SkyWest Airlines 2014 Annual Report Download - page 97

SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(8) Special Items
The following table summarizes the components of the Company’s special items, for the year
ended December 31, 2014, 2013 and 2012 (in thousands):
Year ended
December 31,
2014 2013 2012
Special items:
EMB120 aircraft related items(1) .................... $57,046 $— $—
ERJ145 aircraft related items(2) .................... 12,931 — —
Paint facility and related items(3) .................... 4,800 — —
Total Special items ................................ $74,777 $— $—
(1) Consists primarily of impairment charges to write-down owned EMB120 aircraft,
including capitalized engine overhaul costs, and related long-lived assets to their
estimated fair value of $48.3 million and accrued obligations on leased aircraft and
related costs of $8.8 million. The estimated fair value of the long-lived assets was based
on third-party valuations for similar assets, which is considered an unobservable input
(Level 3) under the fair value hierarchy. In November 2014, the Company approved a
plan to discontinue operating the EMB120 aircraft by the end of the second quarter of
2015. The decision to discontinue use of the EMB120 aircraft included management’s
assessment of the need for pilots to operate upcoming deliveries for the E175 aircraft, the
incremental training cost to hire new pilots compared to retraining existing EMB120
pilots to operate CRJ or E175 aircraft, and the uncertainty related to the number of
qualified pilots available for hire, combined with the overall age and increased operating
costs of the Company’s EMB120 fleet. These special items are reflected in the SkyWest
Airlines operating expenses under Note 2 Segment Reporting.
(2) Consists primarily of impairment charges to write-down certain ERJ145 long-lived assets,
which primarily consisted of spare engines and ERJ145 spare aircraft parts, to their
estimated fair value of $11.4 million and accrued obligations on leased aircraft and
related costs of $1.5 million. The estimated fair value of the long-lived assets was based
on third-party valuations for similar assets, which is considered an unobservable input
(Level 3) under the fair value hierarchy. In November 2014, the Company entered into an
amended and restated contract with United that accelerated the lease terminations of
certain ERJ145 aircraft and accelerated the termination date of the Company’s flying
contract to operate the ERJ145s with United from the year 2020 to 2017. The reduced
term shortened the anticipated useful life of the ERJ145 long-lived assets which triggered
the impairment evaluation. These special items are reflected in the ExpressJet operating
expenses under Note 2 Segment Reporting.
(3) Consists primarily of the write-down of assets associated with the disposition of the
Company’s paint facility located in Saltillo, Mexico, which was sold during the year ended
December 31, 2014. These special items are reflected in the ExpressJet operating
expenses under Note 2 Segment Reporting.
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