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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Skywest, Inc.
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previously. Identify the previous filing by registration statement number,
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SKYWEST, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 14, 2001
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To the Shareholders of
SKYWEST, INC.:
The Annual Meeting of Shareholders of SkyWest, Inc. (the "Company") will be
held at the SkyWest Corporate Offices, 444 South River Road, St. George, Utah
84790, on Tuesday, August 14, 2001, at 11:00 a.m. (the "Annual Meeting"). The
purpose of the Annual Meeting is to consider and vote upon the following
matters, as more fully described in the accompanying Proxy Statement:
(1) The election of nine members of the Board of Directors, each to serve
until the next Annual Meeting of Shareholders and until their
respective successors have been duly elected and qualified.
(2) The ratification of the appointment of Arthur Andersen LLP as
independent public accountants for the transition period ending
December 31, 2001.
(3) Such other matters as may properly come before the meeting.
The Board of Directors has fixed the close of business on June 20, 2001 as
the record date for the determination of shareholders entitled to receive notice
of and to vote at the Annual Meeting or any adjournment or postponement thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jerry C. Atkin
Jerry C. Atkin
Chairman of the Board
DATED: June 29, 2001
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, TO ASSURE
THAT YOUR SHARES WILL BE REPRESENTED, PLEASE DATE, FILL IN, SIGN AND MAIL THE
ENCLOSED PROXY IN THE ACCOMPANYING POSTAGE PAID ENVELOPE. YOUR PROXY WILL NOT BE
USED IF YOU ARE PRESENT AT THE ANNUAL MEETING AND DESIRE TO VOTE YOUR SHARES
PERSONALLY.
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SKYWEST, INC.
444 SOUTH RIVER ROAD
ST. GEORGE, UTAH 84790
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PROXY STATEMENT
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FOR ANNUAL MEETING OF SHAREHOLDERS
AUGUST 14, 2001
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the shareholders of SkyWest,
Inc., a Utah corporation (the "Company"), in connection with the solicitation by
the Board of Directors of the Company of proxies from holders of outstanding
shares of the Company's common stock, no par value (the "Common Stock"), for use
at the Annual Meeting of Shareholders of the Company to be held Tuesday, August
14, 2001, and at any adjournment or postponement thereof (the "Annual Meeting").
This Proxy Statement, the Notice of Annual Meeting of Shareholders and the
accompanying form of proxy are first being mailed to shareholders of the Company
on or about July 2, 2001.
The Company will bear all costs and expenses relating to the solicitation
of proxies, including the costs of preparing, printing and mailing to
shareholders this Proxy Statement and accompanying materials. In addition to the
solicitation of proxies by use of the mails, the directors, officers and
employees of the Company, without receiving additional compensation therefor,
may solicit proxies personally or by telephone or telegram. Arrangements will be
made with brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of the shares of
Common Stock held by such persons, and the Company will reimburse such brokerage
firms, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in connection therewith.
VOTING
The Board of Directors has fixed the close of business on June 20, 2001 as
the record date (the "Record Date") for determination of shareholders entitled
to notice of and to vote at the Annual Meeting. As of the Record Date, there
were issued and outstanding 56,213,580 shares of Common Stock. The holders of
record of the shares of Common Stock on the Record Date entitled to be voted at
the Annual Meeting are entitled to cast one vote per share on each matter
submitted to a vote at the Annual Meeting.
PROXIES
Shares of Common Stock which are entitled to be voted at the Annual Meeting
and which are represented by properly executed proxies will be voted in
accordance with the instructions indicated on such proxies. If no instructions
are indicated, such shares will be voted FOR the election of each of the nine
director nominees; FOR the ratification of the appointment by the Board of
Directors of Arthur Andersen LLP as independent public accountants of the
Company for the transition period ending December 31, 2001; and, in the
discretion of the proxy holder, as to any other matters which may properly come
before the Annual Meeting. A shareholder who has executed and returned a proxy
may revoke it at any time prior to its exercise at the Annual Meeting by
executing and returning a proxy bearing a later date, by filing with the
Secretary of the Company, at the address set forth above, a written notice of
revocation bearing a later date than the proxy being revoked or by voting the
Common Stock covered thereby in person at the Annual Meeting.
VOTE REQUIRED
The presence of a majority of the issued and outstanding shares of Common
Stock entitled to vote, represented in person or by proxy, is required for a
quorum at the Annual Meeting. Holders of shares of
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Common Stock are entitled to one vote at the Annual Meeting for each share of
Common Stock held of record on the Record Date. In the election of directors,
shareholders will not be allowed to cumulate their votes. The nine nominees
receiving the highest number of votes will be elected. Accordingly, abstentions
and broker non-votes will not affect the outcome of the election. The
ratification of the selection of the independent public accountants and any
other matter presented for approval by the shareholders will generally be
approved, in accordance with Utah law, if the votes cast in favor of a matter
exceed the votes cast opposing such matter. As a result, abstentions and broker
non-votes will not affect the outcome of any such matter.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Board of Directors will consist of nine directors, all of whom will be
elected at the Annual Meeting. Such directors will serve until the next annual
meeting of shareholders and until their successors are duly elected and
qualified. Shareholders do not have cumulative voting rights in the election of
directors (each shareholder is entitled to cast one vote for each share held for
each director). Unless authority is withheld, it is the intention of the persons
named in the enclosed form of proxy to vote "FOR" the election as directors of
the persons identified below as nominees for directors. Each of the nominees is
currently serving as a director. If the candidacy of any one or more of such
nominees should, for any reason, be withdrawn, the proxies will be voted "FOR"
such other person or persons, if any, as may be designated by the Board of
Directors. The Board of Directors has no reason to believe that any nominee
herein named will be unable or unwilling to serve.
