SkyWest Airlines 2011 Annual Report Download - page 93

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SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(8) Fair Value Measurements (Continued)
Based on market conditions, the Company uses a discounted cash flow valuation methodology for
auction rate securities. Accordingly, for purposes of the foregoing consolidated financial statements,
these securities were categorized as Level 3 securities. The Company’s ‘‘Marketable Securities’’
classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these
securities.
No significant transfers between Level 1, Level 2 and Level 3 occurred during the year ended
December 31, 2011. The Company’s policy regarding the recording of transfers between levels is to
record any such transfers at the end of the reporting period.
The following table presents the Company’s assets measured at fair value on a recurring basis
using significant unobservable inputs (Level 3) at December 31, 2011 (in thousands):
Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
Auction Rate
Securities
Balance at January 1, 2011 ................................. $4,002
Total realized and unrealized gains or (losses)
Included in earnings .................................... —
Included in other comprehensive income ..................... (209)
Transferred out .......................................... —
Settlements ............................................. —
Balance at December 31, 2011 ............................... $3,793
(9) Investment in Other Companies
In September 2008, the Company entered into an agreement to acquire a 20% interest in Trip. As
of December 31, 2011, the Company’s investment balance in Trip was $28.5 million, which represented
a 20% voting ownership interest in Trip common stock and a 6% non-voting ownership interest in Trip
preferred stock. In connection with the investment in Trip, the Company entered into a put option
agreement with the Majority Shareholder of Trip that allows the Company to put their investment to
the Majority Shareholder at an established price based on a 5% annual rate of return over the
investment period. The put is only exercisable on June 30, 2016. On September 29, 2010, the Company
invested $7 million for a 30% ownership interest in Mekong Aviation Joint Stock Company, an airline
operating in Vietnam (‘‘Air Mekong’’). During 2011, the Company invested an additional $3 million in
Air Mekong. As of December 31, 2011, the Company’s investment balance in Air Mekong was
$2.9 million. These investments were recorded as an ‘‘Other asset’’ on the Company’s consolidated
balance sheet. The Company accounts for its interest in Trip and Air Mekong using the equity method
of accounting. The Company records its equity in Trip’s and Air Mekong’s earnings on a one-quarter
lag. The Company’s portion of the losses incurred by Trip and Air Mekong for the year ended
December 31, 2011 was $13.3 million.
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