EXECUTIVE OFFICER
S
In addition to Russell A. Childs, the Chief Executive Officer of the Company, whose biographical information is set forth above, the following individuals served as executive officers of the Company or its operating subsidiaries during 2016.
Robert J. Simmons
, 54, is the Chief Financial Officer of Company, SkyWest Airlines and ExpressJet. He is responsible for the areas of finance, accounting, treasury and investor relations for the Company and its subsidiaries.
From 2009 until his appointment as Chief Financial Officer in March 2015, Mr. Simmons served as a Partner with Bendigo Partners, LLC. (“
Bendigo Partners
”), a privately held firm focused on technology-based financial services as private equity investors and operational consultants. In his role with Bendigo Partners, Mr. Simmons was responsible for portfolio management. He served as Chief Financial Officer for E*TRADE Financial Corporation from 2003 to 2008 and as Corporate Treasurer for E*TRADE Financial Corporation from 2001 to 2003. He has accumulated more than 30 years of finance and treasury experience in various leadership positions at companies including Oracle, Iomega, and Bank of America. Mr. Simmons holds a master’s degree in business administration, with an emphasis in finance from the Kellogg Graduate School of Management at Northwestern University, and graduated magna cum laude with a bachelor’s degree in international business from Brigham Young University.
Wade J. Steel
, 41, is the Chief Commercial Officer of the Company, SkyWest Airlines and ExpressJet. He is responsible for the Company’s contractual relationships with American Airlines, Inc. (“
American
”), Delta Air Lines, Inc. (“
Delta
”), United Airlines, Inc. (“
United
”) and Alaska Airlines, Inc. (“
Alaska
”), development of new business opportunities with network airlines, fleet management and information technology. He also plays a vital role in the strategic planning and development opportunities of the Company.
Mr. Steel was initially employed with the Company in March 2007 as Director of Financial Planning and Analysis. He held this position until May 2011, when he was appointed to serve as Vice President—Controller for SkyWest Airlines. From May 2014 until Mr. Steel’s appointment as Chief Commercial Officer of the Company in March 2015, he served as the Executive Vice President and acting Chief Financial Officer of the Company, with responsibility for the areas of finance, treasury, investor relations and information technology for the Company and its subsidiaries. Mr. Steel is a certified public accountant.
Michael B. Thompson
, 41, is the Chief Operating Officer of SkyWest Airlines. He is responsible for oversight of all aspects of SkyWest Airlines’ operations, including safety, quality, flight operations, maintenance and customer service. He also oversees SkyWest Airline’s operational relationships with American, Delta, United and Alaska.
Mr. Thompson was initially employed with the Company in April 2001 as Operations Analyst and was later named Director of Market Planning. In 2007 he was named Vice President of Market Development of SkyWest Airlines, in which position he served until May 2014, when he was appointed to serve as Chief Operating Officer of SkyWest Airlines.
Terry M. Vais,
49, is the Chief Operating Officer of ExpressJet. Mr. Vais is responsible for oversight of all aspects of ExpressJet’s operations, including safety, quality, flight operations, maintenance and customer service. He also oversees ExpressJet’s operational relationships with its major airline partners, including American, Delta and United.
Prior to his appointment as Chief Operating Officer of ExpressJet in September 2015, Mr. Vais served as Vice President of Operations, Planning and Support for ExpressJet since 2014 and served as Vice President of Customer Care for ExpressJet from 2008 to 2014. He has accumulated more than 26 years of airline experience in various leadership positions.
Annual Evaluations
The Board conducts an annual evaluation to determine if the Board and its committees are functioning effectively. The Nominating and Corporate Governance Committee solicits comments from all of the Company’s directors and reports annually to the Board with an assessment of the Board’s performance. Each of the Board’s standing committees conducts an annual evaluation to assess the performance of the applicable committee.
Review and Access to Guidelines
The Nominating and Corporate Governance Committee reviews the Company’s Corporate Governance Guidelines at least annually, then, as it deems appropriate, recommends amendments to the Board.
Board Leadership Structure
Although the Board does not have a formal policy as to whether the roles of Chairman of the Board and Chief Executive Officer should be combined or separated, from 1991 until January 2016, Jerry C. Atkin served as both Chairman of the Board and Chief Executive Officer of the Company. In January 2016, the Board appointed Russell A. Childs to serve as the Chief Executive Officer of the Company, which resulted in the separation of the roles of Chairman of the Board and Chief Executive Officer. Currently, Mr. Atkin serves as Chairman of the Board and Mr. Childs serves as the Chief Executive Officer. The Board believes that such separation allows Mr. Childs to focus his time and energy on managing the Company’s business on a day-to-day basis, while also leveraging Mr. Atkin’s background with the Company, perspective and vast experience in the aviation industry as he devotes his time and attention to matters of Board oversight. Accordingly, the Board has determined that the Company’s Board leadership structure is the most appropriate at this time, given the specific characteristics and circumstances of the Company, and the unique skills and experience of each of Mr. Atkin and Mr. Childs.
The Company is committed to independent Board oversight. Pursuant to the Company’s Corporate Governance Guidelines, all of the Company’s directors (other than Messrs. Atkin and Childs) meet the standards of independence applicable to the Company, and the Board has designated Steven F. Udvar-Hazy as Lead Independent Director. As Lead Independent Director, Mr. Udvar-Hazy is empowered to prepare agendas for and conduct meetings of the non-management directors, communicate with the Chairman of the Board, disseminate information to the Board, and raise issues with management on behalf of the independent directors when appropriate. The Board’s independent oversight function is enhanced by the fact that the Audit, Compensation, Nominating and Corporate Governance and Safety and Compliance Committees are comprised entirely of independent directors.
The Board believes no single leadership model is right for all companies at all times. The Board recognizes that, depending on the circumstances, other leadership models may be appropriate. The independent directors and the Nominating and Corporate Governance Committee regularly review the Company’s leadership structure and, depending on the Company’s needs and the available resources, the Board may modify the Company’s existing leadership structure.
Communications with the Board
Shareholders and other interested parties may communicate with one or more directors or the non‑management directors as a group in writing by regular mail. The following address may be used by those who wish to send such communications by regular mail:
Board of Directors or Name of Individual Director(s)
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c/o Chief Financial Officer
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SkyWest, Inc.
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444 South River Road
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St. George, UT 84790
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Consider the independence of each director and nominee for director; and
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Perform other functions or duties deemed appropriate by the Board.
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Safety and Compliance Committee
The Safety and Compliance Committee has four members and met twice during the year ended December 31, 2016. The responsibilities of the Safety and Compliance Committee, which are discussed in detail in its charter, include the responsibility to:
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Review and make recommendations to the Board addressing airline flight operations, safety and compliance with safety regulations;
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Periodically review with the Company’s management, and such advisors as the Safety and Compliance Committee deems appropriate, aspects of flight operations, safety and compliance with safety regulations; and
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Monitor and provide input with respect to management’s efforts to create and maintain a safety culture within the Company’s operations.
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Nomination Process
The policy of the Nominating and Corporate Governance Committee is to consider properly submitted shareholder recommendations for candidates to serve as directors of the Company. In evaluating those recommendations, the Nominating and Corporate Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria described below. Any shareholder wishing to recommend a candidate for consideration by the Nominating and Corporate Governance Committee should submit a recommendation in writing indicating the candidate’s qualifications and other relevant biographical information and provide confirmation of the candidate’s consent to serve as a director. This information should be addressed to Jerry C. Atkin, Chairman of the Board of the Company, 444 South River Road, St. George, Utah 84790.
As contemplated by the Company’s Corporate Governance Guidelines, the Nominating and Corporate Governance Committee reviews the appropriate skills and characteristics required of directors in the context of the current composition of the Board, at least annually. There is currently no set of specific minimum qualifications that must be met by a nominee recommended by the Nominating and Corporate Governance Committee, as different factors may assume greater or lesser significance at particular times and the needs of the Board may vary in light of its composition and the Nominating and Corporate Governance Committee’s perceptions about future issues and needs. Among the factors the Nominating and Corporate Governance Committee considers, which are outlined in the Corporate Governance Guidelines, are independence, diversity, age, skills, integrity and moral responsibility, policy‑making experience, ability to work constructively with the Company’s management and directors, capacity to evaluate strategy and reach sound conclusions, availability of time and awareness of the social, political and economic environment.
In addition, although the Board does not have a formal policy regarding diversity, it believes that ethnic, gender and cultural diversity among its members can provide value and is important. In considering a potential new candidate, the Board considers whether he or she would increase the Board’s ethnic, gender or cultural diversity.
The Nominating and Corporate Governance Committee utilizes a variety of methods for identifying and evaluating director nominees. The Nominating and Corporate Governance Committee assesses the appropriate size of the Board, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominating and Corporate Governance Committee considers various potential
Executive Compensation Procedures
Role of the Committee.
The Compensation Committee has responsibility for establishing and monitoring the executive compensation programs and for making decisions regarding executive compensation. The Chief Executive regularly attends the Compensation Committee meetings, and the Compensation Committee also meets regularly in executive sessions. The Chief Executive is not present for deliberations by the Compensation Committee regarding his compensation. The Compensation Committee recommends the Chief Executive’s compensation to the Board, which then reviews and approves the Committee’s recommendation, unless the Committee is required to approve such compensation under applicable law. The Compensation Committee also considers the recommendations of the Chief Executive with respect to compensation of the other Named Executives, and after reviewing such recommendations, determines their compensation. The Compensation Committee also monitors, administers and approves awards under the various incentive compensation plans for all levels within the Company, including awards under the Company’s annual cash incentive plan and 2010 Long‑Term Incentive Plan (the “
2010 Plan
”). As permitted by the 2010 Plan, the Compensation Committee has delegated its authority to the Chief Executive to approve interim awards under the 2010 Plan to non-executives on a limited basis between meetings of the Compensation Committee.
Role of Consultants.
During 2015 and 2016, the Company and the Compensation Committee received advice from Frederic W. Cook & Co., Inc. (“
F.W. Cook
”) with respect to executive compensation practices and trends generally and within the airline industry and the peer group listed below. The Company and the Compensation Committee retained F.W. Cook to advise on the amounts and forms of compensation awarded to Named Executives in 2015 and 2016. After conducting an evaluation using the factors established by the Securities and Exchange Commission and The Nasdaq Global Select Market, the Compensation Committee determined that F.W. Cook is independent and that there is no conflict of interest resulting from the engagement of F.W. Cook during 2016. The Compensation Committee has sole authority to hire and fire external compensation consultants.
Industry Compensation Data
. The Compensation Committee also evaluates surveys and other available data regarding the executive compensation programs of other regional and major air carriers, as well as other transportation and logistics companies, in order to determine the competitiveness of the Company’s executive compensation programs. The Compensation Committee performed such a review in August 2015, which included a review of the executive compensation levels and practices at peer companies with revenue and enterprise value between approximately one-third times and three times SkyWest’s. The Company’s revenue and enterprise value were both above the peer group median at the time the study was conducted. The peer companies used in the 2015 review were: Alaska Air Group, Inc., Allegiant Travel Company, Air Transport Services Group Inc., Atlas Air Worldwide Holdings, Inc., Forward Air Corporation, Genesee & Wyoming Inc., Hawaiian Holdings, Inc., Hub Group, Inc., JetBlue Airways Corporation, Old Dominion Freight Line, Inc., Republic Airways Holdings Inc., Spirit Airlines, Inc., Virgin America Inc., Werner Enterprises, Inc., WestJet Airlines Ltd., and XPO Logistics, Inc..