NOMINEES FOR DIRECTOR
The following paragraphs set forth information about each nominee for
election as a director.
JERRY C. ATKIN, 52, joined the Company in July 1974 as a member of the
Board of Directors and the Company's Director of Finance. In 1975, he assumed
the office of President and Chief Executive Officer. He was elected Chairman of
the Board in 1991. Prior to employment by the Company, Mr. Atkin was employed by
a public accounting firm and is a certified public accountant. Mr. Atkin is a
board member of each of The Regence Group, a medical insurance holding company,
and Zions Bancorporation, a Utah bank holding company. He also served as the
2000 Chairman of the Regional Airline Association.
J. RALPH ATKIN, 58, was the founder of the Company and served as President
and Chief Executive Officer from 1972 to 1975. He served as Chairman of the
Board from 1972 to 1991. From 1984 to 1988, he served as Senior Vice President
of the Company. He served as Chief Executive Officer of EuroSky, a company
organized to explore the feasibility of a regional airline in Austria, during
1994 and 1995. From March 1991 to January 1993, he was Director of Business and
Economic Development for the State of Utah. Mr. Atkin is an attorney and has
been engaged in the private practice of law in St. George, Utah since 1970. Mr.
Atkin has served as a director of the Company since 1972.
SIDNEY J. ATKIN, 66, was elected Vice Chairman of the Board in 1988. From
1984 to 1988, he served as Senior Vice President of the Company. For more than
five years, Mr. Atkin has been President of Sugarloaf Corp., a Utah corporation
involved in the operation of restaurants and motels. Mr. Atkin has served as a
director of the Company since 1973.
MERVYN K. COX, 64, has been for more than five years an orthodontist
engaged in private practice and has also engaged in the development and
management of real estate. Mr. Cox has served as a director of the Company since
1974.
IAN M. CUMMING, 60, is Chairman of Leucadia National Corporation, a
diversified financial services holding company principally engaged in personal
and commercial lines of property and casualty insurance, banking and lending and
manufacturing. He has served as a director of the Company since 1986. Mr.
Cumming is also a director of MK Gold Company, a gold mining and exploration
company, and Allcity Insurance Company, a property and casualty insurer. In
addition, he is the Chairman of Barbados Light & Power Co., a Caribbean
utilities company.
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HENRY J. EYRING, 37, was appointed the Director of the MBA Program at
Brigham Young University in 1998. From 1989 to 1998, he was employed by the
Monitor Company, an international management consulting firm based in Cambridge,
Massachusetts, and he continues to serve as a consultant to the Monitor Company.
He is also a member of the Board of Trustees of Southern Utah University. Mr.
Eyring has served as a director of the Company since 1995.
STEVEN F. UDVAR-HAZY, 55, is currently President, Director and Chief
Executive Officer of International Lease Finance Corporation, a wholly-owned
subsidiary of American International Group, Inc., which leases and finances
commercial jet aircraft worldwide. Mr. Udvar-Hazy has been engaged in aircraft
leasing and finance for more than 35 years. He has served as a director of the
Company since 1986.
HYRUM W. SMITH, 57, is the co-founder and Vice Chairman of Franklin Covey
Co., a publicly-held learning and performance solutions company dedicated to
increasing the effectiveness of individuals and organizations. Mr. Smith was the
Chief Executive Officer of Franklin Covey Co. from February 1997 to March 1998,
a position he also held from April 1991 to September 1996. Mr. Smith was Senior
Vice President of Franklin Quest Co. from December 1984 to April 1991. Franklin
Covey Co. was formerly known as Franklin Quest Co. prior to its merger with the
Covey Leadership Center, Inc. in May 1997. Mr. Smith has served as a director of
the Company since 1995.
ROBERT G. SARVER, 39, has served as Chairman of the Board and Chief
Executive Officer of California Bank and Trust since October 1995, and Executive
Vice President of Zions Bancorporation, a bank holding company, since October
1998. Mr. Sarver also serves as an executive director of Southwest Value
Partners, a real estate investment company, and a director of each of Zions
Bancorporation, a bank holding company, and Meritage Corporation, a builder of
single-family homes. Mr. Sarver has served as a director of the Company since
January 2000.
MEETINGS AND COMMITTEES.
During the fiscal year ended March 31, 2001, the Board of Directors held
five meetings. All members attended at least 75% of all board meetings and
applicable committee meetings. The Board of Directors has a Compensation
Committee (the "Compensation Committee") that reviews and establishes
compensation for the Company's officers, except the Chief Executive Officer,
whose compensation is approved by the Board of Directors upon recommendation of
the Compensation Committee. The Compensation Committee also approves the amount
of contributions to the employees' retirement plan and administers the Company's
stock option plans. The members of the Compensation Committee are J. Ralph
Atkin, Chairman, Hyrum W. Smith, Steven F. Udvar-Hazy and Henry J. Eyring. The
Compensation Committee met twice during fiscal 2001.
