SkyWest Airlines 2002 Annual Report Download - page 42

the U.S. Bankruptcy Court authorizing, but not requiring, United to honor pre-petition obligations to
its United Express carriers. The Company believes that if these pre-petition amounts are not paid by
United, the Company may offset amounts owed to United for pre-petition services totaling
approximately $3.6 million. Approximately $9.7 million of the $14.0 million claim resulted from
United’s failure to pay the scheduled weekly wire transfer on December 6, 2002. The Company did not
recognize the $9.7 million as revenue due to the uncertainty of collection. Additionally, as of
December 31, 2002, the Company established a reserve against the remaining pre-petition receivables
from United.
Deferred Aircraft Credits
The Company accounts for incentives provided by aircraft manufacturers as deferred credits.
Credits related to leased aircraft are amortized on a straight-line basis as a reduction to lease expense
over the respective lease term. Credits related to owned aircraft are amortized on a straight-line basis
as a reduction to depreciation expense over the life of the related aircraft. The incentives generally
consist of credits that may be used to purchase spare parts and pay for training and other expenses.
In connection with the Company’s commitment to acquire 119 CRJs (see Note 4), the
manufacturer agreed to pay for certain CRJ engine modifications and to provide additional purchase
incentives. During the years ended December 31, 2002 and 2001, the initial engine modifications were
performed and the manufacturer provided certain other purchase incentives.
Income Taxes
The Company recognizes a liability or asset for the deferred tax consequences of all temporary
differences between the tax basis of assets and liabilities and their reported amounts in the consolidated
financial statements that will result in taxable or deductible amounts in future years when the reported
amounts of the assets and liabilities are recovered or settled. As of December 31, 2002 and 2001, the
Company had recorded current deferred tax assets of $6,812,000 and $11,079,000, respectively (which
are included in other current assets), and deferred tax liabilities of $63,379,000 and $41,173,000,
respectively.
Net Income Per Common Share
Basic net income per common share (‘‘Basic EPS’’) excludes dilution and is computed by dividing
net income by the weighted average number of common shares outstanding during the period. Diluted
net income per common share (‘‘Diluted EPS’’) reflects the potential dilution that could occur if stock
options or other contracts to issue common stock were exercised or converted into common stock. The
computation of Diluted EPS does not assume exercise or conversion of securities that would have an
antidilutive effect on net income per common share. During the year ended December 31, 2002,
2,790,000 antidilutive options were excluded from the computation of Diluted EPS. No options were
excluded from the computation of Diluted EPS during the years ended December 31, 2001 and 2000.
The calculation of the weighted average number of common shares outstanding for Basic EPS and
Diluted EPS are as follows for the years ended December 31, 2002, 2001 and 2000 (in thousands):
2002 2001 2000
Weighted average number of common Shares outstanding
for Basic EPS ............................... 57,229 56,365 51,521
Effect of assuming exercise of outstanding dilutive stock
options .................................... 322 872 1,123
Weighted average number of common shares outstanding
for Diluted EPS ............................. 57,551 57,237 52,644
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