over-period comparisons of such operations.  The following table sets forth supplemental financial data and corresponding reconciliations to GAAP financial statements for the three and twelve months ended December 31, 2017 and 2016.  Readers should consider these non-GAAP measures in addition to, not a substitute for, financial reporting measures prepared in accordance with GAAP.  These non-GAAP financial measures exclude some, but not all, items that may affect SkyWest’s net income.  Additionally, these calculations may not be comparable with similarly titled measures of other companies.

Reconciliation to Adjusted Net Income and Diluted Earnings per Share (unaudited)

(Dollars in thousands, except per diluted share)

For the three months ended December 31, 2017

Pre-tax
income

Income tax
benefit (expense)

Net income

Net income per
Diluted Share

GAAP income

$   68,238

$  221,690

$   289,928

$  5.46

Q4 2017 adjustments (1)

(246,845)

(246,845)

Adjusted income

$   68,238

$  (25,155)

$   43,083

$  0.81

For the year ended December 31, 2017

Pre-tax
income

Income tax
benefit (expense)

Net income

Net income per
Diluted Share

GAAP income

$   288,183

$  140,724

$   428,907

$  8.08

2017 year adjustments (1)

(246,845)

(246,845)

Adjusted income

$   288,183

$  (106,121)

$   182,062

$  3.43

For the three months ended December 31, 2016

Pre-tax
income (loss)

Income tax
benefit (expense)

Net income
(loss)

Net income (loss) per
Diluted Share

GAAP income (loss)

$   (426,222)

$  155,977

$   (270,245)

$  (5.22)

Q4 2016 adjustments (2)

465,649

(171,047)

294,602

Q4 2016 adjustments (3)

6,878

(2,526)

4,352

Adjusted income (4)

$   46,305

$  (17,596)

$   28,709

$  0.54

For the year ended December 31, 2016

Pre-tax
income (loss)

Income tax
benefit (expense)

Net income
(loss)

Net income (loss) per
Diluted Share

GAAP income (loss)

$   (248,812)

$  87,226

$   (161,586)

$  (3.14)

2016 year adjustments (2)

465,649

(171,047)

294,602

2016 year adjustments (5)

16,101

(6,023)

10,078

Adjusted income (4)

$   232,938

$  (89,844)

$   143,094

$  2.73

These adjustments allow investors to better understand and analyze our recurring core performance in the periods presented.

(1)

Adjusts for tax benefit resulting from the TCJA enacted during Q4 2017 that resulted in a revaluation of SkyWest’s deferred tax assets and liabilities. 

(2)

Adjusts for a non-cash impairment charge on 50-seat aircraft and related long-lived assets and spare aircraft parts net of a $90 million early settlement of residual value guarantees with Bombardier received in Q4 2016.

(3)

Adjusts for early lease return charges on four CRJ700s.

(4)

Pro forma diluted shares outstanding for Non-GAAP net income were 52,806,000 and 52,369,000 for the three and twelve months ended December 31, 2016, respectively.

(5)

Adjusts for early lease return charges on eight CRJ700s.

About SkyWest

Based in St. George, Utah, SkyWest, Inc. is the holding company for two scheduled passenger airline operations and an aircraft leasing company with more than 17,000 employees. SkyWest’s airline companies provide commercial air service in cities throughout North America with nearly 3,000 daily flights carrying more than 50 million passengers annually. SkyWest Airlines operates through partnerships with United Airlines, Delta Air Lines, American Airlines and Alaska Airlines.

SkyWest will host its conference call to discuss fourth quarter 2017 results today, February 1, 2018, at 2:30 p.m. Mountain Time. The conference call number is 1-877-418-5293 for domestic callers, 1-866-605-3852 for Canada callers and 1-412-717-9593 for other international callers. Please call up to ten minutes in advance to ensure you are connected prior to the start of the call. The conference call will also be available live on the Internet at https://www.webcaster4.com/Webcast/Page/1088/24156.  This press release and additional information regarding SkyWest, including access information for the digital rebroadcast of the fourth quarter 2017 earnings call, participation at investor conferences, investor presentations and monthly traffic statistic releases, can be accessed at inc.skywest.com.