The Board of Directors has an Audit and Finance Committee that is
responsible for determining the adequacy of the Company's internal accounting
and financial controls, reviewing the auditor's reports and recommendations and
interviewing and making recommendations to the Board of Directors for the
selection of the Company's independent public accountants. These
responsibilities are set forth in an Audit and Finance Committee Charter adopted
by the Board of Directors. A copy of the Audit and Finance Committee Charter is
attached to this Proxy Statement as Appendix A. The members of the Audit and
Finance Committee are Sidney J. Atkin, Chairman, Ian M. Cumming, Mervyn K. Cox
and Robert G. Sarver. Each member of the Audit and Finance Committee is an
independent director for purposes of the Marketplace Rules of the Nasdaq
National Market, on which the Common Stock is currently quoted. The Audit and
Finance Committee met twice during fiscal 2001.
The Board of Directors has a Nominating Committee which recommends to the
Board of Directors nominees for election, as well as Board fees. The Nominating
Committee will consider nominees recommended by shareholders submitted in
writing to the Committee. The members of the Nominating Committee are Mervyn K.
Cox, Chairman, Sidney J. Atkin, Ian M. Cumming and Hyrum W. Smith. The
Nominating Committee met once during fiscal 2001.
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EXECUTIVE OFFICERS
In addition to Jerry C. Atkin, certain information is furnished with
respect to the following executive officers of the Company:
RON B. REBER, 47, has served in various capacities since joining the
Company in 1977. He is currently Executive Vice President of the Company and
Chief Operating Officer of SkyWest Airlines, Inc., a wholly-owned subsidiary of
the Company, with general responsibility for flight operations, maintenance,
customer service, market planning, marketing, revenue control and pricing.
BRADFORD R. RICH, 40, joined the Company in 1987 as Corporate Controller.
He was previously employed with Arthur Andersen LLP and is a certified public
accountant. He is currently Executive Vice President, Chief Financial Officer
and Treasurer of the Company, with responsibility for financial accounting,
treasury, public reporting, investor relations, internal audit, risk management,
contracts and information technology.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides certain summary information concerning the
compensation paid or accrued by the Company and its subsidiaries to or on behalf
of the Company's Chief Executive Officer and each of the other executive
officers of the Company whose annual salary and bonus for the fiscal year ended
March 31, 2001 exceeded $100,000 (collectively the "Named Executive Officers").
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTED COMPENSATION(2)
----------------- ---- -------- -------- --------------- ------------ ---------------
Jerry C. Atkin............. F01 $297,066 $315,854 $107,082 208,000 $7,757
Chairman, President and F00 289,510 377,000 104,277 208,000 6,749
Chief Executive Officer F99 272,946 436,000 46,503 208,000 3,950
Ron B. Reber............... F01 191,997 206,341 61,923 84,000 7,757
Executive Vice President F00 180,537 231,000 56,167 84,000 6,749
and Chief Operating
Officer F99 164,106 239,000 26,609 84,000 3,950
of SkyWest Airlines,
Inc.
Bradford R. Rich........... F01 177,749 183,537 57,621 84,000 7,757
Executive Vice President, F00 169,526 219,000 51,833 84,000 6,749
Chief Financial Officer
and F99 153,336 222,000 24,565 84,000 3,950
Treasurer
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(1) Consists of deferred compensation payments made pursuant to the Executive
Deferred Compensation Plan. See "Report of the Compensation
Committee -- Executive Deferred Compensation Plan."
(2) Consists of the Company's contributions to the Company's 401(k) Plan which
were allocated to the accounts of the Named Executive Officers in the
respective fiscal year.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of stock options made to
the Named Executive Officers during the fiscal year ended March 31, 2001.
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
PERCENT OF TOTAL OPTION TERM
OPTIONS OPTIONS GRANTED EXERCISE EXPIRATION -----------------------------
NAME GRANTED(1) IN FISCAL YEAR PRICE DATE 5% 10%
---- ---------- ---------------- -------- ---------- ------------- -------------
Jerry C. Atkin.............. 208,000 29.9% $20.125 3/31/10 $2,632,656 $6,671,392
Ron B. Reber................ 84,000 12.1 20.125 3/31/10 1,063,188 2,694,216
Bradford R. Rich............ 84,000 12.1 20.125 3/31/10 1,063,188 2,694,216
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(1) All options were granted under the Company's Amended and Combined Incentive
and Nonstatutory Stock Option Plan and first become exercisable on April 1,
2003.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
The following table sets forth the aggregate value of unexercised options
to acquire shares of Common Stock held by the Named Executive Officers on March
31, 2001, and the value realized upon the exercise of options during the fiscal
year ended March 31, 2001.
