SkyWest Inc. (NASDAQ:SKYW) Q1 2019 Earnings Conference Call - Final Transcript

Apr 26, 2018 • 04:30 pm ET

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SkyWest Inc. (NASDAQ:SKYW) Q1 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Rob Simmons

ended the quarter with cash of $646 million, down from $685 million last quarter and up from $586 million last year at this time. We issued $160 million in long-term debt during Q1 2018, financing five new E175s and acquiring nine used aircraft off of lease.

Total debt as of March 31, 2018 was $2.8 billion, up slightly from last quarter. SkyWest used $38 million in cash toward equity for new planes and planes acquired of lease. $30 in other CapEx along with $10 million in cash for share repurchases. Non-aircraft acquisition capital spending in 2018 should continue to run in the $20 million to $30 million per quarter range.

With the remaining 34 E175 expected to be delivered this year, we plan to invest $120 million of our own capital and raise approximately $675 million in new term debt by the end of the year for these planes. We expect to by the end of 2018, our debt will be approximately $3.2 billion, up only $400 million from where we are now, because of the $275 million in normal principal payments embedded in our fully amortizing term debt over the next three quarters.

Assuming an end of 2018 peak in debt and no additional new orders for airplanes, we expect that in 2019 and 2020, we will continue to pay down debt in excess of $300 million per year. We would expect cash at the end of 2018 to be up from where we are now, including our plan to invest $120 million of this year's free cash flow in equity toward another 34 new airplanes by the end of the year.

We will continue to explore accretive opportunities to deploy the free cash flow we are generating. As I referenced earlier, during Q1 we repurchased another $10 million in stock under our three year $100 million repurchase program authorized by the board last year. We now have $70 million in authorization remaining under this program and expect to fully utilize it.

2018 is expected to be another busy year for us with many fleet movements as Wade will discuss in a moment. But we finished today with a little commentary on capital allocation. Earlier, I made reference to a small transaction, where we had the opportunity this quarter to acquire nine aircraft off of lease. Negotiating our way out of an unattractive inflexible lease structure and reducing our financing tail risk, the $20 million in equity capital, but we deployed in that transaction will drive a $0.07 annual EPS benefit to 2019 and beyond and represent a 25% pretax return on capital.

This is just another example of the type of opportunities we are exploring to drive value creation through accretive financial engineering and risk reduction within our legacy fleet. Because of all the ins and outs around the fleet in 2018, last quarter we made the comment that we would expect our earnings per share to come in under $4.50 for 2018. Including our actual GAAP results