Forward Looking-Statements

In addition to historical information, this release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “forecasts”, “expects,” “intends,” “believes,” “anticipates,” “estimates”, “should,” “likely” and similar expressions identify forward-looking statements. Such statements include, but are not limited to, statements about SkyWest’s future financial and operating results, plans, objectives, expectations, estimates, intentions and outlook, and other statements that are not historical facts. 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, 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 existing or other carriers to fly new aircraft, ongoing negotiations between SkyWest, SkyWest Airlines and ExpressJet and their major partners regarding their contractual obligations, uncertainties regarding operation of new aircraft, the ability to attract and retain qualified pilots, the impact of regulatory issues such as pilot rest rules and qualification requirements, and the ability to obtain aircraft financing.

Actual operational and financial results of SkyWest, SkyWest Airlines and ExpressJet will likely 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 challenges and costs of integrating operations and realizing anticipated synergies and other benefits from the acquisition of ExpressJet; 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; the financial stability of SkyWest’s major partners and any potential impact of their financial condition on the operations of SkyWest, SkyWest Airlines, or ExpressJet; 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; significant aircraft lease and debt commitments; residual aircraft values and related impairment charges; labor relations and costs; the impact of global instability; rapidly fluctuating fuel costs, and potential fuel shortages; the impact of weather-related or other natural disasters on air travel and airline costs; aircraft deliveries; the ability to attract and retain qualified pilots and other unanticipated factors. Risk factors, cautionary statements and other conditions which could cause SkyWest’s actual results to differ materially from management’s current expectations are contained in SkyWest’s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

1 See Reconciliation of non-GAAP financial measures section of this release for more information.
2 Ibid.
3 See Reconciliation of non-GAAP financial measures section of this release for more information.

SkyWest, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Loss)

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

(Unaudited)

Three Months Ended
December 31

Twelve Months Ended
December 31

2017

2016

2017

2016

OPERATING REVENUES

   Passenger

$ 777,661

$   740,736

$  3,126,708

$   3,051,414

   Ground handling and other

19,497

17,280

77,560

69,792

     Total operating revenues

797,158

758,016

3,204,268

3,121,206

OPERATING EXPENSES

   Salaries, wages and benefits

296,262

295,637

1,196,227

1,211,380

   Aircraft maintenance, materials and repairs             

145,996

144,584

579,463

569,306

   Depreciation and amortization

77,353

75,538

292,768

284,969

   Aircraft rentals

47,709

57,144

215,807

262,602

   Aircraft fuel

49,089

31,457

162,653

122,284

   Ground handling services

17,718

18,434

69,848

72,659

   Special items

465,649

465,649

   Other operating expenses

70,092

74,037

299,303

305,041

     Total operating expenses

704,219

1,162,480

2,816,069

3,293,890

OPERATING INCOME (LOSS)

92,939

(404,464)

388,199

(172,684)

OTHER INCOME (EXPENSE)

   Interest income and other

1,511

543

4,909

2,049

   Interest expense

(26,212)

(22,301)

(104,925)

(78,177)

   Total other expense, net

(24,701)

(21,758)

(100,016)

(76,128)

INCOME (LOSS) BEFORE INCOME TAXES

68,238

(426,222)

288,183

(248,812)

PROVISION (BENEFIT) FOR INCOME TAXES

(221,690)

(155,977)

(140,724)

(87,226)

NET INCOME (LOSS)

$   289,928

$   (270,245)

$    428,907

$   (161,586)

BASIC EARNINGS (LOSS) PER SHARE

$     5.60

$     (5.22)

$      8.28

$     (3.14)

DILUTED EARNINGS (LOSS) PER SHARE

$     5.46

$     (5.22)

$      8.08

$     (3.14)

Weighted average common shares

   Basic

51,811

51,757

51,804

51,505

   Diluted

53,140

51,757

53,100

51,505

 

SkyWest, Inc. and Subsidiaries

Summary of Consolidated Balance Sheets

(Dollars in Thousands)

(Unaudited)

December 31,
2017

December 31,
2016

Cash and marketable securities

$       685,295

$       564,907

Other current assets

309,838

352,885

Total current assets

$       995,133

$       917,792

Property and equipment, net

4,134,003

3,782,897

Deposit on aircraft

49,000

38,800

Other long-term assets

280,143

268,477

Total assets

$    5,458,279

$   5,007,966

Current portion, long-term debt

$       309,678

$      305,460

Other current liabilities

511,147

441,805

Total current liabilities

$       820,825

$      747,265

Long-term debt, net of current maturities

2,377,346

2,240,051

Other long-term liabilities

505,786

669,707

Stockholders’ equity

1,754,322

1,350,943

Total liabilities and stockholders’ equity

$   5,458,279

$   5,007,966

 