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT FY-END(#) FY-END($)(3)
--------------------- ---------------------------
SHARES ACQUIRED ON VALUE EXERCISABLE(2)/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
---- ------------------ -------------- --------------------- ---------------------------
Jerry C. Atkin......... 210,000 $4,088,427 208,000/416,000 $2,730,000/$2,762,448
Ron B. Reber........... 76,000 1,909,553 84,000/168,000 1,102,500/1,115,604
Bradford R. Rich....... 50,000 1,231,285 160,000/168,000 2,629,621/1,115,604
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(1) Calculated based on the difference between the exercise price and the value
of the shares as of the date acquired.
(2) Includes options exercisable within 60 days of March 31, 2001.
(3) Calculated based on the difference between the exercise price and the price
of a share of Common Stock on March 30, 2001. The price of the Common Stock
on March 30, 2001 was $23.25, as reported on the NASDAQ National Market.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
J. Ralph Atkin served as a Chairman of the Compensation Committee during
the fiscal year ended March 31, 2001. Mr. Atkin was the founder of the Company
and served as President and Chief Executive Officer from 1972 to 1975. From 1984
to 1988, Mr. Atkin also served as Senior Vice President of the Company.
DIRECTOR'S COMPENSATION
All directors, except Jerry C. Atkin, receive a fee of $1,250 for each
Board meeting attended, $600 for each Committee meeting attended and $18,000 as
an annual retainer. The Vice Chairman and Committee Chairmen also receive an
additional $1,250 for each meeting attended. Steven F. Udvar-Hazy receives an
additional $6,000 annually in exchange for consulting services rendered to the
Company.
RELATIONSHIPS
J. Ralph Atkin and Sidney J. Atkin are brothers. Jerry C. Atkin is their
nephew.
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COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors to file initial reports of ownership and reports of changes in
ownership with the SEC. Executive officers and directors are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely upon a review of the copies of such forms furnished to the
Company, the Company believes all Section 16(a) forms required to be filed by
the Company's executive officers and directors were timely filed.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company and Delta Air Lines, Inc. ("Delta") operate under a joint
marketing and code-sharing agreement under which the Company uses the Delta
two-letter designator code ("DL") in displaying its schedules on certain flights
in the automated airline reservation systems used throughout the industry. As of
March 31, 2001, New Sky, Ltd., which is affiliated with Delta ("New Sky"), owned
6,215,596 shares of Common Stock, which represented approximately 11.1% of the
outstanding shares of Common Stock. The Company leases various terminal
facilities from Delta and Delta provides certain services to the Company,
including advertising, reservation and ground handling services. Expenses paid
to Delta under these agreements were approximately $7,481,000, $6,475,000 and
$8,409,000 during the years ended March 31, 2001, 2000 and 1999, respectively.
The Company had net payables to Delta of $1,987,000 and $1,546,000 as of March
31, 2001 and 2000, respectively.
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AUDIT AND FINANCE COMMITTEE REPORT
The following is the report of the Audit and Finance Committee of the Board
of Directors with respect to the Company's audited financial statements for the
fiscal year ended March 31, 2001.
The Audit and Finance Committee assists the Board of Directors in
fulfilling its oversight responsibilities by reviewing the audit process, the
financial information which will be provided to shareholders, the financial
community and others and the systems of internal controls which management has
established. The Committee is composed of four outside directors, each of whom
is an independent director for purposes of the Marketplace Rules of the Nasdaq
National Market. All members of the Committee are financially literate and the
Chairman of the Committee has accounting or related financial management
expertise.
Following the end of the 2001 fiscal year, the Audit and Finance Committee
reviewed and discussed the Company's audited financial statements with the
Company's management. The Committee also discussed with Arthur Andersen LLP, the
independent public accountants of the Company, the matters required to be
discussed by the American Institute of Certified Public Accountants' Statement
on Auditing Standards ("SAS") 61, "Communication with Audit Committee." The
Committee also received the written disclosures and a letter from Arthur
Andersen LLP as required by Independence Standards Board's Standard No. 1, and
has discussed with Arthur Andersen LLP the independence of Arthur Andersen LLP.
In determining the independence of Arthur Andersen LLP, the Committee
considered, among other factors, whether the non-audit services provided by
Arthur Andersen LLP could impair the independence of Arthur Andersen LLP and
concluded that such services were compatible with their independence.
Based upon the review and discussions referred to in the foregoing
paragraphs, the Audit and Finance Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended March 31, 2001.
AUDIT AND FINANCE COMMITTEE:
Sidney J. Atkin, Chairman
Ian M. Cumming
Mervyn K. Cox
Robert G. Sarver
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REPORT OF THE COMPENSATION COMMITTEE
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended (the "Securities
Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that incorporate by reference, in whole or in part, subsequent filings
including, without limitation, this Proxy Statement, the following Report of the
Compensation Committee and the Performance Graph set forth on page 11 hereof
shall not be deemed to be incorporated by reference into any such filings.
The Securities and Exchange Commission's ("SEC") rules addressing
disclosure of executive compensation in proxy statements require the
Compensation Committee to include in this Proxy Statement a report from the
Compensation Committee addressing, with respect to the most recently completed
fiscal year, (a) the Company's policies regarding executive compensation
generally, (b) the factors and criteria considered in setting the compensation
of the Company's Chief Executive Officer, Jerry C. Atkin, and (c) any
relationship between such compensation and the Company's performance.
