SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 23, 2021
(Exact name of registrant as specified in its charter)
|(State or other jurisdiction of||(Commission||(I.R.S. Employer|
|incorporation or organization)||File Number)||Identification No.)|
|444 South River Road|
St. George, Utah
|(Address of principal executive offices)||(Zip Code)|
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
|Title of Each Class||Trading Symbol(s)||Name of Each Exchange on which Registered|
|Common Stock, No Par Value||SKYW||The Nasdaq Global Select Market|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (section 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (section 240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.01. Entry into a Material Definitive Agreement.
On April 23, 2021, SkyWest Airlines, Inc. (“SkyWest Airlines”), a wholly-owned subsidiary of SkyWest, Inc. (the “Company”), entered into a Payroll Support Program 3 Agreement (the “PSP3 Agreement”) with the U.S. Department of the Treasury (“Treasury”) with respect to the grant program (the “Third Payroll Support Program”) under section 7301 of the American Rescue Plan Act of 2021 (the “American Rescue Plan Act”). The Third Payroll Support Program and PSP3 Agreement are structured in a substantially similar manner to the Payroll Support Program Agreement among SkyWest Airlines, the Company and Treasury dated as of April 23, 2020 with respect to the grant program (the “Original Payroll Support Program”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), as described in the Company’s Current Report on Form 8-K filed on April 24, 2020 and the Payroll Support Program Extension Agreement among SkyWest Airlines, the Company and Treasury dated as of January 15, 2021 with respect to the grant program (the “Second Payroll Support Program”) under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (“2021 Appropriations Act”), as described in the Company’s Current Report on Form 8-K filed on January 15, 2021.
Payroll Support Program 3 Agreement
Pursuant to the PSP3 Agreement, SkyWest Airlines expects to receive from Treasury approximately $250.0 million in the aggregate. The funding is expected to be disbursed in multiple installments: 50% on the closing date, which was received on April 23, 2021 (the “Closing Date”), and an additional disbursement in May 2021 (each such date on which funds are disbursed, a “Disbursement Date”).
In connection with the receipt of financial assistance under the Third Payroll Support Program, SkyWest Airlines is required to comply with the relevant provisions of the American Rescue Plan Act, many of which are substantially similar to the requirements placed on SkyWest Airlines by the Original Payroll Support Program under the CARES Act and the Second Payroll Support Program under the 2021 Appropriations Act. The relevant provisions include the requirement that the funding be used exclusively for the continuation of payment of employee wages, salaries and benefits. Similar to the Original Payroll Support Program and Second Payroll Support Program, SkyWest Airlines and, in some cases, the Company will also be subject to certain restrictions, including, but not limited to, limitations on involuntary terminations, salary reductions and furloughs through September 30, 2021, restrictions on the payment of dividends and the repurchase of shares through September 30, 2022, and certain limitations on executive compensation through April 1, 2023.
PSP3 Promissory Note
As partial compensation to Treasury for the provision of financial assistance under the PSP3 Agreement, SkyWest Airlines issued, and the Company guaranteed, a promissory note (the “Promissory Note”) to Treasury on the Closing Date. The Promissory Note provides for SkyWest Airlines’ unconditional promise to pay to Treasury the expected principal sum of up to approximately $45.0 million. On the Closing Date, the principal amount of the Promissory Note was approximately $7.5 million, and such principal amount will be increased by an amount equal to 30% of each additional disbursement of grants to SkyWest Airlines under the PSP3 Agreement on each Disbursement Date following the Closing Date.
The Promissory Note will bear interest at a rate equal to 1.00% per annum until the fifth anniversary of the Closing Date, and 2.00% plus an interest rate based on the secured overnight financing rate per annum (but not less than 0.00%) thereafter until the tenth anniversary of the Closing Date (the “Maturity Date”). Accrued interest will be payable in arrears on the last business day of each of March and September of each year, beginning with September 30, 2021. The aggregate unpaid principal amount of the Promissory Note, all accrued and unpaid interest and all other amounts payable under the Promissory Note will be due and payable on the Maturity Date.
SkyWest Airlines may, at any time, make voluntary prepayments of amounts due under the Promissory Note without penalty or premium. Within 30 days of a Change of Control (as defined in the Promissory Note), SkyWest Airlines is required to make mandatory prepayments of the aggregate principal amount outstanding and any accrued interest or other amounts owing under the Promissory Note at such time.
The Promissory Note is SkyWest Airlines’ senior unsecured obligation, and the guarantee of the Promissory Note is the senior unsecured obligation of the Company. The Promissory Note contains certain events of default, including cross-default with respect to acceleration or failure to pay at maturity other material indebtedness of SkyWest Airlines and the Company. Subject to certain grace periods, upon the occurrence of an event of default, the outstanding obligations under the Promissory Note may, and in certain circumstances will automatically, be accelerated and become due and payable immediately.
