Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation of our disclosure controls and procedures, which have been designed to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported accurately and within the time periods specified in the SEC rules and forms. Our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2021, those controls and procedures were effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control
During the most recently completed fiscal quarter, we did not make any changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies may deteriorate.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021, using the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on that evaluation, management believes that our internal control over financial reporting was effective as of December 31, 2021.
The effectiveness of our internal control over financial reporting as of December 31, 2021, has been audited by Ernst & Young LLP (“Ernst & Young”), the independent registered public accounting firm who also has audited our Consolidated Financial Statements included in this Report. Ernst & Young’s report on our internal control over financial reporting appears on the following page.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of SkyWest, Inc.
Opinion on Internal Control over Financial Reporting
We have audited SkyWest, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, SkyWest, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of SkyWest, Inc. and subsidiaries as of December 31, 2021 and 2020, and the related consolidated statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 and our report dated February 17, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Salt Lake City, Utah
February 17, 2022
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ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
Items 10, 11, 12, 13 and 14 in Part III of this Report are incorporated herein by reference to our definitive proxy statement for our 2022 Annual Meeting of Shareholders scheduled for May 3, 2022. We intend to file our definitive proxy statement with the SEC not later than 120 days after December 31, 2021, pursuant to Regulation 14A of the Exchange Act.
Headings in Proxy Statement
ITEM 10 .
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
“Election of Directors,” “Executive Officers,” “Corporate Governance,” “Meetings and Committees of the Board” and “Delinquent Section 16(a) Reports”
ITEM 11 .
EXECUTIVE COMPENSATION
“Corporate Governance,” “Meetings and Committees of the Board,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive Compensation,” “Director Compensation” and “Director Summary Compensation Table”
ITEM 12 .
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
“Security Ownership of Certain Beneficial Owners” and “Securities Authorized for Issuance Under Equity Compensation Plans”
ITEM 13 .
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
“Certain Relationships and Related Transactions”
ITEM 14 .
PRINCIPAL ACCOUNTANT FEES AND SERVICES
“Fees Paid to Independent Registered Public Accounting Firm”
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
Documents Filed:
1.
Financial Statements: Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ), Consolidated Balance Sheets as of December 31, 2021 and 2020, Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019, Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019, Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020, 2019, and 2018 and Notes to Consolidated Financial Statements.
2.
Financial Statement Schedule. The following consolidated financial statement schedule of our company is included in this Item 15.
•
Schedule II—Valuation and qualifying accounts
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All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are not applicable, and therefore have been omitted.
(b)
Exhibits
Number
Exhibit
Incorporated
by Reference
3.1
Restated Articles of Incorporation
(1)
3.2
Amended and Restated Bylaws
(11)
4.1
Specimen of Common Stock Certificate
(2)
4.2
Warrant Agreement, dated as of April 23, 2020, by and between SkyWest, Inc. and the United States Department of the Treasury
(20)
4.3
Form of Warrant (incorporated by reference to Annex B of Exhibit 4.2)
(20)
4.4
Warrant Agreement, dated as of September 29, 2020, by and between SkyWest, Inc. and the United States Department of the Treasury
(21)
4.5
Form of Warrant (incorporated by reference to Annex B of Exhibit 4.4)
(21)
4.6
Warrant Agreement, dated as of January 15, 2021, by and between SkyWest, Inc. and the United States Department of the Treasury
(23)
4.7
Form of Warrant (incorporated by reference to Annex B of Exhibit 4.6)
(23)
4.8
Warrant Agreement, dated as of April 23, 2021, by and between SkyWest, Inc. and the United States Department of the Treasury
(24)
4.9
Form of Warrant (incorporated by reference to Annex B of Exhibit 4.8)
(24)
4.10
Description of Registered Securities
(22)
10.1
Amended and Restated Delta Connection Agreement, dated as of September 8, 2005, between SkyWest Airlines, Inc. and Delta Air Lines, Inc.
(3)
10.2
United Express Agreement dated July 31, 2003, between United Air Lines, Inc., and SkyWest Airlines, Inc.
(4)
10.3
Lease Agreement dated December 1, 1989 between Salt Lake City Corporation and SkyWest Airlines, Inc.
(5)
10.4
Master Purchase Agreement dated November 7, 2000 between Bombardier, Inc. and SkyWest Airlines, Inc.
(6)
10.5
Supplement to Master Purchase Agreement dated November 7, 2000 between Bombardier, Inc. and SkyWest Airlines, Inc.