The Company's executive compensation program is administered by the
Compensation Committee, which is responsible for establishing the policies
governing the Company's compensation program and the amount of compensation for
each of the Company's executive officers. The Compensation Committee is
currently composed of four non-employee directors and has oversight
responsibility for all executive compensation and executive benefit programs of
the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee regularly reviews and approves decisions with
respect to compensation of the Company's officers and other employees. The Board
of Directors has appointed four of its non-employee members to serve on the
Compensation Committee and empowered the committee to:
- Recommend to the Board CEO compensation;
- Approve all other executive officer compensation;
- Approve Company-wide and executive officer incentive/bonus plans, and
profit sharing/retirement contributions;
- Review Company compensation packages as a whole; and
- Administer the Company's various stock-based incentive plans.
Executive Compensation Policies
The Company's executive compensation policies, as endorsed by the
Compensation Committee, have been designed to provide a balanced compensation
program that will assist the Company in its efforts to attract, motivate and
retain talented executives who the Compensation Committee and senior management
believe are important to the Company's long-term financial success. The Company
seeks to accomplish this goal by providing a compensation program that, in the
judgment of the Compensation Committee and senior management:
- is competitive with compensation programs offered by the Company's
primary competitors and by other comparable companies;
- integrates certain compensation elements with the Company's financial
performance by linking an incentive plan to the Company's net income as
well as other corporate and operational goals; and
- links certain compensation elements with an opportunity to own Common
Stock so that Company executives will have a personal interest in the
increase in share value and, as a result, have common interests with the
Company's shareholders.
The Compensation Committee believes that each of these factors is
integrally important to the long-term financial success of the Company. In
designing and implementing the individual components of the
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Company's executive compensation program, the Company seeks a balance among
these factors that will vary depending on the level of policy-making and
operational responsibility of the executive. The Compensation Committee and
senior management annually review the structure of the Company's executive
compensation program to ensure that these goals are being accomplished.
Executive Compensation Program
The components of the Company's current executive compensation program
include salary, annual cash incentive bonus awards and long-term incentive plans
in the form of stock option plans and deferred compensation plans.
Salaries and Cash Incentive Bonus Awards
The Compensation Committee establishes the salaries and bonus awards for
all executive officers, except the CEO, whose salary and annual bonus award it
recommends for approval by the full Board. The salary and bonus award levels are
established and adjusted annually based on factors such as competitive trends,
annual inflation rates, overall financial performance of the Company and
individual performance of the executive officers. The base salary for the
executive officers is generally fixed below industry average levels with the
opportunity to receive annual bonuses that would make total compensation
comparable. The Company's annual bonus awards to its executive officers, some of
which are reflected in the Summary Compensation Table, are based on the
financial performance of the Company together with subjective and objective
performance criteria.
At the beginning of each fiscal year, the Compensation Committee
establishes cash bonus award guidelines based on the Company's earnings.
Commencing in fiscal 2000, the Company adopted an incentive plan for all
officers, including executive officers, pursuant to which a bonus was paid to
the Company's President, two Executive Vice Presidents, and six Vice Presidents;
subject, however, to the discretionary authority of the Board of Directors and
the Compensation Committee to vary the amounts or percentages paid based on
extraordinary performance, achievement of (or failure to achieve) objectives and
other similar factors. For fiscal 2001, bonuses were paid based on the incentive
plan as adopted. A separate incentive bonus plan, paid quarterly, was in effect
for all other employees employed at least two years.
Employee Retirement Plan -- 401(k)
The Company maintains the SkyWest Airlines Employee Retirement Plan (the
"Retirement Plan"), which is a defined contribution plan, for the benefit of
employees who have completed at least 90 days of service with the Company. The
Retirement Plan is qualified under Sections 401(a) and (k) of the Internal
Revenue Code (the "Code").
The Retirement Plan provides for pre-tax participant contributions and
matching contributions by the Company, subject to the requirements of Section
401(k) of the Code. The Company may also make discretionary contributions for
participants without regard to participant contributions. Matching contributions
totaled $2,885,000 and a discretionary contribution of $2,855,000 was made for
fiscal 2001. The Company's officers are not eligible to participate in matching
contributions made by the Company.
Separate accounts are maintained for all contributions and directed by
participants among 16 types of investment funds. All contributions to a
participant's account under the Retirement Plan are non-forfeitable. The
Retirement Plan permits certain withdrawals and loans during service.
Distributions from the Retirement Plan are made upon termination either in a
lump sum or in annual installments over a period of up to ten years (but in no
event over a period exceeding five years following a participant's death).
Executive Deferred Compensation Plan
The Company's Executive Deferred Compensation Plan (the "Plan") was adopted
by the Compensation Committee on August 7, 1990 and became effective January 1,
1991. Under the terms of the Plan, the Company contributes twelve percent of the
compensation paid to the officers of the Company during the prior
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calendar year to the Plan. Under the Plan, the Company maintains split dollar
life insurance policies on the lives of participants. The officer is the owner
of such policies and the Company is responsible for payment of premiums. The
premiums are recoverable by the Company and will be paid to each participant as
deferred compensation following termination of employment. The earnings under
the policies and death proceeds of policies will be paid to participants or to a
designated beneficiary. Participants in this Plan are not eligible for matching
contributions under the Company's 401(k) Plan.