The peer group was modified slightly in 2016 to remove bankrupt companies, and those with less than one-third times to three times the Company’s revenue and enterprise value guideline. As a result, Republic Airways Holdings, Inc., Air Transport Services Group Inc., and Forward Air Corporation were removed, while Air Canada Inc., J.B. Hunt Transport Services, Inc., Kansas City Southern, and YRC Worldwide Inc. were added as new peers. The Company’s revenue and enterprise value size continued to be above the 2016 peer group median.
The Compensation Committee had the 2015 peer group data available when 2016 Named Executive compensation decisions were made at the start of the year and it had the 2016 compensation peer group data available when it approved cash incentive payouts for 2016.
Any survey data reviewed by the Compensation Committee is not compiled specifically for the Company but rather represents a database containing comparative compensation data and information for a broad range of other comparable companies, thereby permitting the Compensation Committee to review pooled compensation data for
positions similar to those held by each Named Executive. The survey data provided to the Compensation Committee does not include the particular names of those companies whose pay practices are surveyed with respect to any particular position being reviewed. Unlike the peer group compensation data, which is limited to publicly available information and does not provide precise comparisons for certain positions, the more comprehensive survey data can be used to provide pooled compensation data for positions closely akin to those held by each Named Executive. In addition, the pool of senior executive talent from which we draw, and against which we compare ourselves, extends beyond the limited community of our immediate peer group. Rather, this pool includes a wide range of other organizations in the sectors outside of our traditional competitors. As a result, the Compensation Committee relies on a combination of industry survey data and peer group compensation data in evaluating our executive compensation.
Compensation Determination
. The Compensation Committee relies on its judgment in making compensation decisions in addition to reviewing relevant information and results. When setting total compensation for each of the Named Executives, the Compensation Committee reviews tally sheets which show the Named Executive’s current compensation, including base pay, annual cash incentive objectives, long‑term, equity‑based compensation objectives, and deferred compensation retirement funding. The executive compensation procedures and the Compensation Committee assessment process take into account these tally sheets as well as the industry compensation data described above, individual performance and contributions, company performance, the results of the most recent say-on-pay vote and such other factors as the Compensation Committee determines are appropriate. The Compensation Committee has the sole discretion to award compensation and make adjustments to awards based on its review of relevant information and other unusual or non‑recurring items.
However, the Company does not believe that it is appropriate to establish compensation levels solely by benchmarking. The Company does not target specific pay levels and uses the peer company market data for context. Instead, its directors rely upon their judgment in making compensation decisions, after reviewing the factors described above. While competitive market compensation paid by other companies is one of the many factors that the Company considers in assessing the reasonableness of compensation, the Company does not attempt to maintain a certain target percentile within a peer group or otherwise rely entirely on that data to determine executive officer compensation. Instead, the Company's compensation determination processes are designed to be flexible in an effort to respond to and adjust for the evolving business environment and individual circumstances.
However, the review of peer data in July 2015 and then again in November 2016 showed that the total compensation levels for the Named Executives generally approximated the 25
th
percentile of the Company’s peer group of companies.
The Company strives to achieve an appropriate mix between long-term equity incentive awards and cash payments in order to meet its objectives. Any apportionment objective is not applied rigidly and does not control its compensation decisions. The Company’s mix of compensation elements is designed to reward recent results, align compensation with shareholder interests and fairly compensate executives through a combination of cash and equity incentive awards.
Compensation Committee Consideration of Shareholder Advisory Vote.
At the Company’s Annual Meeting of Shareholders held in May 2016, the Company submitted the compensation of its named executive officers to the Company’s shareholders in a non‑binding vote. The Company’s executive compensation program received the support of more than 96% of votes cast. The Compensation Committee considered the results of the 2016 vote and views the outcome as evidence of positive shareholder support of its executive compensation decisions and policies.
The Compensation Committee continued to refine the Company’s executive compensation program for 2016 in an effort to better align the compensation packages of the Named Executives with the executive compensation programs of other regional carriers and major airlines and to recognize that the Chief Executive and much of the leadership team is relatively new in their roles. The Compensation Committee will continue to review completed compensation surveys and future shareholder voting results, including the voting results with respect to “Proposal 2—Advisory Vote on Named
Executive Compensation” described in this Proxy Statement, and determine whether to make any changes to the Company’s executive compensation program in light of such surveys and voting results.
Elements of Compensation
The Company’s executive compensation objectives and principles are implemented through the use of the following principal elements of compensation, each discussed more fully below:
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Long‑Term Incentive Awards
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Retirement and Other Benefits
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The compensation components for each Named Executive for 2016 are more fully described in the following paragraphs.
Salary.
Salary is provided with the objective of paying for the underlying role and responsibility associated with the Named Executive’s position, which the Compensation Committee believes allows the Company to attract and retain qualified executives. The Named Executives’ salaries are set at levels that the Compensation Committee believes are generally competitive with the compensation paid to officers in similar positions at other airlines. Salary adjustments are considered annually and influenced by growth of the Company’s operations, individual performance, changes in responsibility, changes in cost of living, and other factors. The salaries of the Named Executives are set forth in the Summary Compensation Table immediately following this section. The salaries of Mr. Childs and Mr. Vais were increased for 2016 due to their promotions, while the salary for Mr. Steel was adjusted more rapidly than is typical due to the Compensation Committee’s review of the peer company market data and its conclusion that his 2015 salary was significantly below the 25
th
percentile of the executives in comparable positions within the peer group companies. The salary for Mr. Simmons was based on a partial year 2015, and Mr. Simmons was provided a more typical salary adjustment of approximately three percent when annualizing his 2015 salary. Mr. Thompson, was provided a more typical annual salary adjustment in the range of two to three percent. Even after these adjustments, the 2016 salaries for Mr. Steel, Mr. Simmons and Mr. Thompson approximated the 25
th
percentile of the executives in comparable positions within the peer group companies.
Annual Cash Incentive.
In an effort to encourage achievement of the Company’s objectives, an annual performance‑based cash incentive plan is maintained for the Named Executives. The combination of salary and annual cash incentives is intended to result in a cash compensation package for each Named Executive that, when performance objectives are met, falls within competitive market standards as determined by the Compensation Committee based on its review of the peer group company data, as well as its understanding of other regional and major air carrier executive compensation programs. The review of market data in August 2016 showed that the 2016 total cash opportunity of the Named Executives, consisting of salary plus target cash incentive, and approximated the 25
th
percentile for all Named Executives when compared to the peer group competitive market data.
The purpose of the annual cash incentive program is to reward the Named Executives with an annual cash incentive in an amount that correlates (i) in part, to one or more financial objectives achieved for the year; and (ii) in part, to the achievement of one or more specific operational objectives during the year. The 2016 annual target incentive opportunity was 100% of salary for Mr. Childs and 80% of salary for Messrs. Simmons, Steel, Thompson and Vais, and their potential annual incentive was allocated 75% based on the financial objective established by the Compensation Committee and 25% based on the operational objective targets established by the Compensation Committee. Mr. Childs
was eligible for a maximum cash incentive payout of 200% of salary. Messrs. Simmons, Steel, Thompson and Vais were eligible for maximum cash incentive payouts of 150% of their salaries. The differing percentages for the Named Executives are due to differing entity level responsibilities.
2016 Corporate Performance Objectives
. For 2016 annual incentive determination purposes, the Compensation Committee determined that pre-tax earnings would be the financial objective and that controllable completion would be the operational objective. In the case of Messrs. Childs, Simmons and Steel, the applicable pre-tax earnings objective and controllable completion objective were based on the pre-tax earnings and controllable completion of the entire Company. This is because they are corporate level executives with Company-wide responsibility and accountability. Mr. Thompson’s pre-tax earnings objective and controllable completion objective were set solely based on the SkyWest Airlines operating segment, since this is his area of responsibility and accountability. Similarly, Mr. Vais is principally engaged in running the operations of the ExpressJet operating segment, so his pre-tax earnings objective and controllable completion objective were set to reflect ExpressJet performance.
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2016 Adjusted Financial Objective.
In setting the 2016 pre-tax earnings objective, the Compensation Committee considered both the planned 2016 budget, with other unusual or non‑recurring items, including changes in pro-rate flying market yields and fuel price changes, non-cash impairments, as well as considering the level of pre-tax earnings that would reflect strong performance and generate shareholder value. Evaluation of unusual or non-recurring items are considered to incentivize the Named Executives to make beneficial long-term business decisions. The pre-tax earnings objective was set to encourage continued focus on profitability and to facilitate the exchange of best practices between the Company’s operating subsidiaries.
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2016 Operational Objective.
A portion of the Named Executives’ annual cash incentive is based on achievement of operating objectives established at the start of the year. The Compensation Committee believes the use of operating objectives allows for consideration of operating execution and achievements that may not be reflected by corporate financial performance. For 2016, the Compensation Committee determined that the operational objectives would be tied to controllable completion. Controllable completion is the percentage of completed scheduled flights over which the Company had control, excluding cancelled flights due to uncontrollable factors such as weather.
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The Compensation Committee established threshold, target and maximum objectives for each of the financial and operational objectives. At threshold performance achievement, the Named Executives were able to earn 50% of their target annual incentive, while the maximum performance allowed a Named Executive to earn 200% of his target annual incentive for the Chief Executive and 187.5% of his target annual incentive for each of the other Named Executives. The higher Chief Executive upside was to reflect his role in the event of over-achievement.
At year‑end, the Compensation Committee reviewed the actual pre-tax earnings and operating performance for the year and determined the extent to which the applicable objectives were met.
The actual amount of the cash incentive payment for each Named Executive is determined by the Compensation Committee based on the Company’s and/or applicable subsidiary’s achievement of the foregoing objectives and the actual cash incentives paid for 2016 were based on the pre-established 2016 cash incentive formula, without application of discretion.
The table below includes the “threshold,” “target” and “maximum” objectives assigned by the Compensation Committee for the corporate performance measures for 2016 and the Company’s 2016 performance relative to those objectives for the Named Executives.
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2016 Annual Cash Incentive Objectives
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Chief Executive
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Other Named Executives
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Weight
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Threshold
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Target
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Maximum
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Achieved
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Achieved Results (% of Salary)
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Achieved Results (% of Salary)
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SkyWest, Inc.