(4)
+10.6
SkyWest, Inc. 2002 Deferred Compensation Plan, as amended and restated, effective January 1, 2008
(5)
+10.7
First Amendment to the Amended and Restated SkyWest, Inc. 2002 Deferred Compensation Plan
(5)
+10.8
SkyWest, Inc. 2009 Employee Stock Purchase Plan
(5)
+10.9
SkyWest, Inc. 2010 Long-Term Incentive Plan
(6)
+10.10
Form of Restricted Stock Unit Award Agreement
(15)
+10.11
Form of Performance Share Award Agreement
(15)
10.12
Capacity Purchase Agreement, dated November 12, 2010, by and among ExpressJet Airlines, Inc. and Continental Airlines, Inc.
(9)
10.13
Aircraft Purchase Agreement, dated December 7, 2012, between Mitsubishi Aircraft Corporation and SkyWest, Inc.
(10)
10.14
Letter Agreement dated December 7, 2012, between Mitsubishi Aircraft Corporation and SkyWest, Inc.
(10)
10.15
Purchase Agreement COM0028-13, between Embraer S.A. and SkyWest Inc. dated February 15, 2013
(12)
*10.16
Amended and Restated Capacity Purchase Agreement, dated as of November 7, 2014, by and between ExpressJet Airlines, Inc. and United Airlines
(13)
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Number
Exhibit
Incorporated
by Reference
+10.17
SkyWest, Inc. 2019 Long-Term Incentive Plan
(18)
10.18
Severance and Release Agreement, dated as of February 12, 2019, by and between the Registrant and Terry M. Vais
(19)
10.19
Form of Indemnification Agreement
(23)
10.20
Payroll Support Program Agreement, dated of April 23, 2020, by and between SkyWest Airlines, Inc. and the United States Department of the Treasury
(20)
10.21
Promissory Note, dated as of April 23, 2020, issued by SkyWest Airlines, Inc. to the United States Department of the Treasury and guaranteed by SkyWest, Inc.
(20)
**10.22
Restatement Agreement to the Loan and Guarantee Agreement, dated of October 28, 2020, by and among SkyWest Airlines, Inc., the United States Department of the Treasury and the Bank of New York Mellon
(21)
10.23
Amendment to Loan and Guarantee Agreement, dated as of January 15, 2021, by and among SkyWest Airlines, Inc., the United States Department of the Treasury and the Bank of New York Mellon.
(23)
10.24
Payroll Support Program Extension Agreement, dated as of January 15, 2021, by and between SkyWest Airlines, Inc. and the United States Department of the Treasury
(23)
10.25
Promissory Note, dated as of January 15, 2021, issued by SkyWest Airlines, Inc. to the United States Department of the Treasury and guaranteed by SkyWest, Inc.
(23)
10.26
Payroll Support Program 3 Agreement, dated as of April 23, 2021, by and between SkyWest Airlines, Inc. and the United States Department of the Treasury
(24)
10.27
Promissory Note, dated as of April 23, 2021, issued by SkyWest Airlines, Inc. to the United States Department of the Treasury and guaranteed by SkyWest, Inc.
(24)
21.1
Subsidiaries of the Registrant
(23)
23.1
Consent of Independent Registered Public Accounting Firm
Filed herewith
31.1
Certification of Chief Executive Officer
Filed herewith
31.2
Certification of Chief Financial Officer
Filed herewith
32.1
Certification of Chief Executive Officer
Filed herewith
32.2
Certification of Chief Financial Officer
Filed herewith
101
The following financial statements from the SkyWest Inc. Annual Report on Form 10-K for the year ended December 31, 2021, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags
Filed herewith
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Filed herewith
*
Certain portions of this exhibit have been omitted pursuant to Rule 24b-2 and are subject to a confidential treatment request.
**
Pursuant to Item 601(a)(5) of Regulation S-K promulgated by the Securities and Exchange Commission, certain exhibits and schedules to this agreement have been omitted. Such exhibits and schedules are described in the referenced agreement. The Company hereby agrees to furnish to the Securities and Exchange Commission, upon its request, any or all of such omitted exhibits or schedules.
+
Management compensatory plan or arrangement.