Stock Option Plans
The Company's Amended and Combined Incentive and Nonstatutory Stock Option
Plan was adopted by the Board of Directors in April 1991 (the "1991 Plan") and
approved by the shareholders of the Company in August 1991. The Plan provided
for the grant of options to purchase shares of Common Stock, which were either
incentive stock options ("Incentive Stock Options"), as that term is defined in
the Code, or non-statutory stock options ("Non-statutory Options"). Options
under the 1991 Plan were granted by the Compensation Committee.
In August, 2000, the Company's shareholders approved the adoption of the
SkyWest, Inc. Executive Stock Incentive Plan (the "Executive Plan"). The
Executive Plan became effective January 1, 2001. The Executive Plan replaced the
1991 Plan; however, all outstanding options under the 1991 Plan as of January 1,
2001 remained outstanding but no further grants will be made under the 1991
Plan. As of December 31, 2000, there were options outstanding under the 1991
Plan for approximately 2,424,000 shares of Common Stock. The Executive Plan
provides for the issuance of up to 4,000,000 shares of Common Stock to officers,
directors and other management employees.
The Compensation Committee has complete authority to determine the persons
to whom and the time or times at which grants of Options under the Executive
Plan will be made, whether such Options will be Incentive Stock Options or
Non-statutory Options, the exercise price, term, restrictions on exercise and
transferability and vesting schedules, all of which are set forth in a Stock
Option Agreement. In no event, however, may the exercise price of an Incentive
Stock Option be less than the fair market value of a share of Common Stock on
the date of grant or exercisable after the expiration of ten years from the date
of grant and no Option may be exercisable before six months have lapsed from the
date of grant (except in the case of death or disability). In considering the
grant of Options to executive officers, the Compensation Committee takes into
consideration such factors as the projected value of the Common Stock in the
future based on the Company achieving its performance goals, the executive
officers' current salary and the overall performance of the Company. The
Compensation Committee attempts to award Options in an amount that will provide
executive officers with Options that will have a value in the future equal to a
targeted percentage of the officers' base salary if the Company's performance
goals are met during the vesting period.
Chief Executive Officer Compensation for Fiscal Year 2001
Using the process and criteria discussed above, effective July 1, 1999 the
Compensation Committee recommended and the Board established Jerry C. Atkin's
annual base salary at $280,000 and established guidelines for the payment of an
annual bonus award, based on the Company's net income and also subject to
achieving other non-financial objectives. After the end of fiscal 2001, the
Compensation Committee awarded Mr. Atkin a $282,066 bonus based on the Company's
exceptional performance during the year. During fiscal 2001, the Compensation
Committee also awarded to Mr. Atkin options to purchase up to 208,000 shares of
Common Stock, based on the criteria described above.
COMPENSATION COMMITTEE
J. Ralph Atkin, Chairman
Steven F. Udvar-Hazy
Hyrum W. Smith
Henry J. Eyring
10
13
PERFORMANCE GRAPH
Set forth below is a graph comparing the five-year cumulative shareholder
return on the Common Stock against the five-year cumulative total return on the
Composite Index for NASDAQ Stock Market (US Companies) and an Index for NASDAQ
Stocks (SIC 4510-4519) (an index composed of NASDAQ companies engaged in air
transportation, including regional airlines whose stocks trade on NASDAQ) for
the periods indicated. The graph assumes an initial investment of $100.00 with
dividends reinvested over the periods indicated.
[PERFORMANCE GRAPH]
---------------------------------------------------------------------------------------------
Total Return Analysis 3/31/1996 3/31/1997 3/31/1998 3/31/1999 3/31/2000 3/31/2001
---------------------------------------------------------------------------------------------
SkyWest, Inc. $100.00 $100.54 $284.83 $452.49 $616.69 $735.19
Peer Group $100.00 $ 70.63 $115.39 $180.21 $190.67 $238.43
Nasdaq Composite $100.00 $111.16 $168.71 $222.92 $415.16 $167.08
---------------------------------------------------------------------------------------------
11
14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 2001, information with
respect to the shares of Common Stock owned beneficially by each director or
nominee for director, by the Named Executive Officers, by all executive officers
and directors as a group and by each person known by the Company to be a
beneficial owner of more than 5% of the outstanding shares of Common Stock.
Except as otherwise indicated below, each person named has sole voting and
investment power with respect to the shares indicated.
