SKYW
$32.96
Skywest
$.89
2.78%
Earnings Details
1st Quarter March 2020
Thursday, May 07, 2020 4:01:00 PM
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Summary

Skywest (SKYW) Recent Earnings

Skywest (SKYW) reported 1st Quarter March 2020 earnings of $0.59 per share on revenue of $729.9 million. The consensus earnings estimate was $0.88 per share on revenue of $690.0 million. Revenue grew 0.9% on a year-over-year basis.

SkyWest Inc, through its subsidiaries offers scheduled passenger service to destinations in the United States, Canada, Mexico and the Caribbean.

Results
Reported Earnings
$0.59
Earnings Whisper
-
Consensus Estimate
$0.88
Reported Revenue
$729.9 Mil
Revenue Estimate
$690.0 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

SkyWest, Inc. Announces First Quarter 2020 Profit

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.