ST. GEORGE, Utah, May 7, 2020 /PRNewswire/ --
First Quarter Highlights:
- Net income of $30 million, or
$0.59 per diluted share
- Placed four of 25 used E175 aircraft into service under a
previously announced agreement with United Airlines
- Working with our major airline partners on fleet solutions in
response to the COVID-19 demand disruption
SkyWest, Inc. (NASDAQ: SKYW) ("SkyWest") today reported
financial and operating results for Q1 2020, including net income
of $30 million, or $0.59 per diluted share, compared to net income
of $88 million, or $1.69 per diluted share, for Q1 2019. Adjusted
net income in Q1 2019 was $69
million, or $1.33 per diluted
share, excluding the gain on the sale of ExpressJet and other
special items1. The primary factor in SkyWest's lower
earnings in Q1 2020 compared to Q1 2019 was decreased demand in
March 2020 resulting from the
COVID-19 outbreak.
Commenting on the results, Chip
Childs, Chief Executive Officer of SkyWest, said, "COVID-19
has caused unprecedented disruption across the airline industry.
Our priority is the safety and well-being of our people and
passengers, and we have taken numerous steps to that end. We are
taking aggressive action to maintain strong liquidity and work
collaboratively with our partners on flexible fleet solutions
during this period of uncertainty. I want to thank our 14,000
employees for their resilience, commitment and flexibility during
this pandemic."
Financial Highlights
Revenue was $730 million in Q1 2020, up from $724 million in Q1 2019, primarily from the
impact of adding 16 E175 aircraft since Q1 2019, partially offset
by reduced passenger demand resulting from the COVID-19 pandemic in
March 2020. For comparability
purposes, SkyWest's Q1 2019 results included ExpressJet
January 2019 revenue of $24 million.
Operating expenses were $664
million in Q1 2020, up from $627
million in Q1 2019, primarily from additional aircraft
maintenance and depreciation on aircraft and spare engines in Q1
2020 compared to the same period in 2019. For comparability
purposes, SkyWest's Q1 2019 results included ExpressJet
January 2019 operating expense of
$29 million.
Operational Update on Previously Announced
Deals
SkyWest is coordinating with its major airline
partners to optimize the timing of upcoming fleet deliveries under
previously announced deals in response to COVID-19 schedule
reductions. The anticipated future delivery dates summarized below
are based on currently available information and are subject to
change.
Flying contract with United Airlines ("United") for 25 used E175
aircraft
- Four E175 aircraft were delivered in Q1 2020
- Deliveries for the 21 remaining aircraft are anticipated
throughout 2020
- The aircraft are financed by United
Flying contract with American Airlines ("American") for 20 new
E175 aircraft
- SkyWest is working with American and the manufacturer on
revised delivery dates
- SkyWest anticipates financing the aircraft through debt
Flying contract with Delta Air Lines ("Delta")
Six new E175 aircraft to be financed and operated by
SkyWest:
- Deliveries are anticipated during 2020
- Normal cash down-payments are already covered by deposits paid
last year
New and used aircraft financed by Delta and operated by
SkyWest:
- Three used E175 aircraft were delivered in Q1 2020
- Three used E175 aircraft were delivered in April 2020
- One new CRJ900 aircraft scheduled for delivery during 2020
In conjunction with seven remaining new aircraft deliveries for
Delta, SkyWest anticipates removing three CRJ700 aircraft and four
CRJ900 aircraft from its flying agreement with Delta by the end of
Q3 2020.
Fleet changes under the American flying contract
SkyWest has a flying contract with American to operate a total of
70 CRJ700 aircraft, of which 61 aircraft are currently operating
under contract. SkyWest is working with American to determine the
in-service dates for the remaining nine aircraft.
Fleet changes under the Delta flying contract
As of March 31, 2020, SkyWest's
capacity purchase agreement with Delta included 55 CRJ200 aircraft
that are scheduled to expire in increments between Q2 and Q4 2020
and are not expected to be extended. SkyWest leases 19 of the 55
aircraft from Delta and anticipates returning the leased aircraft
to Delta in 2020. SkyWest owns the remaining 36 CRJ200 aircraft and
anticipates parking the 36 aircraft on an individual basis
following removal from service. SkyWest has no outstanding
financing obligations on the 36 owned CRJ200s. SkyWest reduced the
estimated useful life on these 36 CRJ200 aircraft to align with
each aircraft's anticipated removal dates, which resulted in
approximately $15 million of
incremental depreciation expense in Q1 2020.