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Pre-tax Earnings ($millions)
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75.0%
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$
191.0
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$
224.0
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$
257.0
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$
256.6
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149.1%
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111.9%
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Operating Objective - Controllable completion
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25.0%
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99.2
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%
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99.5
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%
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99.7
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%
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99.9
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%
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50.0%
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37.5%
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SkyWest Airlines
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Pre-tax Earnings ($millions)
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75.0%
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$
178.0
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$
208.0
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$
238.0
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$
228.9
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96.6%
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Operating Objective - Controllable completion
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25.0%
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99.2
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%
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99.5
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%
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99.7
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%
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99.9
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%
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37.5%
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ExpressJet
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Pre-tax Earnings ($millions)
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75.0%
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$
(30.0
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)
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$
(18.0
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)
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$
(6.0
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)
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$
(5.8
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)
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112.5%
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Operating Objective - Controllable completion
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25.0%
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99.2
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%
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99.5
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%
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99.7
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%
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99.8
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%
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37.5%
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The Company’s achieved pre-tax earnings of $256.6 million for purposes of the 2016 annual incentive plan payouts included certain adjustments to GAAP pre-tax earnings, including special items consisting of (i) a pre-tax non-cash impairment charge of $466 million on SkyWest’s 50-seat aircraft and long-lived assets and spare aircraft parts, (ii) a pre-tax $16 million expense related to early lease returns charges on eight CRJ700 aircraft, and (iii) a pre-tax $23 million loss related to other unusual or non-recurring items such as changes in pro-rate flying market yields, fuel price changes and non-cash related aircraft charges. The Compensation Committee believes these adjustments to GAAP pre-tax earnings lead to continued focus on long-term profitability and incentivize Named Executives to make beneficial long-term business decisions and will enhance the Company’s long-term financial performance and ability to respond to its major airline partners’ future needs.
The corresponding annual cash incentive payments earned for each Named Executive based on performance versus the annual cash incentive objectives during the year ended December 31, 2016, are set forth below.
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Total Annual
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Total Annual
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Threshold
Annual Cash Incentive
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Target Annual Cash Incentive
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Maximum Annual Cash Incentive
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Pre-tax Earnings (% of Salary)
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Operating Objective (% of Salary)
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Cash Incentive Results
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Target Annual Cash Incentive
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Cash Incentive Results
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(% of Salary)
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(% of Salary)
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(% of Salary)
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Weighting of Target
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Results
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Weighting of Target
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Results
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(% of Salary)
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($)
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($)
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Russell A. Childs
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50.0%
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100.0%
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200.0%
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75.0%
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149.1%
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25.0%
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50.0%
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199.1%
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$
400,000
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$
796,364
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Robert J. Simmons
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40.0%
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80.0%
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150.0%
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60.0%
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111.9%
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20.0%
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37.5%
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149.4%
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$
248,000
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$
463,027
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Wade J. Steel
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40.0%
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80.0%
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150.0%
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60.0%
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111.9%
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20.0%
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37.5%
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149.4%
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$
224,000
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$
418,218
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Michael B. Thompson
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40.0%
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80.0%
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150.0%
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60.0%
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96.6%
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20.0%
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37.5%
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134.1%
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$
176,000
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$
294,965
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Terry M. Vais
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40.0%
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80.0%
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150.0%
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60.0%
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112.5%
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20.0%
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37.5%
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150.0%
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$
192,000
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$
360,000
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If the Company’s pre-tax earnings or operating objective achieved results were between two achievement levels, “threshold,” “target” and “maximum”, the earned achievement was determined by linear interpolation between the applicable achievement levels.
Amount of 2016 Performance‑Based Annual Cash Incentive.
The total annual performance‑based cash incentive amounts earned by the Named Executives for 2016 are included in the amounts shown in the Summary Compensation Table below under the caption heading “Non‑Equity Incentive Plan Compensation.”
2017 Annual Cash Incentive Program.
The annual cash incentive objectives were reset for the 2017 plan and the cash incentive plan design for 2017 was refined to align all executives with the same upside (the 2017 annual incentive design allows all Named Executives to earn up to 200% of their target cash incentive) and to administer the
cash incentive plan so that earned awards may qualify for the performance based exception to the $1,000,000 cap on tax deductible compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "
Code
"), which is to ensure financial efficiency for shareholders.
Long‑Term Incentive Awards.
The Company grants discretionary long‑term incentive awards, in the form of stock options, restricted stock units and performance shares to the Named Executives annually.
Long‑term incentive awards are made to encourage the Named Executives to continue their engagement with the Company throughout the vesting periods of the awards and to align management and shareholder interests. In making awards to the Named Executives, the grant size and the appropriate mix of equity‑based awards are considered. The Compensation Committee generally grants long‑term incentive awards at its first meeting of each year. Long‑term incentive awards generally vest only if the Named Executive remains employed by the Company for three years from the date of grant, with the exception of stock options which vest one third at each annual anniversary of the date of grant over a three year period. The Compensation Committee believes the three‑year cliff‑vesting schedule for non-stock option grants and pro-rata vesting over three years for stock options assists in retaining Named Executives and encourages the Named Executives to focus on the Company’s long‑term performance. Commencing with long-term incentive awards granted during 2017, long-term incentive awards granted to the Named Executives will accelerate under certain circumstances, as described below.
In granting stock options, restricted stock units and performance shares to the Named Executives, the Compensation Committee also considers the impact of the grant on the Company’s financial performance, as determined in accordance with the requirements of FASB Accounting Standards Codification Topic 718 (ASC Topic 718). For long‑term incentive awards, the Company records expense in accordance with ASC Topic 718. The amount of expense recorded pursuant to ASC Topic 718 may vary from the corresponding compensation value used in determining the amount of the awards.
Amount and allocation of grant
—For 2016, the total annual targeted long‑term incentive grant value was 125% of salary and targeted annual cash incentive for Mr. Childs and 100% of salary and targeted annual cash incentive for Messrs. Simmons, Steel, Thompson and Vais. The Compensation Committee established these annual targeted amounts to provide a competitive pay package and to ensure that a large portion of each Named Executive’s compensation was based on continuing long‑term service and correlated to the creation of shareholder value. This has been the Compensation Committee’s policy for several years, but is subject to review and continuation or modification each year by the Compensation Committee. The targeted levels of long‑term incentive awards for Mr. Childs are higher than the targeted levels of long‑term incentive awards for other Named Executives as a result of his overall responsibility for the long‑term success of the Company. Each Named Executive’s 2016 long‑term incentive award was allocated among the three types of long‑term incentive awards as follows: stock options, restricted stock units and performance shares.
Stock options, restricted stock unit and performance share grants in 2016 were made pursuant to the Company’s 2010 Plan, as shown in greater detail below and in the table labeled “Grants of Plan Based Awards.”
The following table summarizes the number and nature of long‑term incentive awards granted to the Named Executives by the Company in 2016 under the 2010 Plan.
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Time Vesting Awards
|
|
Performance Vesting Awards
|
|
Options
|
|
Number of Restricted Stock Units
|
|
“Target” Performance Shares (1)
|
Russell A. Childs
|
41,020
|
|
27,064
|
|
27,064
|
Robert J. Simmons
|
22,889
|
|
15,101
|
|
15,101
|
Wade J. Steel
|
20,674
|
|
13,640
|
|
13,640
|
Michael B. Thompson
|
16,244
|
|
10,717
|
|
10,717
|
Terry M. Vais
|
17,721
|
|
11,691
|
|
11,691
|
|
(1)
Number of performance shares if 100% of target is achieved, although the threshold earnout is 50% of target and the maximum earnout is 150% of target.
|
Stock Options
—Options are granted with an exercise price equal to the closing price per share on the date of grant and vest one third at each annual anniversary of the date of grant over a three year period. Grants are made on a systematic schedule, generally one grant per year made at the first Compensation Committee meeting of each year.
The purpose of stock options is to tie a significant percentage of the award’s ultimate value to increases in the market price of the Common Stock, thereby rewarding increased value to the shareholders. A stock option only has a value to the extent the value of the underlying shares on the exercise date exceeds the exercise price. Accordingly, stock options provide compensation only if the underlying share price increases over the option term and the Named Executive’s employment continues through the vesting date.
The size of the grant for each Named Executive is calculated by determining the number of shares with a theoretical future value equal to the targeted compensation for stock options, assuming each option will have a value equal to 33% of its exercise price (i.e., the fair value modifier, like a Black-Scholes value, is set at 33% to simplify administration). This value generally correlates to the ASC Topic 718 grant date fair value of the option awards. The option allocation was 20% of each Named Executive’s total target long‑term incentive value in 2016.
Restricted Stock Units
—The Company also granted restricted stock units to the Named Executives in 2016 under the 2010 Plan. Restricted stock units comprised 40% of each Named Executive's 2016 long‑term incentive compensation. The restricted stock units awarded to a Named Executive entitle the Named Executive to receive a designated number of shares of Common Stock upon completion of a three‑year vesting period, measured from the date of grant. Until the vesting date, the shares underlying the restricted stock units are not issued and outstanding. Accordingly, the Named Executive is not entitled to vote or receive dividends on the shares underlying his restricted stock units unless and until those restricted stock units vest. The purpose of the restricted stock unit component is to support continued employment through volatile economic and stock market conditions, to manage dilution overhang, and to align officers’ interests with maintaining shareholder value already created as well as future value creation. The Compensation Committee believes this approach mitigates the incentive for Named Executives to take unnecessary risks and helps retain the Named Executives’ expertise through continued employment. Restricted stock unit awards deliver significantly greater share‑for‑share compensation value at grant than do stock options, and the Company can offer what it anticipates will be comparable grant date compensation value with approximately 65% fewer shares than if the grant were made solely with stock options.
Performance Shares
. The remaining component of each Named Executive’s 2016 annual long‑term incentive compensation was performance shares payable in Common Stock under the 2010 Plan. Performance share value
comprised 40% of each Named Executive's 2016 long-term incentive g compensation (target performance share value is stock price at grant multiplied by the shares earned if the objectives are achieved). The purpose of the performance share awards is to reward achievement of the three-year financial plan, which the Company believes will also support shareholder value achievement. Under each Named Executive’s performance shares award, a number of performance shares will vest upon completion of a three-year performance period from the date of the grant (subject to the Named Executive’s continued employment through the vesting date), based on the achievement of certain corporate performance objectives.
For purposes of the performance share awards granted in 2016, which will be eligible to vest based on corporate performance during the three year performance period ending December 31, 2018 (the “
2016-2018 PSU Awards
”), the Compensation Committee set three-year performance share objectives, based on cumulative three-year adjusted pre-tax earnings, cumulative three-year adjusted earnings per share, and three-year average return on capital objectives. Under each Named Executive’s performance share award, the performance shares are eligible to vest (and be settled in shares of Common Stock) upon completion of a three-year vesting period from the date of the grant (subject to the Named Executive’s continued employment through the vesting date), based on the level of adjusted pre-tax earnings, adjusted earnings per share and adjusted return on invested capital actually attained in aggregate over the 2016 to 2018 calendar years. Until the vesting date, the shares underlying the performance shares are not issued and outstanding. Accordingly, the Named Executive is not entitled to vote or receive dividends on the shares underlying his performance shares unless and until those performance shares vest.
The Compensation Committee’s philosophy for setting performance share targets is to set maximum targets that will be difficult for the Named Executives to achieve on a consistent basis. For the 2016-2018 PSU Awards, the Compensation Committee established threshold, target and maximum performance levels for each of the three corporate performance objectives, with the actual number of performance shares that will vest to be adjusted in proportion to the extent to which the combined actual results varied from the target levels of performance. The performance shares are allocated equally between each of the three metrics in determining the actual awarded performance shares payable in Common Stock. Specifically, a number of performance shares attributable to each objective according to the weightings assigned by the Compensation Committee will be earned ranging from 50% (for threshold performance) to 100% (for target performance) to 150% (for maximum performance), with performance in between such levels determined by linear interpolation. If performance is below the threshold level for one or more of the objectives, no performance shares will be earned with respect to such objective(s).