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNERS OWNERSHIP CLASS(1)
------------------------------------- ----------------- -------------
New Sky, Ltd.(2)...................................... 6,215,596 11.1%
Craig Appin House
8 Wesley Street
Hamilton, Bermuda HMJX
FMR Corp.(2).......................................... 4,578,420 8.2%
82 Devonshire Street
Boston, MA 02109
Wellington Management Co. LLP(2)...................... 3,991,000 7.1%
75 State Street
Boston, MA 02109
American Express Financial Corporation(2)............. 3,905,878 7.0%
200 AXP Financial Center
Minneapolis, MN 55479
Jerry C. Atkin........................................ 1,920,812(3) 3.4%
Sidney J. Atkin....................................... 1,608,345(4) 2.9%
Mervyn K. Cox......................................... 518,500(5) *
Bradford R. Rich...................................... 171,438(6) *
Ron B. Reber.......................................... 134,052(7) *
Steven Udvar-Hazy..................................... 49,000(5) *
Robert J. Sarver...................................... 33,000(5) *
Henry J. Eyring....................................... 18,000(5) *
Ian M. Cumming........................................ 18,000(5) *
Hyrum W. Smith........................................ 16,000(5) *
J. Ralph Atkin........................................ 16,000(5) *
All Executive Officers and Directors, as a group (11 4,207,657(8) 7.5%
persons)............................................
---------------
* Represents less than 1% of total outstanding shares.
(1) Based on total outstanding shares of 56,101,580 as of March 31, 2001.
(2) Data for New Sky, Ltd., FMR Corp., Wellington Management Co. LLP and
American Express Financial Corporation is as of March 31, 2001, the date of
the most recent statement of ownership delivered to the Company.
(3) Includes 827,070 shares held separately by Carolyn J. Atkin, his wife, and
208,000 shares issuable upon exercise of options.
(4) Includes 1,145,500 shares held by a family limited partnership of which Mr.
Atkin and his wife are the general partners, 433,125 shares held by Mr.
Atkin as trustee of a trust for the benefit of his family, 13,720 shares
held by his wife and 16,000 shares issuable upon exercise of options.
(5) Includes 16,000 shares issuable upon exercise of options.
(6) Includes 160,000 shares issuable upon exercise of options.
(7) Includes 84,000 shares issuable upon exercise of options.
(8) Includes 336,000 shares issuable upon exercise of options.
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15
PROPOSAL NO. 2 -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
In February 2001, the Company announced its intention to change its fiscal
year end to December 31. Accordingly, the Board of Directors proposes to engage
independent public accountants for the Company to serve during the transition
period of April 1, 2001 through December 31, 2001. Ratification of the
appointment by the Board of Directors of the independent public accountants for
the Company for the transition period ending December 31, 2001 is to be voted
upon at the Annual Meeting. The Board of Directors recommends shareholder
ratification of the appointment of Arthur Andersen LLP, whose appointment has
been approved, subject to shareholder approval, by the Board of Directors.
Representatives of Arthur Andersen LLP are expected to be present at the Annual
Meeting to answer any questions shareholders may have and will be given the
opportunity to make a statement if they desire to do so.
AUDIT FEES
The aggregate fees for professional services rendered by Arthur Andersen
LLP in connection with its audit of SkyWest's consolidated financial statements
and reviews of the consolidated financial statements included in SkyWest's
Quarterly Reports on Form 10-Q for the 2001 fiscal year were approximately
$113,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Arthur Andersen LLP did not provide to SkyWest any services related to
financial systems design and implementation during fiscal 2001.
ALL OTHER FEES
In addition to performing the audit of SkyWest's consolidated financial
statements, Arthur Andersen LLP provided various other services to SkyWest
during fiscal 2001. The aggregate fees for these other services was
approximately $309,700. "Other services" include services rendered to SkyWest
primarily related to the following: (i) SkyWest's secondary public offering of
Common Stock, (ii) outsourced internal audit services; (iii) income tax planning
and preparation of tax returns; and (iv) audit of the SkyWest sponsored benefit
plans.
The affirmative vote of a majority of the votes cast on this proposal shall
constitute ratification of the appointment of Arthur Andersen LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
TRANSITION PERIOD ENDING DECEMBER 31, 2001.
OTHER MATTERS
OTHER BUSINESS
The Board of Directors does not know of any matter to be presented at the
Annual Meeting that is not listed in the Notice of Annual Meeting and discussed
above. If other matters should come before the Annual Meeting, however, the
proxyholders will vote in accordance with their best judgment.
PROPOSALS OF SECURITY HOLDERS FOR 2002 ANNUAL MEETING
Shareholders desiring to submit proposals for the Proxy Statement for the
2002 Annual Meeting will be required to submit them to the Company in writing on
or before March 1, 2002. Any shareholder proposal must also be proper in form
and substance, as determined in accordance with the Exchange Act and the rules
and regulations promulgated thereunder.
13
16
ADDITIONAL INFORMATION
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2001 will be furnished without charge upon receipt of a written
request. The exhibits to that Report will also be provided upon request and
payment of copying charges. Requests should be directed to the Corporate
Secretary, SkyWest, Inc., 444 South River Road, St. George, Utah 84790.
14
17
APPENDIX A
SKYWEST, INC.
AUDIT AND FINANCE COMMITTEE CHARTER
PURPOSE
The primary purpose of the Audit and Finance Committee (the "Committee") is
to assist the Board of Directors (the "Board") of SkyWest, Inc. (the "Company")
in fulfilling its responsibility to oversee management's conduct of the
Company's financial reporting process. The Committee will assist the Board by
overviewing (i) the financial reports and other financial information provided
by the Company to governmental or regulatory bodies, the public or other users,
(ii) the Company's systems of internal accounting and financial controls and
(iii) the annual independent audit of the Company's financial statements.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention. The Committee shall have full
access to all books, records, facilities and personnel of the Company and shall
have the power to retain outside counsel, auditors or other experts when
necessary. The Board and the Committee are in place to represent the Company's
shareholders; accordingly, the outside auditor is accountable to the Board and
the Committee.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations.