Lease agreement with a third party for 29 CRJ700 aircraft
As of March 31, 2020, SkyWest had
placed 16 of 29 CRJ700 aircraft under a previously announced lease
agreement with a third party under a ten-year lease term. Under the
terms of the lease agreement, the remaining aircraft were scheduled
to be placed under lease by mid-2020. Placement of the remaining 13
CRJ700 aircraft under this lease is to be determined by the
parties.
Capital and Liquidity
SkyWest had $578 million in cash and marketable securities at
March 31, 2020, up from $520 million at December
31, 2019. During the first quarter of 2020, SkyWest:
- Used $55 million to purchase
spare engines and $22 million for
other capital investments, primarily related to used aircraft,
aircraft parts and maintenance assets
- Did not finance any new aircraft in Q1 2020
- Used $20 million to repurchase
stock during Q1 2020
SkyWest expects to receive approximately $438 million as payroll support under the
Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"),
of which approximately $337 million
will be a direct grant and approximately $101 million will be in the form of a ten-year,
low interest unsecured loan. SkyWest has elected to receive
the funds in four monthly disbursements from April to July 2020. SkyWest received $219 million of the $438
million in April 2020. In
consideration for the funding, SkyWest will issue to the U.S.
Treasury Department warrants to purchase an aggregate of 357,317
shares of SkyWest common stock. The warrants carry an exercise
price of $28.38 per share.
SkyWest has applied for approximately $497 million in secured loans under the CARES Act
and is evaluating its level of participation in this loan
program.
Total debt at March 31, 2020 was
$2.9 billion, down from $3.0 billion as of December 31, 2019. As of March 31, 2020, SkyWest had a $75 million line of credit facility. SkyWest had
approximately $9 million of letters
of credit issued under the facility and $66
million available under the line at March 31, 2020.
Reconciliation to
Adjusted Net Income and Diluted Earnings per Share
(unaudited)
|
(Dollars in
thousands, except per diluted share)
|
|
|
|
|
|
|
|
|
|
|
|
For the three
months ended March 31, 2019
|
|
|
Pre-tax
income
|
|
Income tax
benefit
(expense)
|
|
Net
income
|
|
Net income per
diluted share
|
GAAP income Q1
2019
|
|
$
114,444
|
|
$
(26,263)
|
|
$
88,181
|
|
$
1.69
|
Q1 2019 adjustments
(1)
|
|
(24,656)
|
|
5,646
|
|
(19,010)
|
|
|
Adjusted income Q1
2019
|
|
$
89,788
|
|
$
(20,617)
|
|
$
69,171
|
|
$
1.33
|
(1) Excludes the gain
on the sale of ExpressJet of $46.6 million (pre-tax); also excludes
special
item operating expenses of $21.9 million (pre-tax), primarily
consisting of a non-cash write-off of
aircraft manufacturer part credits that SkyWest forfeited to settle
future lease return obligations.
|
There were no comparable non-GAAP reconciling items for the Q1
2020 period.
The non-GAAP information presented in this release should not be
considered in isolation or as a substitute for any measure derived
in accordance with GAAP. The non-GAAP information may also be
inconsistent with the manner in which similar measures are derived
or used by other companies. Management uses such non-GAAP
information for financial and operational decision-making purposes
and as a means to evaluate period-over-period comparisons and in
forecasting SkyWest's business going forward. Management believes
that the presentation of such non-GAAP information, when considered
in conjunction with the most directly comparable GAAP information,
provides additional useful comparative information for investors in
their assessment of the underlying performance of SkyWest's
business without regard to these items.
About SkyWest
SkyWest, Inc. is the holding company for
SkyWest Airlines and SkyWest Leasing, an aircraft leasing company.
SkyWest Airlines has a fleet of nearly 500 aircraft connecting
passengers to over 250 destinations throughout North America. SkyWest Airlines operates
through partnerships with United Airlines, Delta Air Lines,
American Airlines and Alaska Airlines carrying more than 43 million
passengers in 2019.
SkyWest will host its conference call to discuss first quarter
2020 results today, May 7, 2020, at
2:30 p.m. Mountain Time. The
conference call number is 1-877-418-5293 for domestic callers,
1-866-605-3852 for Canada callers
and 1-412-717-9593 for other international callers. Please call up
to ten minutes in advance to ensure you are connected prior to the
start of the call. The conference call will also be available live
on the Internet at
https://www.webcaster4.com/Webcast/Page/1088/34193. This press
release and additional information regarding SkyWest, including
access information for the digital rebroadcast of the first quarter
2020 earnings call, participation at investor conferences and
investor presentations can be accessed at inc.skywest.com.