The corporate objectives for the 2016-2018 PSU Awards for each Named Executive were based on the Company-wide performance, with no individual component or subsidiary-level objectives, in order to encourage teamwork and a collective focus on the creation of long‑term value for the Company’s shareholders. In determining the degree to which the corporate objectives have been attained, the Company’s performance will be automatically adjusted for unusual or non‑recurring items.
Actual results for 2016-2018 PSU Awards are measured over the three year performance period. Therefore, the degree to which performance shares granted in 2016 ultimately earned will not be determined until the conclusion of the 2018 calendar year.
Long‑Term Incentive Awards for 2017.
The Compensation Committee adjusted the long‑term incentive metrics for performance shares awarded for 2017 to better align the incentive awards with the creation of shareholder value and to align the compensation package of the Named Executives with those of other regional and major air carrier executive compensation programs. Stock options will not be issued in 2017, which simplifies the long-term incentive program design and aligns with the industry trend away from stock options. The 2017 long-term incentive awards will consist of performance shares and restricted stock units. The target grant value of the performance shares component will be upweighted from the 40% weighting in 2016 to a 60% weighting for Named Executives and the performance shares upside will be increased from 150% of target to 200% of target for “maximum” performance. This is intended to replace the performance-based component of the discontinued stock options with performance-based equity value from
performance shares. The Compensation Committee implemented a performance measurement for restricted stock units so that earned awards may be eligible to qualify for the performance based exception to the $1 million cap on tax deductible compensation under Section 162(m) of the Code, which is to ensure financial efficiency for shareholders.
Acceleration of Long-Term Incentive Awards
. With respect to long-term incentive awards granted to the Named Executives commencing in 2017, such awards will vest on an accelerated basis under certain circumstances.
Specifically, restricted stock unit awards granted to the Named Executives will vest on an accelerated basis (i) in the event of the Named Executive’s involuntary termination without cause or resignation for good reason (although such vesting will be subject to the achievement of a threshold performance objective included in such restricted stock unit awards for Section 162(m) purposes unless such termination occurs within 24 months following a change in control of the Company), or (ii) in the event of the Named Executive’s death.
Performance share awards granted to the Named Executives will vest on an accelerated basis (i) in the event of the Named Executive’s death prior to a change in control, as to the “target” number of performance shares subject to the award on the date of death and as to any incremental performance shares above “target” based on the Company’s actual performance relative to the corporate performance objectives under such award at the end of the three year performance period (or, if earlier, a change in control of the Company), (ii) in the event of the Named Executive’s death following a change in control, any “vesting eligible shares” (as described below) will vest upon the date of death, (iii) in the event of the Named Executive’s involuntary termination without cause or resignation for good reason, in each case prior to a change in control, the Named Executive will remain eligible to vest in such number of performance shares as ultimately vest based on the Company’s actual performance relative to the corporate performance objectives under such award at the end of the three year performance period (or, if earlier, a change in control of the Company), which vesting will be pro-rated for the portion of the performance period that has elapsed prior to the date of termination, or (iv) in the event of the Named Executive’s involuntary termination without cause or resignation for good reason, in each case following a change in control, any vesting eligible shares will vest upon the date of such termination. For purposes of the performance shares, in the event of a change in control of the Company, the performance shares will be converted into a number of “vesting eligible shares” that will vest at the end of the three year performance period based on the greater of (i) the “target” number of performance shares subject to the award, or (ii) the number of performance shares that would vest if performance had been measured against the corporate performance objectives as of the date of the change in control.
No Employment and Severance Agreements
The Named Executives do not have employment, severance or change‑in‑control agreements, although the vesting of long-term equity incentive awards may accelerate under certain circumstances, as described below under “Elements of Compensation – Long-Term Incentive Awards.” The Named Executives serve at the will of the Board, which enables the Board to terminate the employment of any Named Executive with discretion as to the terms of any severance. This is consistent with the Company’s performance‑based employment and compensation philosophy.
Retirement and Other Benefits.
The Company and SkyWest Airlines sponsor a 401(k) retirement plan for their eligible employees, including the Named Executives other than Mr. Vais. ExpressJet also maintains a substantially equivalent 401(k) plan for its eligible employees, including Mr. Vais. Both plans are broad based, tax‑qualified retirement plans under which eligible employees, including the Named Executives, may make annual pre‑tax salary reduction contributions subject to the various limits imposed under the Code. The sponsoring employers make matching contributions under the plans on behalf of eligible participants; however, the right of Named Executives and other officers to such matching contributions is limited. The Compensation Committee believes that maintaining the 401(k) retirement plans and providing a means to
save for retirement is an essential part of a competitive compensation package necessary to attract and retain talented executives.
The Company also maintains the SkyWest, Inc. 2002 Deferred Compensation Plan, a non‑qualified deferred compensation plan for the benefit of officers and other highly compensated employees. All of the Named Executives other than Mr. Vais participate in the SkyWest, Inc. 2002 Deferred Compensation Plan. ExpressJet also maintains a separate but similar non‑qualified deferred compensation plan, the ExpressJet Executive Deferred Compensation Plan, for its highly compensated management employees, including Mr. Vais. Under both such deferred compensation plans (the “
Deferred Compensation Plans
”), the employer credits each Named Executive’s account with a discretionary employer contribution equal to 15% of salary and annual cash incentive. These amounts are included in the Summary Compensation Table under the column “All Other Compensation”. Additional information on the Deferred Compensation Plans is found in the section “Non‑Qualified Deferred Compensation for 2016” below. The purpose of the Deferred Compensation Plans is to attract and retain executive talent by assisting with building retirement assets over the course of their career with the Company.
The SkyWest Inc. 2002 Deferred Compensation Plan (but not the ExpressJet Executive Deferred Compensation Plan) also permits eligible executives, including the Named Executives, to elect in advance of each calendar year to defer up to 100% of their cash salary and annual cash incentive compensation for the year. Only Mr. Simmons elected to defer any portion of his salary or annual cash incentive for 2016.
The Company and its subsidiaries do not maintain any defined benefit pension plans for the Named Executives.
Other Benefits.
In addition to the benefits described above, the Company provides certain other benefits to the Named Executives that the Compensation Committee believes are generally consistent with the benefits provided to senior executives of other airlines. The Compensation Committee believes that those benefits, which are detailed in the footnotes to the Summary Compensation Table applicable to the heading “All Other Compensation” below, are reasonable, competitive and consistent with overall executive compensation objectives. Those benefits consist primarily of employer‑paid premiums on health, dental and eye insurance, a personal automobile allowance, and use of Company owned recreational equipment.
The Company and its subsidiaries also maintain a non‑discriminatory, broad based program under which all full‑time employees and their dependents, including the Named Executives and their dependents, may fly without charge on a space available basis on regularly scheduled flights of aircraft operated by the Company’s operating airline subsidiaries.
The Company has not agreed to provide its Named Executives with any gross‑up or reimbursement for taxes.
Share Ownership Guidelines
The Company maintains ownership guidelines for the Named Executives to encourage the alignment of their interests with the long‑term interests of the Company’s shareholders. Each Named Executive is strongly encouraged to maintain a minimum ownership interest in the Company. The guideline ownership level is a number of shares of Common Stock having a value equal to a multiple of the annual base salary for each Named Executive. The Chief Executive’s guideline ownership level is five times salary while the remaining Named Executives’ guideline ownership level is three times salary.
The Named Executives are limited in their ability to sell shares under long‑term incentive awards until their applicable guideline ownership level is reached.
The guidelines also include an expectation that the Named Executives will hold 50% of their net after-tax profit shares held after vesting or option exercise if the applicable guideline ownership level is not met. Any Named Executive
that did not meet the guidelines at December 31, 2016 is encouraged to make progress towards the ownership guideline. The holdings of the Named Executives are summarized in the table entitled “Security Ownership of Certain Beneficial Owners” below.
Deductibility of Executive Compensation
Section 162(m) of the Code imposes a $1 million annual limit on the amount that a publicly traded company may deduct for compensation paid to the company’s principal executive officer during a tax year or to any of the company’s three other most highly compensated executive officers who are still employed at the end of the tax year (other than the Company’s principal financial officer). The limit does not apply to compensation that meets the requirements of Section 162(m) of the Code for “qualified performance‑based compensation” (i.e., compensation paid only if the executive meets pre‑established, objective goals based upon performance criteria approved by the Company’s shareholders). The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Code. In certain situations, the Compensation Committee may approve compensation that will not meet the requirements of Code Section 162(m) in order to ensure competitive levels of total compensation for its executive officers.
Effect of Compensation on Risk
The Compensation Committee believes the Company’s compensation policies and practices are designed to create appropriate and meaningful incentives for the Company’s employees without encouraging excessive or inappropriate risk taking. Among other factors, the Compensation Committee considered the following:
|
·
|
|
The Company’s compensation policies and practices are designed to include a significant level of long‑term compensation, which discourages short‑term risk taking;
|
|
·
|
|
The base salaries and target cash incentive opportunities the Company provides to its employees are generally consistent with salaries paid for comparable positions in the Company’s industry, and provide the Company’s employees with steady income while reducing the incentive for employees to take risks in pursuit of short‑term benefits;
|
|
·
|
|
The Company’s cash incentive and performance equity incentive compensation is capped at levels established by the Compensation Committee, consistent with peer data, and at which the Compensation Committee believes reduces the incentive for excessive risk‑taking;
|
|
·
|
|
The Company has established internal controls and adopted codes of ethics and business conduct, which are designed to reinforce the balanced compensation objectives established by the Compensation Committee; and
|
|
·
|
|
The Company has adopted equity ownership guidelines for its executive officers, which the Compensation Committee believes discourages excessive risk‑taking.
|
Based on the review outlined above, the Company has concluded that the risks arising from its compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company.
COMPENSATION COMMITTEE REPOR
T
The Compensation Committee has reviewed the foregoing compensation discussion and analysis and discussed with the Company’s management the information set forth herein. Based on such review and discussions with management, the Compensation Committee recommended to the Board that the foregoing compensation discussion and analysis be included in this proxy statement.
The Compensation Committee
Keith E. Smith, Chair
Henry J. Eyring
Meredith S. Madden
Ronald J. Mittelstaedt
Steven F. Udvar‑Hazy
The information contained in this Compensation Committee Report shall not be deemed to be “soliciting material,” to be “filed” with the Securities and Exchange Commission or be subject to Regulation 14A or Regulation 14C or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing of SkyWest, Inc., except to the extent that SkyWest, Inc. specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Exchange Act.
EXECUTIVE COMPENSATIO
N
Summary Compensation Table
The table below summarizes the total compensation paid to or earned by each of the Named Executives for the years indicated.
