SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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SkyWest, Inc.
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(Name of Registrant as Specified In Its Charter)
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SKYWEST INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 7, 2002
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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, May 7, 2002, 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) Such other matters as may properly come before the meeting.
The Board of Directors has fixed the close of business on March 29, 2002 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: April 5, 2002
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.
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
MAY 7, 2002
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, May 7,
2002, 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 April 5, 2002.
In February 2001, the Company announced a change in its fiscal year end
from March 31 to December 31. Consequently, for purposes of this Proxy
Statement, the Company's most recent fiscal period is the nine-month transition
period ended December 31, 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 March 29, 2002 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 56,976,391 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; and, in the discretion of the proxy holders, 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.
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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 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. Any other matter presented for approval by the
shareholders at the Annual Meeting 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 consists 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 director. 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 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, 53, 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, and serves on the Utah
Board of Regents. 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, 67, 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, 65, is an orthodontist engaged in private practice and is
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, 61, 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
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Insurance Company, a property and casualty insurer. In addition, he is the
Chairman of Barbados Light & Power Co., a Caribbean utilities company.
HENRY J. EYRING, 38, 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, 56, is currently Chairman of the Board, 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, 58, 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, 40. Retired. Served as Chairman of the Board and Chief
Executive Officer of California Bank and Trust from 1995 to 2001. Prior to 1995,
served as President of National Bank of Arizona. Mr. Sarver also serves as
executive director of Southwest Value Partners, a real estate investment
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 nine-month transition period ended December 31, 2001, the Board
of Directors held five meetings. All members attended at least 75% of all board
meetings and applicable committee meetings held during the transition period.
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 the nine-month transition period ended December 31, 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 reports and recommendations of the
independent public accountants 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. 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 the nine-month transition period ended
December 31, 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
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are Mervyn K. Cox, Chairman, Sidney J. Atkin, Ian M. Cumming and Hyrum W. Smith.
The Nominating Committee did not meet during the nine-month transition period
ended December 31, 2001.
RELATIONSHIPS.
J. Ralph Atkin and Sidney J. Atkin are brothers. Jerry C. Atkin is their
nephew.
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 for the calendar
year ended December 31, 2001 ("CY01"), the fiscal year ended March 31, 2001
("FY01") and the fiscal year ended March 31, 2000 ("FY00") 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 calendar year
ended December 31, 2001 exceeded $100,000 (collectively, the "Named Executive
Officers").
LONG TERM
ANNUAL COMPENSATION COMPENSATION
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OTHER ANNUAL OPTIONS ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTED COMPENSATION(2)
----------------- ---- -------- -------- --------------- ------------ ---------------
Jerry C. Atkin............ CY01(3) $311,853 $282,066 $ 89,399 104,000 $6,193
Chairman, President and FY01 297,066 315,854 107,082 208,000 7,757
Chief Executive Officer FY00 289,510 377,000 104,277 208,000 6,749
Ron B. Reber.............. CY01(3) 206,045 180,233 49,091 50,000 6,193
Executive Vice President FY01 191,997 206,341 61,923 84,000 7,757
and Chief Operating FY00 180,537 231,000 56,167 84,000 6,749
Officer of SkyWest
Airlines, Inc.
Bradford R. Rich.......... CY01(3) 188,641 160,500 43,728 50,000 6,193
Executive Vice
President, FY01 177,749 183,537 57,621 84,000 7,757
Chief Financial Officer FY00 169,526 219,000 51,833 84,000 6,749
and 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 year.
(3) Compensation for the three-month period from January 1 through March 31,
2001 is included in both CY01 and FY01, in the following amounts: Jerry C.
Atkin, $82,716; Ron B. Reber, $51,754; and Bradford R. Rich, $47,688.
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OPTION GRANTS IN TRANSITION PERIOD
The following table sets forth individual grants of stock options made to
the Named Executive Officers during the nine-month transition period ended
December 31, 2001.
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
PERCENT OF TOTAL OF STOCK PRICE APPRECIATION
OPTIONS GRANTED FOR OPTION TERM
OPTIONS IN TRANSITION EXERCISE EXPIRATION ---------------------------
NAME GRANTED(1) PERIOD PRICE DATE 5% 10%
---- ---------- ---------------- -------- ---------- ------------ ------------
Jerry C. Atkin............... 104,000 18.8% $25.95 5/8/11 $2,422,492 $4,301,192
Ron B. Reber................. 50,000 9.0 25.95 5/8/11 815,991 2,067,881
Bradford R. Rich............. 50,000 9.0 25.95 5/8/11 815,991 2,067,881
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(1) All options were granted under the Company's Amended and Combined Incentive
and Nonstatutory Stock Option Plan and first became exercisable on May 8,
2001.
