SkyWest(US:SKYW)2024-04-26 20:01PART I FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the first quarter of 2024 Item 1. Financial Statements This section presents SkyWest, Inc.'s unaudited condensed consolidated financial statements for Q1 2024, including balance sheets, income, equity, and cash flow statements, with detailed accounting notes Consolidated Balance Sheets This section provides a summary of the company's financial position, detailing assets, liabilities, and stockholders' equity as of March 31, 2024, and December 31, 2023 Balance Sheet Summary (as of March 31, 2024) | Metric | March 31, 2024 (USD thousands) | December 31, 2023 (USD thousands) | | :--- | :--- | :--- | | Total Assets | $6,982,743 | $7,026,293 | | Total Current Assets | $1,069,361 | $1,131,896 | | Total Property and Equipment, net | $5,490,819 | $5,482,967 | | Total Liabilities | $4,817,840 | $4,912,791 | | Total Current Liabilities | $1,312,296 | $1,254,292 | | Long-Term Debt, net | $2,389,227 | $2,562,183 | | Total Stockholders' Equity | $2,164,903 | $2,113,502 | - Total assets slightly decreased to $6.98 billion from $7.03 billion at year-end 2023, primarily due to a decrease in marketable securities811 - Total stockholders' equity increased to $2.16 billion from $2.11 billion, driven by net income811 Consolidated Statements of Comprehensive Income (Loss) This section outlines the company's financial performance, presenting total operating revenues, operating income, net income, and diluted EPS for Q1 2024 and Q1 2023 Q1 2024 vs. Q1 2023 Income Statement Highlights | Metric | Q1 2024 (USD thousands) | Q1 2023 (USD thousands) | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $803,614 | $691,831 | +16.2% | | Operating Income (Loss) | $99,506 | $(4,704) | Significant Turnaround | | Net Income (Loss) | $60,298 | $(22,071) | Significant Turnaround | | Diluted EPS | $1.45 | $(0.45) | Significant Turnaround | - The company reported a significant turnaround, with net income of $60.3 million in Q1 2024 compared to a net loss of $22.1 million in Q1 2023, driven by a 16.2% increase in operating revenues13 Condensed Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities for Q1 2024 and Q1 2023, highlighting changes in liquidity Q1 2024 vs. Q1 2023 Cash Flow Summary | Cash Flow Activity | Q1 2024 (USD thousands) | Q1 2023 (USD thousands) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $157,648 | $150,203 | | Net Cash from (used in) Investing Activities | $(554) | $3,032 | | Net Cash used in Financing Activities | $(125,392) | $(181,695) | - Cash from operations increased slightly to $157.6 million17 - Cash used in financing activities decreased significantly, primarily due to lower treasury stock purchases ($8.8 million in Q1 2024 vs. $100.0 million in Q1 2023)17 Notes to Condensed Consolidated Financial Statements These notes detail accounting policies, revenue recognition from flying agreements, segment reporting, stock-based compensation, debt structure, and future aircraft purchase commitments Flying Agreements Revenue Breakdown (Q1 2024 vs Q1 2023) | Revenue Type | Q1 2024 (USD thousands) | Q1 2023 (USD thousands) | | :--- | :--- | :--- | | Capacity purchase agreements | $677,205 | $586,496 | | Prorate agreements and SWC revenue | $101,084 | $77,337 | | Total Flying Agreements Revenue | $778,289 | $663,838 | - As of March 31, 2024, the company had 475 aircraft in scheduled service under code-share agreements with United, Delta, American, and Alaska Airlines32 - The company has firm purchase commitments for 21 E175 aircraft with delivery dates through 2026 and agreements to place 38 additional E175 aircraft into service with partners through 20263868 Segment Profit (Loss) Summary (Q1 2024 vs Q1 2023) | Segment | Q1 2024 Profit (USD thousands) | Q1 2023 Profit/(Loss) (USD thousands) | | :--- | :--- | :--- | | SkyWest Airlines and SWC | $1,970 | $(69,281) | | SkyWest Leasing | $67,707 | $30,957 | - During Q1 2024, the company repurchased 136,261 shares of common stock for $8.7 million5253 - As of March 31, 2024, $82.2 million remained available under the current repurchase authorization5253 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial results, noting a 16.2% operating revenue increase to $803.6 million and a net income turnaround to $60.3 million, driven by block hour growth, prorate revenue, and deferred revenue changes Overview and Fleet This section describes the company's regional airline business model, its reliance on code-share agreements, and the current composition and future plans for its aircraft fleet - The business model is based on providing regional airline service under code-share agreements, with capacity purchase agreements representing 87.0% of flying agreement revenue in Q1 2024101104 Fleet Composition (as of March 31, 2024) | Category | E175 | CRJ900 | CRJ700 | CRJ200 | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | In scheduled service/under contract | 240 | 41 | 105 | 89 | 475 | | SWC | - | - | - | 16 | 16 | | Leased to third parties | - | 5 | 35 | - | 40 | | Other | - | 3 | 27 | 40 | 70 | | Total Fleet | 240 | 49 | 167 | 145 | 601 | - The company plans to add 38 E175 aircraft with partners through 2026, aiming to improve profitability by replacing older, higher-maintenance aircraft102 Results of Operations This section