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
Performance
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Stock Units
|
|
Shares
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)(1)
|
|
($)(2)
|
|
($)(2)
|
|
($)(2)
|
|
($)(3)
|
|
($)
|
|
($)
|
|
Russell A. Childs
|
|
2016
|
|
$
|
400,000
|
|
$
|
—
|
|
$
|
400,000
|
|
$
|
400,000
|
|
$
|
200,000
|
|
$
|
796,364
|
|
$
|
161,745
|
(4)
|
$
|
2,358,109
|
|
CEO & President
|
|
2015
|
|
$
|
330,000
|
|
$
|
—
|
|
$
|
330,000
|
|
$
|
330,000
|
|
$
|
165,000
|
|
$
|
464,277
|
|
$
|
111,563
|
(5)
|
$
|
1,730,840
|
|
|
|
2014
|
|
$
|
287,317
|
|
$
|
252,475
|
|
$
|
209,128
|
|
$
|
—
|
|
$
|
97,481
|
|
$
|
237,593
|
|
$
|
104,210
|
(6)
|
$
|
1,188,204
|
|
Robert J. Simmons
|
|
2016
|
|
$
|
310,000
|
|
$
|
—
|
|
$
|
223,200
|
|
$
|
223,200
|
|
$
|
111,600
|
|
$
|
463,027
|
|
$
|
126,103
|
(7)
|
$
|
1,457,130
|
|
Chief Financial Officer
|
|
2015
|
|
$
|
225,000
|
|
$
|
—
|
|
$
|
251,014
|
|
$
|
251,014
|
|
$
|
125,507
|
|
$
|
337,656
|
|
$
|
56,308
|
(8)
|
$
|
1,246,499
|
|
Wade J. Steel
|
|
2016
|
|
$
|
280,000
|
|
$
|
—
|
|
$
|
201,600
|
|
$
|
201,600
|
|
$
|
100,800
|
|
$
|
418,218
|
|
$
|
110,424
|
(9)
|
$
|
1,312,642
|
|
Chief Commercial Officer
|
|
2015
|
|
$
|
240,000
|
|
$
|
—
|
|
$
|
172,800
|
|
$
|
172,800
|
|
$
|
86,400
|
|
$
|
270,125
|
|
$
|
85,299
|
(10)
|
$
|
1,027,424
|
|
|
|
2014
|
|
$
|
185,708
|
|
$
|
130,240
|
|
$
|
103,549
|
|
$
|
—
|
|
$
|
45,959
|
|
$
|
146,140
|
|
$
|
56,133
|
(11)
|
$
|
667,729
|
|
Michael B. Thompson
|
|
2016
|
|
$
|
220,000
|
|
$
|
—
|
|
$
|
158,400
|
|
$
|
158,400
|
|
$
|
79,200
|
|
$
|
294,965
|
|
$
|
96,159
|
(12)
|
$
|
1,007,124
|
|
Chief Operating Officer
|
|
2015
|
|
$
|
215,300
|
|
$
|
—
|
|
$
|
155,016
|
|
$
|
155,016
|
|
$
|
77,508
|
|
$
|
235,624
|
|
$
|
78,770
|
(13)
|
$
|
917,234
|
|
—SkyWest Airlines
|
|
2014
|
|
$
|
176,125
|
|
$
|
112,050
|
|
$
|
98,347
|
|
$
|
—
|
|
$
|
43,585
|
|
$
|
138,239
|
|
$
|
53,483
|
(14)
|
$
|
621,829
|
|
Terry M. Vais
|
|
2016
|
|
$
|
240,000
|
|
$
|
—
|
|
$
|
172,800
|
|
$
|
172,800
|
|
$
|
86,400
|
|
$
|
360,000
|
|
$
|
69,841
|
(15)
|
$
|
1,101,841
|
|
Chief Operating Officer
|
|
2015
|
|
$
|
165,200
|
|
$
|
—
|
|
$
|
101,205
|
|
$
|
101,205
|
|
$
|
51,883
|
|
$
|
163,371
|
|
$
|
51,412
|
(16)
|
$
|
634,276
|
|
—ExpressJet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes discretionary annual performance bonuses approved by the Compensation Committee for 2014 of $19,100 to Mr. Childs and $12,345 to Mr. Steel. Such bonuses were paid during 2015, Messrs. Simmons, Thompson and Vais did not receive a discretionary annual performance bonus for 2014. No discretionary annual performance bonuses were awarded to the Named Executives in 2015 or 2016.
|
The amounts in this column also include the amounts, approved by the Compensation Committee, of discretionary performance unit awards issued in 2015 with respect to 2014, but payable in cash in 2017, subject to forfeiture in the event of termination of employment prior to February 18, 2017. The 2017 cash value of those discretionary performance unit awards for 2014 service were $233,375 for Mr. Childs, $117,895 for Mr. Steel and $112,050 for Mr. Thompson. Messrs. Simmons and Vais did not receive discretionary performance unit awards with respect to 2014.
|
(2)
|
|
These columns show the grant date fair value of the options and stock awards granted as computed under ASC Topic 718 (excluding estimates for forfeitures in case of awards with service-based vesting). With respect to the performance share awards, the grant date fair value is reported based on the probable outcome of the performance conditions as of the grant date. The maximum potential value of the performance share awards, assuming the highest level of performance achievement, is as follows: Mr. Childs, $495,000 (2015), $600,000 (2016); Mr. Simmons, $376,521 (2015), $334,800 (2016); Mr. Steel, $259,200 (2015), $302,400 (2016); Mr. Thompson, $232,524 (2015), $237,600 (2016); and Mr. Vais, $151,808 (2015), $259,200 (2016). These amounts do not reflect the extent to which the Named Executive realized or will realize an actual financial benefit from the awards. Assumptions and methodologies used in the calculation of these amounts are included in footnotes to the Company’s audited financial statements for the year ended December 31, 2016 which are included in the Company’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission.
|
|
(3)
|
|
The amounts in this column reflect the annual performance cash incentive amounts earned in the year indicated based on performance in that year and paid in the subsequent year. As described in the section entitled “Compensation Discussion and Analysis” above, annual performance cash incentives payable to the Named Executives are calculated based upon the financial and operational performance of the Company or its subsidiaries.
|
The threshold, target and maximum amount of each Executive’s annual performance cash incentive opportunity for 2016 is reported in the “Grants of Plan‑Based Awards for 2016” table below.
|
|
(4)
|
|
All other compensation for Mr. Childs for 2016 consists of: $132,490 of employer credits under the SkyWest Deferred Compensation Plan attributable to compensation earned for 2016; $5,958 in employer‑paid health insurance premiums; $15,728 for a personal vehicle lease; $5,606 for personal use of the Company’s recreational equipment; and $1,963 in discretionary matching contributions under the SkyWest 401(k) Plan.
|
|
(5)
|
|
All other compensation for Mr. Childs for 2015 consists of: $88,793 of employer credits under the SkyWest Deferred Compensation Plan attributable to compensation earned for 2015; $5,887 in employer‑paid health insurance premiums; $10,505 for a personal vehicle lease; $5,155 for personal use of the Company’s recreational equipment; and $1,223 in discretionary matching contributions under the SkyWest 401(k) Plan.
|
|
(6)
|
|
All other compensation for Mr. Childs for 2014 consists of: $77,440 of employer credits under the SkyWest Deferred Compensation Plan attributable to compensation earned for 2014; $5,289 in employer‑paid health insurance premiums; $14,727 for a personal vehicle lease; $5,943 for personal use of the Company’s recreational equipment; and $811 in discretionary matching contributions under the SkyWest 401(k) Plan.
|
|
(7)
|
|
All other compensation for Mr. Simmons for 2016 consists of: $98,158 of employer credits under the SkyWest Deferred Compensation Plan attributable to compensation earned for 2016; $5,958 in employer‑paid health insurance premiums; $14,418 for a personal vehicle allowance; $5,606 for personal use of the Company’s recreational equipment and $1,963 in discretionary matching contributions under the SkyWest 401(k) Plan.
|
|
(8)
|
|
All other compensation for Mr. Simmons for 2015 consists of: $34,452 of employer credits under the SkyWest Deferred Compensation Plan attributable to compensation earned for 2015; $5,887 in employer‑paid health insurance premiums; $10,814 for a personal vehicle allowance; and $5,155 for personal use of the Company’s recreational equipment.
|
|
(9)
|
|
All other compensation for Mr. Steel for 2016 consists of: $84,897 of employer credits under the SkyWest Deferred Compensation Plan attributable to compensation earned for 2016; $5,958 in employer‑paid health insurance premiums; $12,000 for a personal vehicle lease; $5,606 for personal use of the Company’s recreational equipment; and $1,963 in discretionary matching contributions under the SkyWest 401(k) Plan.
|
|
(10)
|
|
All other compensation for Mr. Steel for 2015 consists of: $60,422 of employer credits under the SkyWest Deferred Compensation Plan attributable to compensation earned for 2015; $5,887 in employer‑paid health insurance premiums; $12,000 for a personal vehicle lease; $5,155 for personal use of the Company’s recreational equipment; and $1,835 in discretionary matching contributions under the SkyWest 401(k) Plan.
|
|
(11)
|
|
All other compensation for Mr. Steel for 2014 consists of: $37,640 of employer credits under the SkyWest Deferred Compensation Plan attributable to compensation earned for 2014; $5,132 in employer‑paid health insurance premiums; $6,000 for a personal vehicle lease; $5,943 for personal use of the Company’s recreational equipment; and $1,418 in discretionary matching contributions under the SkyWest 401(k) Plan.
|
|
(12)
|
|
All other compensation for Mr. Thompson for 2016 consists of: $70,790 of employer credits under the SkyWest Deferred Compensation Plan attributable to compensation earned for 2016; $5,800 in employer‑paid health insurance premiums; $12,000 for a personal vehicle lease; $5,606 for personal use of the Company’s recreational equipment; and $1,963 in discretionary matching contributions under the SkyWest 401(k) Plan.
|
|
(13)
|
|
All other compensation for Mr. Thompson for 2015 consists of: $54,051 of employer credits under the SkyWest Deferred Compensation Plan attributable to compensation earned for 2015; $5,729 in employer‑paid health insurance premiums; $12,000 for a personal vehicle lease; $5,155 for personal use of the Company’s recreational equipment; and $1,835 in discretionary matching contributions under the SkyWest 401(k) Plan.
|
|
(14)
|
|
All other compensation for Mr. Thompson for 2014 consists of: $34,990 of employer credits under the SkyWest Deferred Compensation Plan attributable to compensation earned for 2014; $5,132 in employer‑paid health insurance premiums; $6,000 for a personal vehicle lease; $5,943 for personal use of the Company’s recreational equipment; and $1,418 in discretionary matching contributions under the SkyWest 401(k) Plan.
|
|
(15)
|
|
All other compensation for Mr. Vais for 2016 consists of: $50,601 of employer credits under the ExpressJet Deferred Compensation Plan attributable to compensation earned for 2016; $4,840 in employer‑paid health insurance premiums; and $14,400 for a personal vehicle lease.
|
|
(16)
|
|
All other compensation for Mr. Vais for 2015 consists of: $42,972 of employer credits under the ExpressJet Deferred Compensation Plan attributable to compensation earned for 2015; $4,840 in employer‑paid health insurance premiums; and $3,600 for a personal vehicle lease.