AGGREGATED OPTION EXERCISES IN TRANSITION PERIOD AND PERIOD END OPTION VALUES
The following table sets forth the aggregate value of unexercised options
to acquire shares of Common Stock held by the Named Executive Officers on
December 31, 2001, and the value realized upon the exercise of options during
the nine-month transition period ended December 31, 2001.
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT PERIOD-END(#) PERIOD-END($)(3)
------------------------ -----------------------
SHARES ACQUIRED VALUE EXERCISABLE(2)/ EXERCISABLE(2)/
NAME ON EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- ------------------------ -----------------------
Jerry C. Atkin.......... 100,000 $ 112,500 108,000/416,000 $1,655,100/$4,301,648
Ron B. Reber............ 50,000 909,200 34,000/168,000 521,050/ 1,737,204
Bradford R. Rich........ 76,000 2,321,321 84,000/168,000 1,287,300/ 1,737,204
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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 December 31, 2001.
(3) Calculated based on the difference between the exercise price and the price
of a share of Common Stock on December 31, 2001. The price of the Common
Stock on December 31, 2001 was $25.45, as reported on the Nasdaq National
Market.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
J. Ralph Atkin served as the Chairman of the Compensation Committee during
the nine-month transition period ended December 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 $1,400 for each
Board meeting attended, $700 for each Committee meeting attended and $21,000 as
an annual retainer. The Vice Chairman and Committee Chairmen also receive an
additional $1,400 for each meeting attended. Steven F. Udvar-Hazy receives an
additional $6,000 annually in exchange for consulting services rendered to the
Company.
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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 December 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 fiscal year, the Audit and Finance Committee
reviewed and discussed the 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 fiscal year ended December 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 period, (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
7
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 the nine-month transition period ended December 31,
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 $2,551,180 and a discretionary contribution of $2,799,071 was made for
the nine-month transition period ended December 31, 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).
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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 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, 2001, there were options outstanding under the 1991
Plan for approximately 1,692,000 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.
9
Chief Executive Officer Compensation for Transition Period
Using the process and criteria discussed above, effective July 1, 2001 the
Compensation Committee recommended and the Board established Jerry C. Atkin's
annual base salary at $315,000 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 the nine-month
transition period ended December 31, 2001, the Compensation Committee awarded
Mr. Atkin a $183,323 bonus based on the Company's exceptional performance during
the transition period. During the transition period, the Compensation Committee
also awarded to Mr. Atkin options to purchase up to 104,000 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
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 and written representations from the Company's executive officers and
directors, the Company believes that, except as described in the following
sentence, all Section 16(a) forms required to be filed by the Company's
executive officers and directors during the nine-month transition period ended
December 31, 2001 were timely filed. During the nine-month transition period
ended December 31, 2001, Mervyn K. Cox, a director of the Company, inadvertently
failed to report 27 transactions which should have been reported on Forms 4 for
the months of August, September, November and December 2002. Upon being informed
of the oversight, Mr. Cox completed the delinquent reports and, on March 11,
2002, Mr. Cox filed all delinquent reports with the SEC.
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. Until
October 12, 2001, when it sold all of its shares of Common Stock, New Sky, Ltd.,
which is affiliated with Delta, 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
$7,094,000 during the nine-month transition period ended December 31, 2001 and
$7,481,000 and $6,475,000 during the years ended March 31, 2001 and 2000,
respectively.
10
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative shareholder return on
the Common Stock from March 31, 1997 through December 31, 2001 against the
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 same period. The graph assumes an initial
investment of $100.00 with dividends reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR SKYWEST, INC.
(PERFORMANCE GRAPH)
------------------------------------------------------------------------------------------------------
CRSP Total Returns Index 03/31/1997 03/31/1998 03/31/1999 03/31/2000 03/31/2001 03/31/2002
------------------------------------------------------------------------------------------------------
SkyWest, Inc. $100.00 $283.20 $449.70 $612.90 $731.00 $802.50
Nasdaq Stock Market (US
Companies) $100.00 $151.60 $204.80 $380.90 $152.30 $161.90
NASDAQ Stocks (SIC
4510 - 4519 US
Companies) Air
Transportation,
Scheduled, and Air
Courier Services $100.00 $163.40 $130.30 $133.10 $ 40.10 $ 42.00
------------------------------------------------------------------------------------------------------
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.00 on 03/31/97.