(1) Incorporated by reference to the exhibits to a Registration Statement on Form S -3 (File No. 333-129831) filed on November 18, 2005
(2) Incorporated by reference to a Registration Statement on Form S- 3 (File No. 333-42508) filed on July 28, 2000
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(3) Incorporated by reference to Registrant’s Current Report on Form 8-K filed on September 13, 2005, as amended by Amendment No. 2 on Form 8-K/A filed on February 21, 2006
(4) Incorporated by reference to exhibits to Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2003
(5) Incorporated by reference to the exhibits to Registrant’s Quarterly Report on Form 10-Q filed for the quarter ended December 31, 1986
(6) Incorporated by reference to the exhibits to Registrant’s Quarterly Report on Form 10-Q filed on February 13, 2001
(7) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 23, 2009
(8) Incorporated by reference to Appendix A to Registrant's Definitive Proxy Statement on Schedule 14A (File No. 000-14719) filed on March 12, 2010
(9) Incorporated by reference to the exhibits to Registrant’s Current Report on Form 8-K filed on November 18, 2010
(10) Incorporated by reference to the exhibits to Registrant’s Current Report on Form 8-K filed on December 13, 2012, as amended by Amendment No. 1 to Current Report on Form 8-K/A filed on June 25, 2013
(11) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 24, 2012
(12) Incorporated by reference to the exhibits to Registrant’s Quarterly Report on Form 10-Q filed on August 7, 2013, as amended by Amendment No. 1 to Quarterly Report on Form 10-Q/A filed on November 4, 2013
(13) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 14, 2014
(14) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 18, 2015
(15) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 27, 2017
(16) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 26, 2018
(17) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 21, 2019
(18) Incorporated by reference to Appendix B of the Registrant’s Definitive Proxy Statement on Schedule 14A filed on March 22, 2019
(19) Incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed on February 15, 2019
(20) Incorporated by reference to the exhibits to Registrant’s Quarterly Report on Form 10-Q filed on August 7, 2020
(21) Incorporated by reference to the exhibits to Registrant’s Quarterly Report on Form 10-Q filed on November 5, 2020
(22) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 18, 2020
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(23) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 22, 2021
(24) Incorporated by reference to the exhibits to Registrant’s Quarterly Report on Form 10-Q filed on May 6, 2021
Item 16. Form 10-K Summary
None.
SKYWEST, INC. AND SUBSIDIARIES
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2021, 2020 and 2019
(Dollars in thousands)
Additions
Balance at
Charged to
Beginning
Costs and
Balance at
Description
of Year
Expenses
Deductions
End of Year
Year Ended December 31, 2021
Allowance for inventory obsolescence
$
19,676
3,280
—
$
22,956
Allowance for credit losses
46,225
—
( 4,249 )
41,976
$
65,901
3,280
( 4,249 )
$
64,932
Year Ended December 31, 2020
Allowance for inventory obsolescence
$
15,890
3,786
—
$
19,676
Allowance for doubtful accounts receivable
18
—
( 18 )
—
Allowance for credit losses (adoption of Topic 326)
15,388
30,837
—
46,225
$
31,296
34,623
( 18 )
$
65,901
Year Ended December 31, 2019
Allowance for inventory obsolescence
$
22,141
—
( 6,251 )
$
15,890
Allowance for doubtful accounts receivable
158
—
( 140 )
18
$
22,299
—
( 6,391 )
$
15,908
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K for the year ended December 31, 2021, to be signed on its behalf by the undersigned, thereunto duly authorized, on February 17, 2022.
SkyWest, Inc.
By:
/s/ ROBERT J. SIMMONS
Robert J. Simmons
Chief Financial Officer
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ADDITIONAL SIGNATURES
Pursuant to the requirement of the Securities Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons in the capacities and on the dates indicated.
Name
Capacities
Date
/s/ Jerry C. Atkin
Jerry C. Atkin
Chairman of the Board
February 17, 2022
/s/ Russell A. Childs
Russell A. Childs
Chief Executive Officer and President (Principal Executive Officer) and Director
February 17, 2022
/s/ Robert J. Simmons
Robert J. Simmons
Chief Financial Officer (Principal Financial Officer)
February 17, 2022
/s/ Eric J. Woodward
Eric J. Woodward
Chief Accounting Officer (Principal Accounting Officer)
February 17, 2022
/s/ Steven F. Udvar-Hazy
Steven F. Udvar-Hazy
Lead Director
February 17, 2022
/s/ W. Steve Albrecht
Steve Albrecht
Director
February 17, 2022
/s/ Smita Conjeevaram
Smita Conjeevaram
Director
February 17, 2022
/s/ Meredith S. Madden
Meredith S. Madden
Director
February 17, 2022
/s/ Ronald J. Mittelstaedt
Ronald J. Mittelstaedt
Director
February 17, 2022
/s/ Andrew C. Roberts
Andrew C. Roberts
Director
February 17, 2022
/s/ Keith E. Smith
Keith E. Smith
Director
February 17, 2022
/s/ James L. Welch
James L. Welch
Director
February 17, 2022
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.