|
Grants of Plan‑Based Awards For 2016
The following table provides information about non‑equity based and equity‑based plan awards granted to the Named Executives for the year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under
|
|
Estimated Possible Payouts Under
|
|
All Other Stock Awards
|
|
All Other Stock Awards
|
|
|
|
Grant Date
Fair Value
|
|
|
|
|
Non-Equity Incentive Plan Awards
|
|
Equity Incentive Plan Awards
|
|
Number of
|
|
Number of
|
|
Exercise Price of
|
|
of Stock
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Options
|
|
Option Awards
|
|
and Option
|
Name
|
|
Grant Date
|
|
($)(1)
|
|
($)(1)
|
|
($)(1)
|
|
(#)(2)
|
|
(#)(2)
|
|
(#)(2)
|
|
(#)(3)
|
|
(#)(4)
|
|
($/Share)(5)
|
|
Awards($)(6)
|
Russell A. Childs
|
|
|
|
$
|
200,000
|
|
$
|
400,000
|
|
$
|
800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
400,000
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
13,532
|
|
27,064
|
|
40,596
|
|
|
|
|
|
|
|
$
|
400,000
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,064
|
|
|
|
|
|
$
|
400,000
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,020
|
|
$ 14.78
|
|
$
|
200,000
|
Robert J. Simmons
|
|
|
|
$
|
124,000
|
|
$
|
248,000
|
|
$
|
465,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
248,000
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
7,551
|
|
15,101
|
|
22,652
|
|
|
|
|
|
|
|
$
|
223,200
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,101
|
|
|
|
|
|
$
|
223,200
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,889
|
|
$ 14.78
|
|
$
|
111,600
|
Wade J. Steel
|
|
|
|
$
|
112,000
|
|
$
|
224,000
|
|
$
|
420,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
224,000
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
6,820
|
|
13,640
|
|
20,460
|
|
|
|
|
|
|
|
$
|
201,600
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,640
|
|
|
|
|
|
$
|
201,600
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,674
|
|
$ 14.78
|
|
$
|
100,800
|
Michael B. Thompson
|
|
|
|
$
|
88,000
|
|
$
|
176,000
|
|
$
|
330,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
176,000
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
5,359
|
|
10,717
|
|
16,076
|
|
|
|
|
|
|
|
$
|
158,400
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,717
|
|
|
|
|
|
$
|
158,400
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,244
|
|
$ 14.78
|
|
$
|
79,200
|
Terry M. Vais
|
|
|
|
$
|
96,000
|
|
$
|
192,000
|
|
$
|
360,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
192,000
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
5,846
|
|
11,691
|
|
17,537
|
|
|
|
|
|
|
|
$
|
172,800
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,691
|
|
|
|
|
|
$
|
172,800
|
|
|
10-Feb-2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,721
|
|
$ 14.78
|
|
$
|
86,400
|
|
(1)
|
|
The amounts in these columns reflect the threshold, target and maximum amount of each Named Executive’s annual cash incentive opportunity for 2016. As described in the section entitled “Compensation Discussion and Analysis” above, annual cash incentives payable to the Named Executives are calculated based upon the financial and operational performance of the Company or its subsidiaries.
|
|
(2)
|
|
Represents the 2016-2018 PSU Awards granted in 2016 which will be eligible to vest based on corporate performance during the three year performance period ending December 31, 2018. The Compensation Committee determined that the corporate objectives for purposes of such awards would be pre-tax earnings, earnings per share and return on invested capital actually attained over the three year performance period. Until the vesting date, the shares underlying the performance shares are not issued and outstanding. Accordingly, the Named Executive is not entitled to vote or receive dividends on the shares underlying his performance shares unless and until those performance shares vest. For the 2016-2018 PSU Awards, the Compensation Committee established threshold, target and maximum performance levels for each of the three corporate performance objectives, with the actual number of performance shares that will vest to be adjusted in proportion to the extent to which the combined actual results varied from the target levels of performance. The performance shares are allocated equally between each of the three metrics in determining the actual awarded performance shares payable in Common Stock. Specifically, a number of performance shares attributable to each objective according to the weightings assigned by the Compensation Committee will be earned ranging from 50% (for threshold performance) to 100% (for target
|
performance) to 150% (for maximum performance), with performance in between such levels determined by linear interpolation. If performance is below the threshold level for one or more of the objectives, no performance shares will be earned with respect to such objective(s).
|
|
(3)
|
|
Represents restricted stock unit awards that vest on the third anniversary of the date of grant, subject to the Named Executive’s continued employment through the vesting date.
|
|
(4)
|
|
Represents stock option awards that vest one third at each annual anniversary of the date of grant over a three year period.
|
|
(5)
|
|
The exercise price of the options of $14.78 per share for the February 10, 2016 grant date is the market closing price of the Common Stock on the date of grant.
|
|
(6)
|
|
This column shows the grant date fair value of the options and stock awards granted as computed under ASC Topic 718 (excluding estimates for forfeitures in case of awards with service-based vesting). With respect to the performance share awards, the grant date fair value is reported based on the probable outcome of the performance conditions as of the grant date. These amounts do not reflect the extent to which the Named Executive realized or will realize an actual financial benefit from the awards. Assumptions and methodologies used in the calculation of these amounts are included in footnotes to the Company’s audited financial statements for the year ended December 31, 2016 which are included in the Company’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission.
|
Outstanding Equity Awards at Year‑End
The following table provides information on the year‑end 2016 holdings of stock options and other stock awards (restricted stock units and performance shares) by the Named Executives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive Plan Awards:
|
|
Equity Incentive Plan Awards: Market or
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Payout Value of
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
Number of
|
|
Market Value
|
|
Shares, Units
|
|
Shares, Units
|
|
|
Unexercised
|
|
Unexercised
|
|
|
Option
|
|
Option
|
|
Share Units
|
|
of Share Units
|
|
or Other Rights
|
|
or Other Rights
|
|
|
Options
|
|
Options
|
|
|
Exercise
|
|
Expiration
|
|
That Have
|
|
That Have
|
|
That Have
|
|
That Have
|
Name
|
|
Exercisable (#)
|
|
Unexercisable (#)
|
|
|
Price ($)
|
|
Date(1)
|
|
Not Vested (#)
|
|
Not Vested(9)($)
|
|
Not Vested (#)
|
|
Not Vested(9)($)
|
Russell A. Childs
|
|
9,929
|
|
|
|
|
$
|
15.51
|
|
2‑Feb‑18
|
|
|
|
|
|
|
|
|
|
|
|
|
22,979
|
|
|
|
|
|
13.06
|
|
15‑Feb‑19
|
|
|
|
|
|
|
|
|
|
|
|
|
16,389
|
|
|
|
|
$
|
13.24
|
|
13‑Feb‑20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,054
|
|
(2)
|
$
|
12.10
|
|
18‑Feb‑21
|
|
13,896
|
(2)
|
$
|
506,509
|
|
|
|
|
|
|
|
|
|
4,687
|
|
(3)
|
$
|
11.36
|
|
15‑May‑21
|
|
3,608
|
(3)
|
$
|
131,512
|
|
|
|
|
|
|
|
12,217
|
|
24,806
|
|
(4)
|
$
|
13.51
|
|
17‑Feb‑22
|
|
24,426
|
(4)
|
$
|
890,328
|
|
36,639
|
(6)
|
$
|
1,335,492
|
|
|
|
|
41,020
|
|
(5)
|
$
|
14.78
|
|
10-Feb-23
|
|
27,064
|
(5)
|
$
|
986,483
|
|
27,064
|
(7)
|
$
|
986,483
|
Robert J. Simmons
|
|
7,997
|
|
16,236
|
|
(4)
|
$
|
14.12
|
|
17‑Feb‑22
|
|
15,988
|
(4)
|
$
|
582,763
|
|
23,982
|
(6)
|
$
|
874,144
|
|
|
|
|
22,889
|
|
(5)
|
$
|
14.78
|
|
10-Feb-23
|
|
15,101
|
(5)
|
$
|
550,431
|
|
15,101
|
(7)
|
$
|
550,431
|
Wade J. Steel
|
|
|
|
5,429
|
|
(2)
|
$
|
12.10
|
|
18‑Feb‑21
|
|
4,179
|
(2)
|
$
|
152,325
|
|
|
|
|
|
|
|
|
|
6,059
|
|
(3)
|
$
|
11.36
|
|
15‑May‑21
|
|
4,664
|
(3)
|
$
|
170,003
|
|
|
|
|
|
|
|
|
|
12,989
|
|
(4)
|
$
|
13.51
|
|
17‑Feb‑22
|
|
12,791
|
(4)
|
$
|
466,232
|
|
19,187
|
(6)
|
$
|
699,348
|
|
|
|
|
20,674
|
|
(5)
|
$
|
14.78
|
|
10-Feb-23
|
|
13,640
|
(5)
|
$
|
497,178
|
|
13,640
|
(7)
|
$
|
497,178
|
Michael B. Thompson
|
|
|
|
5,051
|
|
(2)
|
$
|
12.10
|
|
18‑Feb‑21
|
|
3,888
|
(2)
|
$
|
141,718
|
|
|
|
|
|
|
|
|
|
5,868
|
|
(3)
|
$
|
11.36
|
|
15‑May‑21
|
|
4,516
|
(3)
|
$
|
164,608
|
|
|
|
|
|
|
|
|
|
11,652
|
|
(4)
|
$
|
13.51
|
|
17‑Feb‑22
|
|
11,474
|
(4)
|
$
|
418,227
|
|
17,211
|
(6)
|
$
|
627,341
|
|
|
|
|
16,244
|
|
(5)
|
$
|
14.78
|
|
10-Feb-23
|
|
10,717
|
(5)
|
$
|
390,635
|
|
10,717
|
(7)
|
$
|
390,635
|
Terry M. Vais
|
|
|
|
5,515
|
|
(2)
|
$
|
12.10
|
|
18‑Feb‑21
|
|
4,245
|
(2)
|
$
|
154,730
|
|
|
|
|
|
|
|
|
|
4,715
|
|
(4)
|
$
|
13.51
|
|
17‑Feb‑22
|
|
4,642
|
(4)
|
$
|
169,201
|
|
6,963
|
(6)
|
$
|
253,801
|
|
|
1,116
|
|
2,265
|
|
(8)
|
$
|
17.25
|
|
9-Sep‑22
|
|
2,231
|
(8)
|
$
|
81,320
|
|
5,021
|
(6)
|
$
|
183,015
|
|
|
|
|
17,721
|
|
(5)
|
$
|
14.78
|
|
10-Feb-23
|
|
11,691
|
(5)
|
$
|
426,137
|
|
11,691
|
(7)
|
$
|
426,137
|
|
(1)
|
|
All stock option awards have a term of seven years from the date of grant.
|
|
(2)
|
|
Awards scheduled to vest on February 18, 2017.
|
|
(3)
|
|
Awards scheduled to vest on May 15, 2017.
|
|
(4)
|
|
Restricted stock unit awards scheduled to vest on February 17, 2018. One third of the shares subject to the options vest on each anniversary of the date of grant over a three year period.
|
|
(5)
|
|
Restricted stock unit awards scheduled to vest on February 10, 2019. One third of the shares subject to the options vest on each anniversary of the date of grant over a three year period.