Forward Looking-Statements
In addition to historical
information, this release contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Words such as "forecasts," "expects," "intends,"
"believes," "anticipates," "estimates," "should," "likely" and
similar expressions identify forward-looking statements. Such
statements include, but are not limited to, statements about the
expected terms, timing and benefits of the CARES Act funding, the
impact of the COVID-19 outbreak on SkyWest's business, financial
condition and results of operations, the scheduled aircraft
deliveries for SkyWest Airlines in upcoming years, and related
removal from service and/or placement into service of certain
aircraft, SkyWest's coordination with major airline partners to
optimize the delivery of aircraft under previously announced deals,
the expected terms, timing and benefits related to SkyWest's
leasing and joint venture transactions, as well as SkyWest's future
financial and operating results, plans, objectives, expectations,
estimates, intentions and outlook, and other statements that are
not historical facts. All forward-looking statements included in
this release are made as of the date hereof and are based on
information available to SkyWest as of such date. SkyWest assumes
no obligation to update any forward-looking statements for any
reason. Readers should note that many factors could affect the
future operating and financial results of SkyWest and could cause
actual results to vary materially from those expressed in
forward-looking statements set forth in this release. These factors
include, but are not limited to, uncertainties regarding the impact
of the CARES Act funding on SkyWest's business and operations, the
consequences of the COVID-19 outbreak to economic conditions, the
travel industry and our major partners in general and the financial
condition and operating results of SkyWest in particular, the
prospects of entering into agreements with existing or other
carriers to fly new aircraft, ongoing negotiations between SkyWest
and its major partners regarding their contractual obligations,
uncertainties regarding operation of new aircraft, the ability to
attract and retain qualified pilots, the impact of regulatory
issues such as pilot rest rules and qualification requirements, and
the ability to obtain aircraft financing.
Actual operational and financial results of SkyWest will likely
also vary, and may vary materially, from those anticipated,
estimated, projected or expected for a number of other reasons,
including, in addition to those identified above: the existing
global COVID-19 pandemic and the outbreak of any other disease or
similar public health threat that affects travel demand or travel
behavior; the challenges of competing successfully in a highly
competitive and rapidly changing industry; developments associated
with fluctuations in the economy and the demand for air travel,
including related to the duration and impact of the COVID-19
pandemic, and related decreases in customer demand and spending;
the financial stability of SkyWest's major partners and any
potential impact of their financial condition on the operations of
SkyWest; fluctuations in flight schedules, which are determined by
the major partners for whom SkyWest conducts flight operations;
variations in market and economic conditions; significant aircraft
lease and debt commitments; estimated useful life of long-lived
assets, residual aircraft values and related impairment charges;
labor relations and costs; the impact of global instability;
rapidly fluctuating fuel costs, and potential fuel shortages; the
impact of weather-related or other natural disasters on air travel
and airline costs; aircraft deliveries; the ability to attract and
retain qualified pilots and other unanticipated factors. Risk
factors, cautionary statements and other conditions which could
cause SkyWest's actual results to differ materially from
management's current expectations are contained in SkyWest's
filings with the Securities and Exchange Commission, including its
most recent Annual Report on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K.
