SkyWest Airlines 2008 Annual Report Download - page 69

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SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2008
(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)
The Company’s passenger and ground handling revenues could be impacted by a number of
factors, including changes to the Company’s code-share agreements with Delta, United or Midwest,
contract modifications resulting from contract re-negotiations, the Company’s ability to earn incentive
payments contemplated under the Company’s code-share agreements and Midwest’s proposed financial
restructuring and reimbursement disputes with our major partners.
Deferred Aircraft Credits
The Company accounts for incentives provided by aircraft manufacturers as deferred credits. The
deferred credits related to leased aircraft are amortized on a straight-line basis as a reduction to rent
expense over the lease term. Credits related to owned aircraft reduce the purchase price of the aircraft,
which has the effect of amortizing the credits on a straight-line basis as a reduction in depreciation
expense over the life of the related aircraft. The incentives are credits that may be used to purchase
spare parts and pay for training and other expenses.
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.
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
anti-dilutive effect on net income per common share. During the years ended December 31, 2008, 2007
and 2006, 3,665,000, 529,000 and 1,219,000 shares reserved for issuance upon the exercise of
outstanding options were excluded from the computation of Diluted EPS respectively, as their inclusion
would be anti-dilutive.
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, 2008, 2007 and 2006 (in thousands):
Year Ended December 31,
2008 2007 2006
Numerator:
Numerator for earnings per share .......................... $112,929 $159,192 $145,806
Denominator:
Denominator for basic earnings per-share weighted average shares . . . 57,790 62,710 62,474
Dilution due to stock options and restricted stock ............... 843 1,334 908
Denominator for diluted earnings per-share weighted average shares . 58,633 64,044 63,382
Basic earnings per-share ................................. $ 1.95 $ 2.54 $ 2.33
Diluted earnings per-share ................................ $ 1.93 $ 2.49 $ 2.30
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