|
|
(6)
|
|
Represents performance share awards granted in 2015 which will be eligible to vest based on corporate performance during the three year performance period ending December 31, 2017 (the “2015-2017 PSU Awards”). The Compensation Committee determined that the corporate objectives for purposes of such awards would be pre-tax earnings, earnings per share and return on invested capital actually attained over the three year performance period. Until the vesting date, the shares underlying the performance shares are not issued and outstanding. Accordingly, the Named Executive is not entitled to vote or receive dividends on the shares underlying his performance shares unless and until those performance shares vest. For the 2015-2017 PSU Awards, the Compensation Committee established threshold, target and maximum performance levels for each of the three corporate performance objectives, with the actual number of performance shares that will vest to be adjusted in proportion to the extent to which the combined actual results varied from the target levels of performance. The performance shares are allocated equally between each of the three metrics in determining the actual awarded performance shares payable in Common Stock. Specifically, a number of performance shares attributable to each objective according to the weightings assigned by the Compensation Committee will be earned ranging from 50% (for threshold performance) to 100% (for target performance) to 150% (for maximum performance), with performance in between such levels determined by linear interpolation. If performance is below the threshold level for one or more of the objectives, no performance shares will be earned with respect to such objective(s). The actual number of shares of Common Stock issued to our Named Executives following the conclusion of a performance period will be based on our performance relative to the corporate performance objectives for that performance period. As of December 31 2016, the Company’s performance relative to the objectives was tracking at “maximum” performance levels and as such the “maximum” number of performance shares subject to these awards are reported in the table above.
|
|
(7)
|
|
Represents the 2016-2018 PSU Awards granted in 2016 which will be eligible to vest based on corporate performance during the three year performance period ending December 31, 2018 (. The Compensation Committee determined that the corporate objectives for purposes of such awards would be pre-tax earnings, earnings per share and return on invested capital actually attained over the three year performance period. Until the vesting date, the shares underlying the performance shares are not issued and outstanding. Accordingly, the Named Executive is not entitled to vote or receive dividends on the shares underlying his performance shares unless and until those performance shares vest. For the 2016-2018 PSU Awards, the Compensation Committee established threshold, target and maximum performance levels for each of the three corporate performance objectives, with the actual number of performance shares that will vest to be adjusted in proportion to the extent to which the combined actual results varied from the target levels of performance. The performance shares are allocated equally between each of the three metrics in determining the actual awarded performance shares payable in Common Stock. Specifically, a number of performance shares attributable to each objective according to the weightings assigned by the Compensation Committee will be earned ranging from 50% (for threshold performance) to 100% (for target performance) to 150% (for maximum performance), with performance in between such levels determined by linear interpolation. If performance is below the threshold level for one or more of the objectives, no performance shares will be earned with respect to such objective(s). The actual number of shares of Common Stock issued to our Named Executives following the conclusion of a performance period will be based on our performance relative to the corporate performance objectives for that performance period and our stock price on the applicable vesting date. The Company has reported the number and market value of the performance shares subject to the awards based on “target” performance.
|
|
(8)
|
|
Restricted stock unit awards scheduled to vest September 9, 2018. One third of the shares subject to the options vest on each anniversary of the date of grant over a three year period.
|
|
(9)
|
|
Based on market closing price per share of Common Stock of $36.45 on December 30, 2016, the last trading day of 2016.
|
Option Exercises and Stock Vested
Stock options exercised and restricted stock units that vested for the Named Executives during the year ended December 31, 2016 are outlined below.
Stock options exercised and restricted stock units that vested for the Executives during the year ended December 31, 2016 are outlined below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
Value Realized
|
|
Number of Shares
|
|
Value Realized
|
|
|
|
Acquired On Exercise
|
|
on Exercise
|
|
Acquired on Vesting
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
|
Russell A. Childs
|
|
|
31,029
|
|
$
|
443,609
|
|
|
12,391
|
|
$
|
190,326
|
|
Robert J. Simmons
|
|
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
Wade J. Steel
|
|
|
11,292
|
|
$
|
171,301
|
|
|
3,701
|
|
$
|
56,847
|
|
Michael B. Thompson
|
|
|
10,321
|
|
$
|
155,949
|
|
|
3,464
|
|
$
|
53,207
|
|
Terry M. Vais
|
|
|
20,648
|
|
$
|
212,550
|
|
|
3,731
|
|
$
|
57,308
|
|
Non‑Qualified Deferred Compensation for 2016
Pursuant to the SkyWest Deferred Compensation Plan and the ExpressJet Deferred Compensation Plan, covered Named Executives may elect prior to the beginning of each calendar year to defer the receipt of base salary and annual performance cash incentives earned for the ensuing calendar year. Amounts deferred are credited to an unfunded liability account maintained by the Company on behalf of the applicable Named Executive, which account is deemed invested in and earns a rate of return based upon certain notational, self‑directed investment options offered under the applicable plan.
Each Named Executive’s account under the SkyWest Deferred Compensation Plan and ExpressJet Deferred Compensation Plan, as applicable, is also credited with a discretionary employer contribution monthly, whether or not the Named Executive contributes. For 2016 that discretionary employer contribution was 15% of the Named Executive’s salary and annual cash incentive. Participant account balances under the SkyWest and ExpressJet Deferred Compensation Plans are fully vested and will be paid by the Company to each Named Executive upon retirement or separation from employment, or on other specified dates, in a lump sum form or in installments according to a schedule elected in advance by the Named Executive.
The following table provides information regarding the SkyWest Deferred Compensation Plan for Messrs. Childs, Simmons, Steel and Thompson for the year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Withdrawals/
|
|
Aggregate
|
|
|
|
Contributions in
|
|
Contributions in
|
|
Earnings in
|
|
Distributions in
|
|
Balance at
|
|
|
|
Last Year
|
|
Last Year
|
|
Last Year
|
|
Last Year
|
|
Last Year
|
|
Name
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)
|
|
End ($)(4)
|
|
Russell A. Childs
|
|
$
|
—
|
|
$
|
132,490
|
|
$
|
79,168
|
|
$
|
—
|
|
$
|
1,203,837
|
|
Robert J. Simmons
|
|
$
|
2,587
|
|
$
|
98,158
|
|
$
|
13,548
|
|
$
|
—
|
|
$
|
148,183
|
|
Wade J Steel
|
|
$
|
—
|
|
$
|
84,897
|
|
$
|
21,326
|
|
$
|
—
|
|
$
|
305,745
|
|
Michael B. Thompson
|
|
$
|
—
|
|
$
|
70,790
|
|
$
|
42,071
|
|
$
|
—
|
|
$
|
466,631
|
|
|
(1)
|
|
The amount in this column represents deferral of base salary for 2016 and annual performance cash incentives earned for the ensuing calendar year, which deferred amounts are reported in the Summary Compensation Table above.
|
|
(2)
|
|
The amounts in this column reflect the amounts of employer contributions credited under the applicable deferred compensation plan for 2016 at the rate of 15% of each Executive’s 2016 base salary and annual cash incentive which was paid in 2016. The amounts reported in this column are also included in the amounts reported in the “Other Compensation” column of the Summary Compensation Table appearing above.
|
|
(3)
|
|
The amounts in this column reflect the notational earnings during 2016 credited to each Executive’s account under the SkyWest Deferred Compensation Plan. These amounts are not reported in the Summary Compensation Table because they are based on market rates determined by reference to mutual funds that are available to participants in the SkyWest 401(k) Plan or otherwise broadly available.
|
|
(4)
|
|
All Named Executive and Company contributions in prior years to the SkyWest Deferred Compensation Plan have been reported in the Summary Compensation Tables in the company’s previously filed proxy statements, to the extent that an executive was a named executive officer in that fiscal year. These amounts are as follows: Mr. Childs, $132,490 (2016), $88,793 (2015) and $77,440 (2014); Mr. Simmons, $100,745 (2016) and $34,452 (2015); Mr. Steel, $84,897 (2016), $60,422 (2015) and $37,640 (2014); and Mr. Thompson, $70,790 (2016), $56,025 (2015) and $35,467 (2014).
|
At the election of the executive, deferred amounts are invested in a selection of third party investment funds and each executive receives the rates of return under those funds on such deferred amounts.
The following table provides information regarding the ExpressJet Deferred Compensation Plan for Mr. Vais for 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Withdrawals/
|
|
Aggregate
|
|
|
|
Contributions in
|
|
Contributions in
|
|
Earnings in
|
|
Distributions in
|
|
Balance at
|
|
|
|
Last Year
|
|
Last Year
|
|
Last Year
|
|
Last Year
|
|
Last Year
|
|
Name
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)
|
|
End ($)(4)
|
|
Terry M. Vais
|
|
—
|
|
$
|
50,601
|
|
$
|
44,534
|
|
—
|
|
|
383,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The amount in this column represents deferral of base salary for 2016 and annual performance cash incentives earned for the ensuing calendar year, which deferred amounts are reported in the Summary Compensation Table above.
|
|
(2)
|
|
The amount in this column reflects the employer contributions credited under the applicable deferred compensation plan for 2016 at the rate of 15% of Mr. Vais’s 2016 base salary and annual cash incentive which was paid in 2016. The amount reported in this column is also included in the amount reported in the “Other Compensation” column of the Summary Compensation Table appearing above.
|
|
(3)
|
|
The amounts in this column reflect the notational earnings during 2016 credited to Mr. Vais’s account under the ExpressJet Deferred Compensation Plan. This amount is not reported in the Summary Compensation Table because it is based on market rates determined by reference to mutual funds that are available to participants in the ExpressJet 401(k) Plan or, in certain cases, otherwise broadly available.
|
|
(4)
|
|
All Named Executive and Company contributions in prior years to the ExpressJet Deferred Compensation Plan have been reported in the Summary Compensation Tables in the company’s previously filed proxy statements, to the extent that Mr. Vais was a named executive officer in that fiscal year. These amounts are as follows: $50,601 (2016), and $42,972 (2015).
|
At the election of the executive, deferred amounts are invested in a selection of third party investment funds and each executive receives the rates of return under those funds on such deferred amounts.
Potential Payments upon Termination or Change in Control
The information below describes and quantifies certain payments or benefits that would be payable under the existing plans and programs of the Company and its subsidiaries if a Named Executive’s employment had terminated on December 31, 2016, or the Company had undergone a change in control on December 31, 2016. These benefits are in addition to benefits generally available to all salaried employees of the Company in connection with a termination of employment, such as distributions from the 401(k) plan and accrued vacation pay. Except as noted below, the Named Executives do not have any other severance benefits, severance agreements or change‑in‑control agreements.
Accelerated Vesting of Long-Term Incentive Awards Upon Change In Control.
Under the Company’s long‑term incentive plans, all outstanding stock options, restricted stock units, performance shares and performance units held by a Named Executive on December 31, 2016, would have become fully vested upon a “change in control” occurring on that date without regard to whether the Named Executive terminated employment in connection with or following the change in control if such awards were not assumed by the acquirer. The Company’s long‑term incentive plans generally define a “change in control” as any of the following events: (i) the acquisition by any person of 50% or more of the Company’s voting shares, (ii) replacement of a majority of the Company’s directors within a two‑year period under certain conditions, or (iii) shareholder approval of a merger in which the Company is not the surviving entity, sale of substantially all of the Company’s assets or liquidation.