1 See Reconciliation of non-GAAP financial
measures section of this release for more information
SkyWest, Inc. and
Subsidiaries
|
Condensed
Consolidated Statements of Income
|
(Dollars and Shares
in Thousands, Except per Share Amounts)
|
(Unaudited)
|
|
|
Three Months
Ended
March
31
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
OPERATING
REVENUES
|
|
|
|
|
|
|
|
|
Flying
agreements
|
$
709,494
|
|
$
700,001
|
|
|
|
|
|
Lease, airport
services and other
|
20,442
|
|
23,693
|
|
|
|
|
|
Total
operating revenues
|
729,936
|
|
723,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
Salaries,
wages and benefits
|
249,160
|
|
257,588
|
|
|
|
|
|
Aircraft
maintenance, materials and
repairs
|
160,216
|
|
118,262
|
|
|
|
|
|
Depreciation
and amortization
|
111,708
|
|
89,986
|
|
|
|
|
|
Airport-related expenses
|
30,640
|
|
30,647
|
|
|
|
|
|
Aircraft
fuel
|
25,413
|
|
25,656
|
|
|
|
|
|
Aircraft
rentals
|
17,056
|
|
20,158
|
|
|
|
|
|
Special
items
|
-
|
|
21,869
|
|
|
|
|
|
Other
operating expenses
|
69,422
|
|
63,109
|
|
|
|
|
|
Total
operating expenses
|
663,615
|
|
627,275
|
|
|
|
|
|
OPERATING
INCOME
|
66,321
|
|
96,419
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
Interest
income
|
2.564
|
|
3,807
|
|
|
|
|
|
Interest
expense
|
(30,204)
|
|
(32,507)
|
|
|
|
|
|
Other income,
net
|
398
|
|
46,725
|
|
|
|
|
|
Total other
income (expense), net
|
(27,242)
|
|
18,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME
TAXES
|
39,079
|
|
114,444
|
|
|
|
|
|
PROVISION FOR INCOME
TAXES
|
9,091
|
|
26,263
|
|
|
|
|
|
NET INCOME
|
$
29,988
|
|
$
88,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC EARNINGS PER
SHARE
|
$
0.60
|
|
$
1.71
|
|
|
|
|
|
DILUTED EARNINGS PER
SHARE
|
$
0.59
|
|
$
1.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares
|
|
|
|
|
|
|
|
|
Basic
|
50,277
|
|
51,440
|
|
|
|
|
|
Diluted
|
50,559
|
|
52,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SkyWest, Inc. and
Subsidiaries
|
Summary of
Consolidated Balance Sheets
|
(Dollars in
Thousands)
|
(Unaudited)
|
|
|
March
31,
2020
|
|
December
31,
2019
|
Cash and marketable
securities
|
$
577,895
|
|
$
520,172
|
Other current
assets
|
191,073
|
|
240,174
|
Total current
assets
|
768,968
|
|
760,346
|
|
|
|
|
Property and
equipment, net
|
5,344,880
|
|
5,345,823
|
Deposit on
aircraft
|
48,858
|
|
48,858
|
Other long-term
assets
|
498,705
|
|
502,102
|
Total
assets
|
$
6,661,411
|
|
$
6,657,129
|
|
|
|
|
Current portion,
long-term debt
|
$
364,579
|
|
$
364,126
|
Other current
liabilities
|
655,264
|
|
560,550
|
Total current
liabilities
|
1,019,843
|
|
924,676
|
|
|
|
|
Long-term debt, net
of current maturities
|
2,537,613
|
|
2,628,989
|
Other long-term
liabilities
|
940,517
|
|
928,450
|
Stockholders'
equity
|
2,163,438
|
|
2,175,014
|
Total liabilities and
stockholders' equity
|
$
6,661,411
|
|
$
6,657,129
|
SkyWest, Inc. and
Subsidiaries
|
Additional
Operational Information (unaudited)
|
|
SkyWest's fleet in
scheduled service by aircraft type:
|
|
|
March 31,
2020
|
December 31,
2019
|
March 31,
2019
|
E175
aircraft
|
163
|
156
|
147
|
CRJ900
aircraft
|
43
|
43
|
43
|
CRJ700
aircraft
|
88
|
94
|
99
|
CRJ200
aircraft
|
190
|
190
|
187
|
Total
aircraft
|
484
|
483
|
476
|
As of March 31, 2020, SkyWest
leased four CRJ200s, 16 CRJ700s and five CRJ900s to third parties
(these aircraft are excluded from the table above).
Selected
operational data:
|
|
|
Three months ended
March 31,
|
|
2020
|
2019
|
Change
|
Block hours by
aircraft type:
|
|
|
|
E175s
|
132,679
|
126,749
|
4.7%
|
CRJ900s
|
28,920
|
30,965
|
(6.6)%
|
CRJ700s
|
68,074
|
71,768
|
(5.1)%
|
CRJ200
|
127,550
|
119,907
|
6.4%
|
Total block
hours
|
357,223
|
349,389
|
2.2%
|
|
|
|
|
Departures
|
209,283
|
193,475
|
8.2%
|
Adjusted flight
completion
|
99.9%
|
99.9%
|
0.0 pts
|
Raw flight
completion
|
95.2%
|
96.4%
|
(1.2) pts
|
Passengers
carried
|
8,864,506
|
9,614,952
|
(7.8)%
|
Passenger load
factor
|
67.5%
|
78.6%
|
(11.1) pts
|
Average trip
length
|
493
|
507
|
(2.8)%
|
Adjusted flight completion percent excludes weather
cancellations. Raw flight completion includes weather
cancellations.
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SOURCE SkyWest, Inc.