11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 1, 2002, information with
respect to the shares of Common Stock owned beneficially by each director or
nominee for director, each Named Executive Officer, all executive officers and
directors as a group and 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
NAME AND ADDRESS OF BENEFICIAL OWNERS OWNERSHIP OF CLASS(1)
------------------------------------- ----------------- -----------
FMR Corp.(2)................................................ 7,438,990 13.1%
82 Devonshire Street
Boston, MA 02109
American Express Financial Corporation(3)................... 3,704,375 6.5%
200 AXP Financial Center
Minneapolis, MN 55474
Jerry C. Atkin.............................................. 2,060,338(4) 3.6%
State Board of Administration of Florida(5)................. 1,766,600 3.1%
1801 Hermitage Boulevard, Suite 100
Box 13300
Tallahassee, FL 32317
Lord, Abbett & Co.(6)....................................... 1,751,540 3.1%
90 Hudston Street
Jersey City, NJ 07302
Sidney J. Atkin............................................. 1,585,069(7) 2.8%
Mervyn K. Cox............................................... 523,000(8) *
Bradford R. Rich............................................ 135,438(9) *
Ron B. Reber................................................ 109,026(9) *
Steven Udvar-Hazy........................................... 45,000(10) *
Ian M. Cumming.............................................. 33,000(11) *
Hyrum W. Smith.............................................. 32,000(12) *
Henry J. Eyring............................................. 26,000(13) *
Robert J. Sarver............................................ 24,500(11) *
J. Ralph Atkin.............................................. 16,000(11) *
All Executive Officers and Directors, as a group (11
persons).................................................. 4,589,371(14) 8.0%
---------------
* Represents less than 1% of total outstanding shares.
(1) Based on total outstanding shares of 56,915,917 as of February 1, 2002.
(2) Data for FMR Corp. is as of February 14, 2002, the filing date of the most
recent statement of ownership.
(3) Data for American Express Financial Corporation is as of February 7, 2002,
the filing date of the most recent statement of ownership.
(4) Includes 827,070 shares held by his wife and 208,000 shares issuable upon
exercise of options.
(5) Data for State Board of Administration of Florida is as of February 8,
2002, the filing date of the most recent statement of ownership.
(6) Data for Lord, Abbett & Co. is as of January 19, 2001, the filing date of
the most recent statement of ownership.
(7) Includes 1,145,500 shares held by a family limited partnership of which Mr.
Atkin and his wife are the general partners, 413,625 shares held by Mr.
Atkin as trustee of a trust for the benefit of his family, 9,944 shares
held by his wife and 16,000 shares issuable upon exercise of options.
(8) Includes 48,000 shares issuable upon exercise of options.
12
(9) Includes 84,000 shares issuable upon exercise of options.
(10) Includes 30,000 shares issuable upon exercise of options.
(11) Includes 16,000 shares issuable upon exercise of options.
(12) Includes 32,000 shares issuable upon exercise of options.
(13) Includes 22,000 shares issuable upon exercise of options.
(14) Includes 572,000 shares issuable upon exercise of options.
INDEPENDENT PUBLIC ACCOUNTANTS
GENERAL
The Board of Directors has delegated to the Audit Committee the
responsibility to work with the Company's management to review the
qualifications of the major national accounting firm to serve as the Company's
independent public accountants for the fiscal year ending December 31, 2002.
Although the Board has no disagreements or differences with Arthur Andersen LLP
and has generally been satisfied with its work, management and the Audit
Committee have carefully considered events to date concerning Arthur Andersen
LLP, including the U.S. Justice Department's recent action against the firm.
Management and the Audit Committee will continue to monitor ongoing developments
regarding Arthur Andersen LLP and, in its discretion, the Board may change the
appointment at any time during the year if it determines that such a change
would be in the best interest of the Company and its shareholders.
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 fiscal year ended December 31, 2001 were
approximately $170,000.
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 the fiscal year ended
December 31, 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 the fiscal year ended December 31, 2001. The aggregate fees for these
other services were approximately $253,000. "Other services" include services
rendered to SkyWest primarily related to the following: (i) outsourced internal
audit services; (ii) income tax planning and preparation of tax returns; and
(iii) audit of the SkyWest sponsored benefit plans.
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 2003 ANNUAL MEETING
Shareholders desiring to submit proposals for the Proxy Statement for the
2003 Annual Meeting will be required to submit them to the Company in writing on
or before December 3, 2002. Any shareholder proposal
13
must also be proper in form and substance, as determined in accordance with the
Exchange Act and the rules and regulations promulgated thereunder.
ADDITIONAL INFORMATION
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 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
PROXY
SKYWEST, INC.
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 SkyWest, Inc., a Utah corporation (the
"Company"), held of record by the undersigned on March 29, 2002 at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at the SkyWest
Corporate Offices, 444 South River Road, St. George, Utah 84790, on Tuesday, May
7, 2002, 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 J. SARVER
2. 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. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES NAMED ABOVE.
Please complete, sign and date this proxy where indicated and return it
promptly in the accompanying prepaid envelope.
DATED: , 2002
-------------------------- -----------------------------------
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.)