The following table shows for each Named Executive the intrinsic value of his unvested stock options, unvested restricted stock units, performance shares and performance units payable in cash, as of December 31, 2016, that would have been accelerated had a change in control of the Company occurred on that date and the vesting of such awards accelerated, calculated in the case of restricted stock units, performance shares and stock options, by multiplying the number of underlying shares by the closing price of the Common Stock on December 30, 2016, the last trading day of 2016 ($36.45 per share), and, in the case of stock options, by then subtracting the applicable option exercise price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Early Vesting
|
|
Early Vesting
|
|
Early Vesting
|
|
Early Vesting
|
|
Name
|
|
of Stock Options
|
|
of Restricted Stock Units
|
|
of Performance Shares(1)
|
|
of Performance Units
|
|
Russell A. Childs
|
|
$
|
2,015,165
|
|
$
|
2,514,831
|
|
$
|
2,321,975
|
|
$
|
233,375
|
|
Robert J. Simmons
|
|
$
|
858,555
|
|
$
|
1,133,194
|
|
$
|
1,424,575
|
|
$
|
—
|
|
Wade J. Steel
|
|
$
|
1,030,190
|
|
$
|
1,285,737
|
|
$
|
1,196,526
|
|
$
|
117,895
|
|
Michael B. Thompson
|
|
$
|
889,524
|
|
$
|
1,115,188
|
|
$
|
1,017,976
|
|
$
|
112,050
|
|
Terry M. Vais
|
|
$
|
669,954
|
|
$
|
831,388
|
|
$
|
862,953
|
|
$
|
56,600
|
|
(1)
Reflects the value of the performance shares granted in 2015 at “maximum” performance levels and the value of the performance shares granted in 2016 at “target” performance levels.
Deferred Compensation.
If the employment of a Named Executive were terminated on December 31, 2016, the Named Executive would have become entitled to receive the balance in his account under the applicable deferred compensation plan. Distribution would be made in the form of a lump sum or in installments, and in accordance with the distributions schedule elected by the Named Executive under the applicable plan. The 2016 year‑end account balances under those plans are shown in the applicable Non‑qualified Deferred Compensation Tables set forth above. A Named Executive’s account balance would continue to be credited with notational investment earnings or losses through the date of actual distribution.
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has recommended and approved the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm to examine the consolidated financial statements of the Company for the year ending December 31, 2017. The Company is seeking shareholder ratification of such action.
It is expected that representatives of Ernst & Young LLP will attend the Meeting and be available to make a statement or respond to appropriate questions.
The Board and the Audit Committee Recommend that Shareholders Vote
FOR
the Ratification of Appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the year ending December 31, 2017.
AUDIT COMMITTEE DISCLOSUR
E
Who served on the Audit Committee?
The members of the Audit Committee as of December 31, 2016, were W. Steve Albrecht (Chairman), Henry J. Eyring, Andrew C. Roberts, Keith E. Smith and James Welch. Each member of the Audit Committee has been determined by the Board to be independent under the rules of the Securities and Exchange Commission and The Nasdaq Global Select Market. The Board has determined that W. Steve Albrecht, who served on the Audit Committee during the year ended December 31, 2016, is an “audit committee financial expert” as defined in Item 407(d) (5)(ii) of Regulation S-K promulgated under the Exchange Act.
What document governs the activities of the Audit Committee?
The Audit Committee acts under a written charter, which sets forth its responsibilities and duties, as well as requirements for the Audit Committee’s composition and meetings. The Audit Committee charter is available on the Company’s website at inc.skywest.com, and is also available in print, free of charge, upon request. Requests for a printed copy of the Audit Committee charter should be submitted to Eric J. Woodward, Chief Accounting Officer of the Company, at 444 South River Road, St. George, Utah 84790.
How does the Audit Committee conduct its meetings?
During the year ended December 31, 2016, the Audit Committee met with the senior members of the Company’s financial management team at each of its regularly scheduled quarterly meetings. The Audit Committee also met with representatives of Ernst & Young LLP (“
EY
”), the Company’s independent registered public accounting firm, at each of its in-person meetings and met with representatives of Protiviti, Inc. (“
Protiviti
”), the Company’s principal internal auditor, at several of its meetings. Agendas for the Audit Committee’s meetings are established by the Chairman of the Audit Committee, after consultation with the Company’s Chief Financial Officer and Chief Accounting Officer. At those meetings, the Audit Committee reviewed and discussed the Company’s financial performance, financial reporting practices, various financial and regulatory issues, accounting and financial management issues, developments in the accounting profession, as well as the Company’s industry, risk management and a summary of calls received on the Company’s anonymous reporting line. The Audit Committee also had separate, executive sessions regularly with representatives of EY, the Company’s Chief Financial Officer, Protiviti and the Company’s legal counsel, at which meetings candid discussions of financial management, accounting, internal controls and legal and compliance issues took place. Additionally, the Chairman of the Audit Committee had separate discussions regularly with the Chief Financial Officer and representatives of EY, Protiviti and the Company’s legal counsel.
Does the Audit Committee review the periodic reports and other public financial disclosures of the Company?
The Audit Committee reviews each of the Company’s quarterly and annual reports, including Management’s Discussion and Analysis of Financial Condition and Results of Operations. As part of its review, the Audit Committee discusses the reports with the Company’s management and independent registered public accounting firm and considers the audit and review reports prepared by the independent registered public accounting firm about the Company’s quarterly and annual reports, as well as related matters such as the quality (and not just the acceptability) of the Company’s accounting practices, alternative methods of accounting under GAAP and the preferences of the independent registered public accounting firm in this regard, the Company’s critical accounting policies and the clarity and completeness of the Company’s financial and other disclosures.
Did the Audit Committee play any role in connection with the Company’s report on internal controls?
The Audit Committee reviewed management’s report on internal control over financial reporting, required under Section 404 of the Sarbanes Oxley Act of 2002 and related rules. As part of this review, the Audit Committee
reviewed the bases for management’s conclusions in that report, and also reviewed the report of the independent registered public accounting firm on internal control over financial reporting. Throughout the year ended December 31, 2016, the Audit Committee reviewed management’s plan for documenting and testing controls, the results of their documentation and testing, any deficiencies discovered and the resulting remediation of any such deficiencies.
What is the role of the Audit Committee in connection with the financial statements and controls of the Company?
Management of the Company has primary responsibility for the Company’s financial statements and internal control over the Company’s financial reporting. The Company’s independent registered public accounting firm has responsibility for the integrated audit of the Company’s financial statements and internal control over financial reporting. It is the responsibility of the Audit Committee to oversee financial and control matters, among other responsibilities fulfilled by the Audit Committee under its charter. The Audit Committee meets regularly with representatives of EY and Protiviti, without the presence of management, to ensure candid and constructive discussions about the Company’s compliance with accounting standards and best practices among public companies comparable in size and scope to the Company. The Audit Committee also regularly reviews with its outside advisors material developments in the law and accounting literature that may be pertinent to the Company’s accounting financial reporting practices.
Does the Audit Committee have any policy‑making responsibility?
From time to time, the Audit Committee establishes certain policies as required by the rules of the Securities and Exchange Commission and the listing standards of The Nasdaq Global Select Market. For example, the Audit Committee has established a policy for the receipt and retention (including on an anonymous basis) of complaints about financial and control matters. The Audit Committee also has implemented a policy that addresses when the Company may recruit personnel who formerly were employed by the Company’s independent registered public accounting firm. In other cases, the Audit Committee is responsible for overseeing the efficacy of management policies, including compliance with the Company’s Code of Ethics and the availability of perquisites.
What matters have members of the Audit Committee discussed with the independent registered public accounting firm?
In its meetings with representatives of EY, the Audit Committee asked EY to address and discuss their responses to several questions that they believed were particularly relevant to its oversight. These questions included:
|
·
|
|
Are there any significant judgments made by management in preparing the financial statements that would have been made differently had EY prepared and been responsible for the financial statements?
|
|
·
|
|
Based on EY’s experience, and their knowledge of the Company, do the Company’s financial statements fairly present to investors, with clarity and completeness, the Company’s financial position and performance for the reporting period in accordance with GAAP and Securities and Exchange Commission disclosure requirements?
|
|
·
|
|
Based on EY’s experience, and their knowledge of the Company, has the Company implemented internal controls and internal audit procedures that are appropriate for the Company?
|
|
·
|
|
During the course of the applicable year, has EY received any communication or discovered any information indicating any improprieties with respect to the Company’s accounting and reporting procedures or reports?
|
The Audit Committee has also discussed with EY that they are retained by the Audit Committee and that they must raise any concerns about the Company’s financial reporting and procedures directly with the Audit Committee. Based on these discussions and its discussions with management, the Audit Committee believes it has a basis for its oversight judgments and for recommending that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2016.
What has the Audit Committee done with regard to the Company’s audited financial statements for the year ended December 31, 2016?
The Audit Committee has:
|
·
|
|
Reviewed and discussed the Company’s audited financial statements with the Company’s management; and
|
|
·
|
|
Discussed with EY the matters required to be discussed by applicable standards of the Public Company Accounting Oversight Board ("
PCAOB
").
|
Has the Audit Committee considered the independence of the Company’s independent registered public accounting firm?
The Audit Committee has received from EY the written disclosures regarding EY’s independence required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and has discussed with EY their independence. The Audit Committee has concluded that EY is independent from the Company and its management.
Has the Audit Committee made a recommendation regarding the audited financial statements for the year ended December 31, 2016?
Based upon its review and the discussions with management and the Company’s independent registered public accounting firm, the Audit Committee recommended to the Board that the audited consolidated financial statements for the Company be included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2016.
Does the Audit Committee provide a periodic report of its activities to the Board?
The Audit Committee provides reports of its activities at each regularly scheduled Board meeting.
Has the Audit Committee reviewed the fees paid to the Company’s independent registered public accounting firm during the year ended December 31, 2016?
The Audit Committee has reviewed and discussed the fees paid to EY during the year ended December 31, 2016, for the annual audit of the Company’s financial statements, including the integrated audit of internal control over financial reporting and the quarterly reviews of the Company’s financial statements included in its Quarterly Reports on Form 10‑Q, which are set forth below under “Fees Paid to Independent Registered Public Accounting Firm.” The Audit Committee has concluded that EY’s delivery of non‑audit services is compatible with EY’s independence.
What is the Company’s policy regarding the retention of the Company’s independent registered public accounting firm?
The Audit Committee has adopted a policy regarding the retention of the independent registered public accounting firm that requires pre‑approval of all services by the Audit Committee or the Chairman of the Audit Committee. When services are pre‑approved by the Chairman of the Audit Committee, notice of such approval is given to the other members of the Audit Committee and presented to the full Audit Committee at its next scheduled meeting.
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIR
M
Audit Fees
During the years ended December 31, 2016 and 2015, the Company paid EY fees in the aggregate amount of $1,397,000 and $1,265,000, respectively, for the annual audit of the Company’s financial statements, including the integrated audit of internal control over financial reporting and the quarterly reviews of the Company’s financial statements included in its Quarterly Reports on Form 10‑Q.
Audit‑Related Fees, Tax Fees and All Other Fees
The Company did not pay EY for audit-related fees, tax fees and all other fees during the years ended December 31, 2016 and 2015.