analyzes the key drivers of financial performance, including changes in block hours, revenue streams from capacity purchase and prorate agreements, and significant shifts in operating expenses - Total block hours increased by 4.9% YoY to 289,801 in Q1 2024, driven by an increase in available captains114115 - Capacity purchase revenue increased by $90.7 million (15.5%) due to higher block hours and the recognition of $0.9 million in previously deferred revenue in Q1 2024, compared to deferring $63.2 million in Q1 2023109120 - Prorate and SWC revenue increased by $23.7 million (30.7%) due to more passengers and the start of SWC operations in May 2023109121122 - Total operating expenses increased by only 1.1%, primarily due to higher salaries and maintenance costs, which were largely offset by a $18.3 million (93.5%) decrease in aircraft rental expense from early lease buyouts in 2023110124129 Business Segments Analysis This section provides a detailed analysis of the financial performance of the SkyWest Airlines and SWC segment and the SkyWest Leasing segment, highlighting key drivers of their respective profits - The SkyWest Airlines and SWC segment reported a profit of $2.0 million, a significant turnaround from a $69.3 million loss in Q1 2023, driven by increased block hour production and favorable deferred revenue recognition137138140 - The SkyWest Leasing segment profit increased by 118.7% to $67.7 million, benefiting from additional lease revenue, lower interest expense, and favorable deferred lease revenue recognition compared to the prior year137144 Liquidity and Capital Resources This section assesses the company's financial flexibility, detailing cash and marketable securities, operating cash flow, financing activities, and long-term debt structure - As of March 31, 2024, the company had $821.2 million in cash and marketable securities and believes its working capital is sufficient for at least the next 12 months145 - Net cash from operating activities was $157.6 million for Q1 202417146150 - Cash used in financing activities was $125.4 million, which included $8.7 million for stock repurchases and $111.2 million in principal payments on long-term debt17146150 - Total long-term debt was $2.9 billion as of March 31, 2024, with an average effective interest rate of approximately 4.1%161 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include aircraft fuel prices, interest rates, and labor/inflation, with fuel price exposure mainly on prorate and SWC operations, while fixed-rate debt mitigates interest rate risk - The company bears the economic risk of fuel price fluctuations on its prorate and SWC operations, which accounted for 13.0% of total flying agreements revenue in Q1 2024165 - A hypothetical 25% increase in fuel price would have increased fuel expense by $5.3 million for the quarter165 - As of March 31, 2024, all long-term debt had fixed interest rates, mitigating near-term interest rate risk on existing debt166 - Labor and inflation are identified as significant risks167168 - Salaries, wages, and benefits represented 49.9% of total operating expenses in Q1 2024167168 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting identified during Q1 2024 - Management concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective170171 - There were no changes in internal control over financial reporting during Q1 2024 that materially affected, or are reasonably likely to materially affect, internal controls172 PART II OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, other disclosures, and a list of exhibits Item 1. Legal Proceedings The company is subject to routine legal actions, but management believes these are not likely to have a material adverse effect on its financial position, liquidity, or operations - As of March 31, 2024, management believes that ongoing legal matters are not likely to have a material adverse effect on the company173 Item 1A. Risk Factors This section refers readers to the company's 2023 Annual Report on Form 10-K and other SEC filings for a comprehensive discussion of material risk factors affecting the business - The company directs investors to its 2023 Form 10-K for a detailed discussion of risk factors174 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's Q1 2024 stock repurchase activity, totaling 136,261 shares at a weighted average price of $64.21 per share under its authorized program Q1 2024 Stock Repurchase Summary | Period | Total Shares Purchased | Average Price Paid Per Share ($) | Remaining Authorization (USD thousands) | | :--- | :--- | :--- | :--- | | Jan 2024 | 18,707 | $51.23 | $89,964 | | Feb 2024 | 18,255 | $59.79 | $88,872 | | Mar 2024 | 99,299 | $67.47 | $82,172 | | Total Q1 2024 | 136,261 | $64.21 | $82,172 | - As of March 31, 2024, $82.2 million remained available for repurchase under the May 2023 stock purchase program authorization of $250.0 million175 Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q1 2024 - No director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement during Q1 2024176 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including compensation plans and officer certifications required by the Sarbanes-Oxley Act - Exhibits filed include compensation plan documents and certifications from the Chief Executive Officer and Chief Financial Officer177