Unaudited Operating Highlights

Three Months Ended
December 31

Twelve Months Ended
December 31

2017

2016

 Change

2017

2016

 Change

Block hours

450,095

464,736

(3.2) %

1,839,779

1,938,492

(5.1) %

Departures

260,943

273,589

(4.6) %

1,087,052

1,153,480

(5.8) %

Passengers carried

12,622,527

12,926,784

(2.4) %

51,483,552

53,539,438

(3.8) %

Passenger load factor

81.8%

82.9%

 (1.1) pts

80.4%

82.1%

 (1.7) pts

Average passenger trip length

520

526

(1.1) %

512

523

(2.1) %

 

SkyWest, Inc. and Subsidiaries

Additional Operational Information (unaudited)

SkyWest’s total fleet in service decreased by nine aircraft during Q4 2017, as follows:

Aircraft in scheduled service at September 30, 2017:

604

Additions:

New E175 aircraft:

3

Removals, net:

CRJ900 aircraft:

(8)

ERJ145/135 aircraft:

(6)

CRJ700 aircraft:

(2)

             Total Removals, net:

(16)

Redeployed in-transit CRJ200 aircraft:

4

Aircraft in scheduled service at December 31, 2017:

595

SkyWest’s total fleet in service decreased by 57 aircraft over the last twelve months, as follows:

Aircraft in scheduled service at December 31, 2016:

652

Additions:

New E175 aircraft:

21

Removals, net:

ERJ145/135 aircraft:

(47)

CRJ200 aircraft:

(18)

CRJ900 aircraft;

(12)

CRJ700 aircraft:

(1)

Total Removals, net:

(78)

Aircraft in scheduled service at December 31, 2017:

595

 

SkyWest, Inc. and Subsidiaries

Additional Operational Information (continued and unaudited)

Completed Block Hours by Aircraft Type and by Airline

Three months ended December 31

Twelve months ended December 31

By Aircraft Type:

2017

2016

Variance
%

2017

2016

Variance
%

E175s

98,553

68,048

44.8

367,601

219,421

67.5

CRJ700/900s

139,178

137,351

1.3

571,937

608,377

(6.0)

Dual-class aircraft

237,731

205,399

15.7

939,538

827,798

13.5

CRJ200s

135,544

143,319

(5.4)

543,195

619,840

(12.4)

ERJ145/135s

76,820

116,018

(33.8)

357,046

490,854

(27.3)

50-seat aircraft

212,364

259,337

(18.1)

900,241

1,110,694

(18.9)

Total Block Hours

450,095

464,736

(3.2)

1,839,779

1,938,492

(5.1)

Three months ended December 31

Twelve months ended December 31

By Airline:

2017

2016

Variance
%

2017

2016

Variance
%

SkyWest Airlines

329,182

269,586

22.1

1,237,547

1,105,031

12.0

ExpressJet

120,913

195,150

(38.0)

602,232

833,461

(27.7)

Total Block Hours

450,095

464,736

(3.2)

1,839,779

1,938,492

(5.1)

 

Quarterly Fleet and Block Hour Production Forecast for 2018

As of

12/31/2017

As of

3/31/2018

As of

6/30/2018

As of

9/30/2018

As of

12/31/2018

Fleet (1):

(Actual)

(Estimate)

(Estimate)

(Estimate)

(Estimate)

E175/175SCs

107

112

128

142

149

CRJ700/900s

181

169

158

149

140

CRJ200s

195

191

192

180

171

ERJ145s/135s

112

100

100

100

100

Totals

595

572

578

571

560

Q4-2017

Q1-2018

Q2-2018

Q3-2018

Q4-2018

Total 2018

Production (2):

(Actual)

(Estimate)

(Estimate)

(Estimate)

(Estimate)

(Estimate)

Block Hours

450,095

441,000

444,000

457,000

442,000

1,784,000

(1) Fleet count excludes aircraft removed from scheduled service. Actual fleet counts may vary from the forecast due to timing of aircraft removed from service, timing of aircraft transitioned into service and timing of new aircraft deliveries.

(2) Actual production may vary from estimates for various reasons including, but not limited to, timing of aircraft removals and deliveries and anticipated flight completion rates. SkyWest has discontinued providing ASM forecasts, as ASMs are not a meaningful metric in SkyWest’s capacity purchase agreements.

 

 

 

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SOURCE SkyWest, Inc.