PSP3 Warrant Agreement and Warrants
In connection with the PSP3 Agreement and as partial compensation to Treasury for the provision of financial assistance under the PSP3 Agreement, the Company will issue warrants (each a “Warrant” and, collectively, the “Warrants”) to Treasury to purchase up to an expected aggregate of 78,317 shares (the “Warrant Shares”) of the Company’s common stock, no par value (the “Common Stock”), at an exercise price of $57.47 per share (the “Exercise Price”), which was the closing price of the Common Stock on The Nasdaq Stock Market on March 10, 2021. The Warrants will be issued pursuant to the terms of a Warrant Agreement entered into by the Company and Treasury on April 23, 2021 (the “Warrant Agreement”). The number of Warrant Shares to be issued is subject to adjustment as a result of certain anti-dilution provisions contained in the Warrants.
On the Closing Date, the Company issued a Warrant to Treasury to purchase 13,058 shares of Common Stock. On each Disbursement Date, the Company will issue to Treasury an additional Warrant to purchase a number of shares of Common Stock determined by the quotient of (a) the product of the amount by which the principal amount of the Promissory Note is increased on the closing date of such Warrant, multiplied by 0.1, divided by (b) the Exercise Price.
The Warrants are freely transferable and do not have any voting rights. The Warrant Agreement also provides for certain registration rights. The right to purchase Warrant Shares expires on the fifth anniversary of the date of issuance of each Warrant. The Warrants will be exercisable either through net share settlement or cash, at the Company’s option.
The Warrants are being issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). Any issuance of Common Stock upon exercise of the Warrants will be exempt as an exchange by the Company exclusively with its security holders eligible for exemption under Section 3(a)(9) of the Securities Act.
PSP2 Promissory Note and Warrants
As previously reported in the Company’s Current Report on Form 8-K filed on January 15, 2021, SkyWest Airlines entered into a Payroll Support Program Extension Agreement (the “PSP2 Agreement”) with Treasury with respect to the Second Payroll Support Program and received proceeds of approximately $233.1 million in the aggregate. In April 2021, SkyWest received additional proceeds of approximately $35.0 million under the PSP2 Agreement and the Second Payroll Support Program. In consideration of the additional funding, the principal amount of the promissory note SkyWest Airlines issued to Treasury on January 15, 2021 was increased by approximately $10.5 million and the Company issued to Treasury warrants to purchase an additional 25,958 shares of Common Stock at an exercise price of $40.41 per share pursuant to the warrant agreement entered into by the Company and Treasury on January 15, 2021.
The foregoing descriptions do not purport to be complete and are qualified in their entirety by reference to each of the PSP3 Agreement, the Promissory Note, the Warrant Agreement and the Form of Warrant, copies of which will be filed with the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2021.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information provided in Item 1.01 above under the captions “PSP3 Promissory Note” and “PSP2 Promissory Note and Warrants” are incorporated herein by reference to the extent responsive to Item 2.03.
Item 3.02. Unregistered Sales of Equity Securities.
The information provided in Item 1.01 above under the captions “PSP3 Warrant Agreement and Warrants” and “PSP2 Promissory Note and Warrants” are incorporated herein by reference to the extent responsive to Item 3.02.
Item 8.01. Other Events.
On April 23, 2021, the Company issued a press release captioned “SkyWest to Receive $250 million through Payroll Support Program 3 Under the American Rescue Plan Act” A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
Title of Document
|99.1||Press Release, dated April 23, 2021.|
|104||Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)|
This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “forecasts,” “expects,” “intends,” “believes,” “anticipates,” “estimates,” “should,” “likely” and similar expressions identify forward-looking statements. Such statements include, but are not limited to, statements about the expected timing and benefits of the American Rescue Plan Act funding and other statements that are not historical facts. All forward-looking statements included in this Current Report on Form 8-K are made as of the date hereof and are based on information available to the Company as of such date. The Company assumes no obligation to update any forward-looking statements unless required by law. Readers should note that many factors could affect the future operating and financial results of the Company and the timing of certain events and could cause actual results to vary materially from those expressed in forward-looking statements set forth in this report. These factors include, but are not limited to, uncertainties regarding the impact of the American Rescue Plan Act funding on the Company’s business and operations, and the consequences of the continuing COVID-19 outbreak to economic conditions, the travel industry and the Company’s major partners in general and the financial condition and operating results of the Company in particular. Risk factors, cautionary statements and other conditions which could cause the Company’s actual results to differ materially from management’s current expectations are contained in the Company’s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|Date: April 23, 2021||By||/s/ Robert J. Simmons|
|Robert J. Simmons, Chief Financial Officer|