SkyWest Airlines 2015 Annual Report Download - page 84

80
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.
(9) Capital Transactions
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock in one or more series without
shareholder approval. No shares of preferred stock are presently outstanding. The Company’s Board of Directors is
authorized, without any further action by the shareholders of the Company, to (i) divide the preferred stock into series;
(ii) designate each such series; (iii) fix and determine dividend rights; (iv) determine the price, terms and conditions on
which shares of preferred stock may be redeemed; (v) determine the amount payable to holders of preferred stock in the
event of voluntary or involuntary liquidation; (vi) determine any sinking fund provisions; and (vii) establish any
conversion privileges.
Stock Compensation
On May 4, 2010, the Company’s shareholders approved the adoption of the SkyWest Inc. 2010 Long-Term
Incentive Plan, which provides for the issuance of up to 5,150,000 shares of common stock to the Company’s directors,
employees, consultants and advisors (the “2010 Incentive Plan”). The 2010 Incentive Plan provides for awards in the
form of options to acquire shares of common stock, stock appreciation rights, restricted stock grants, restricted stock
units and performance awards. The 2010 Incentive Plan is administered by the Compensation Committee of the
Company’s Board of Directors (the “Compensation Committee”), which is authorized to designate option grants as either
incentive stock options for income tax purposes (“ISO”) or non-statutory stock options ISOs are granted at not less than
100% of the market value of the underlying common stock on the date of grant. Non-statutory stock options are granted
at a price as determined by the Compensation Committee.
In prior years, the Company adopted three stock option plans: the Executive Stock Incentive Plan (the
“Executive Plan”), the 2001 Allshare Stock Option Plan (the “Allshare Plan”) and SkyWest Inc. Long-Term Incentive
Plan (the “2006 Incentive Plan”). As of December 31, 2015, options to purchase an aggregate 76,923 shares of the
Company’s common stock remained outstanding under the Executive Plan, the Allshare Plan and the 2006 Incentive
Plan. There are no additional shares of common stock available for issuance under these plans.
The fair value of stock options awarded under the Company’s stock option plans has been estimated as of the
grant date using the Black-Scholes option pricing model. The Company uses historical data to estimate option exercises
and employee termination in the option pricing model. The expected term of options granted is derived from the output
of the option pricing model and represents the period of time that options granted are expected to be outstanding. The
expected volatilities are based on the historical volatility of the Company’s traded stock and other factors. The Company
granted 267,433, 255,503 and 173,560 stock options to employees under the 2010 Incentive Plan during the years ended