The Committee shall review the adequacy of this Charter on an annual basis.
MEMBERSHIP
The Committee shall be comprised of three or more directors, a majority of
which must be independent. The members of the Committee shall be appointed by
the Board and shall meet the independence and experience requirements of the
Nasdaq Stock Market Inc.
Accordingly, all members of the Committee will be directors:
1. who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company (except as
permitted by the Nasdaq Stock Market Inc. rules); and
2. who are financially literate or who become financially literate
within a reasonable period of time after appointment to the Committee. In
addition, at least one member of the Committee will have accounting or
related financial management expertise.
KEY RESPONSIBILITIES
The Committee's job is one of oversight. The Company's management is
responsible for preparing the Company's financial statements and the independent
public accountants are responsible for auditing those financial statements. The
Committee recognizes that financial management and the independent public
accountants have more time, knowledge and detailed information regarding the
Company than do Committee members. Accordingly, in carrying out its oversight
responsibilities, the Committee will not provide any expert or special assurance
as to the Company's financial statements or any professional certification as to
the work of the independent public accountants.
A-1
18
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
- The Committee shall review with management and the independent public
accountants the audited financial statements to be included in the
Company's Annual Report on Form 10-K (or the Annual Report to
Shareholders if distributed prior to the filing of Form 10-K) and review
and consider with the independent public accountants the matters required
to be discussed by Statement of Auditing Standards ("SAS") No. 61, as
such statement may be amended from time to time, including, without
limitation, the amendments contained in SAS No. 90.
- As a whole, or through the Committee chair, the Committee shall review
with the independent public accountants the Company's interim financial
results to be included in the Company's quarterly reports to be filed
with the Securities and Exchange Commission and the matters required to
be discussed by SAS No. 61 and 90; this review will occur prior to the
Company's filing of Form 10-Q.
- The Committee shall discuss with management and the independent public
accountants the quality and adequacy of the Company's internal controls
as well as review the program of internal audit.
- The Committee shall:
- request from the independent public accountants annually, a formal
written statement delineating all relationships between the independent
public accountants and the Company consistent with Independence
Standards Board Standard Number 1;
- discuss with the independent public accountants any such disclosed
relationships and their impact on the independence of the independent
public accountants; and
- recommend that the Board take appropriate action in response to the
report of the independent public accountants to satisfy itself of the
independence of the independent public accountants;
- The Committee, subject to any action that may be taken by the full Board,
shall have the ultimate authority and responsibility to select (or
nominate for shareholder approval), evaluate and, where appropriate,
replace the independent public accountants. Additionally, the committee
shall review second opinions on significant accounting issues when they
arise.
- The Committee shall review the performance of Chief Executive Officer,
Chief Financial Officer and Controller as it relates to financial
controls and procedures.
- The Committee shall review and confirm the Company's approved investment
policy and review and advise on equity, debt, lease and overall capital
structure.
- The Committee shall review the Company's program of compliance with code
of corporate conduct as deemed necessary.
A-2
19
SKYWEST, INC. PROXY THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jerry C. Atkin, Bradford R. Rich and Eric D.
Christensen, and each of them, as proxies, with full power of substitution, and
hereby authorizes them to represent and vote, as designated below, all shares of
Common Stock of Sky West, Inc., a Utah corporation (the "Company"), held of
record by the undersigned on June 20, 2001 at the Annual Meeting of Shareholders
(the "Annual Meeting") to be held at the Sky West Corporate Offices, 444 South
River Road, St. George, Utah 84790, on Tuesday, August 14, 2001, at 11:00 a.m.,
local time, or at any adjournment or postponement thereof, upon the matters set
forth below, all in accordance with and as more fully described in the
accompanying Notice of Annual Meeting and Proxy Statement, receipt of which is
hereby acknowledged.
1. ELECTION OF DIRECTORS, each to serve until the next annual meeting of
shareholders of the Company and until their respective successors shall
have been duly elected and shall qualify.
FOR all nominees listed below (except as marked to the contrary).
WITHOUT AUTHORITY to vote for all nominees listed below.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
JERRY C. ATKIN J. RALPH ATKIN STEVEN F. UDVAR-HAZY IAN M. CUMMING HENRY J. EYRING
MERVYN K. COX SIDNEY J. ATKIN HYRUM W. SMITH ROBERT G. SARVER
2. PROPOSAL TO RATIFY the appointment of Arthur Andersen LLP as independent
public accountants of the Company for the transition period ending December
31, 2001.
FOR AGAINST ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IN NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES NAMED ABOVE AND FOR PROPOSAL 2
DESCRIBED ABOVE.
Please complete, sign and date this proxy where indicated and return it promptly
in the accompanying prepaid envelope.
DATED: , 2001 Signature: Signature (if held jointly):
---------------- --------------------------- ---------------------------
(Please sign above exactly as the shares are issued. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.)