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Capital Transactions | 12 Months Ended
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Dec. 31, 2017
Capital Transactions |
Capital Transactions | (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. Stock Options 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. During the year ended December 31, 2017, the Company did not grant any options to purchase shares of common stock. The Company granted 206,021 and 267,433 stock options to employees under the 2010 Incentive Plan during the years ended December 31, 2016 and 2015, respectively. Stock options granted in 2015 and 2016 vest in three equal installments over a three-year period. The following table shows the assumptions used and weighted average fair value for grants in the years ended December 31, 2016 and 2015.
|  | 2016 |  | 2015 |
Expected annual dividend rate |  |  | 1.08 | % |  | 1.18 | %
Risk-free interest rate |  |  | 1.15 | % |  | 1.62 | %
Average expected life (years) |  |  | 5.7 |  |  | 5.7 |
Expected volatility of common stock |  |  | 0.412 |  |  | 0.401 |
Forfeiture rate |  |  | 0.0 | % |  | 0.0 | %
Weighted average fair value of option grants |  | $ | 5.27 |  | $ | 4.75 |
The Company recorded share‑based compensation expense only for those options that are expected to vest. The estimated fair value of the stock options is amortized over the vesting period of the respective stock option grants. Options are exercisable for a period as defined by the Compensation Committee on the date granted; however, no stock option will be exercisable before six months have elapsed from the date of grant and no stock option shall be exercisable after seven years from the date of grant. The following table summarizes the stock option activity for all of the Company’s plans for the years ended December 31, 2017, 2016 and 2015:
|  | 2017 |  | 2016 |  | 2015 |
|  |  |  |  |  |  | Weighted |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  | Weighted |  | Average |  | Aggregate |  |  |  | Weighted |  |  |  | Weighted |
|  |  |  | Average |  | Remaining |  | Intrinsic |  |  |  | Average |  |  |  | Average |
|  | Number of |  | Exercise |  | Contractual |  | Value |  | Number of |  | Exercise |  | Number of |  | Exercise |
|  | Options |  | Price |  | Term |  | ($000) |  | Options |  | Price |  | Options |  | Price |
Outstanding at beginning of year |  | 819,981 |  | $ | 13.58 |  | 4.4 | years | $ | 18,756.9 |  | 1,064,429 |  | $ | 13.64 |  | 2,888,074 |  | $ | 16.46 |
Granted |  | — |  |  | — |  |  |  |  |  |  | 206,021 |  |  | 14.90 |  | 267,433 |  |  | 13.63 |
Exercised |  | (356,209) |  |  | 13.36 |  |  |  |  |  |  | (351,296) |  |  | 14.17 |  | (544,917) |  |  | 14.68 |
Cancelled |  | (5,669) |  |  | 14.33 |  |  |  |  |  |  | (99,173) |  |  | 14.90 |  | (1,546,161) |  |  | 18.53 |
Outstanding at end of year |  | 458,103 |  |  | 13.73 |  | 4.0 | years | $ | 18,034.1 |  | 819,981 |  |  | 13.58 |  | 1,064,429 |  |  | 13.64 |
Exercisable at December 31, 2017 |  | 254,192 |  |  | 13.17 |  | 3.4 | years | $ | 10,150.8 |  |  |  |  |  |  |  |  |  |  |
Exercisable at December 31, 2016 |  | 263,851 |  |  | 13.76 |  | 2.8 | years | $ | 5,985.5 |  |  |  |  |  |  |  |  |  |  |
The total intrinsic value of options to acquire shares of the Company’s common stock that were exercised during the years ended December 31, 2017, 2016 and 2015 was $9,940,000, $4,250,000 and $1,800,000, respectively. The following table summarizes the status of the Company’s non‑vested stock options as of December 31, 2017:
|  |  |  | Weighted-Average |
|  | Number of |  | Grant-Date |
|  | Shares |  | Fair Value |
Non-vested shares at beginning of year |  | 556,130 |  | $ | 4.86 |
Granted |  | — |  |  | — |
Vested |  | (346,550) |  |  | 4.67 |
Cancelled |  | (5,669) |  |  | 5.14 |
Non-vested shares at end of year |  | 203,911 |  | $ | 5.17 |
The following table summarizes information about the Company’s stock options outstanding at December 31, 2017:
|  |  |  | Options Outstanding |  | Options Exercisable |
|  |  |  |  |  | Weighted Average |  |  |  |  |  |  |  |  |
|  |  |  | Number |  | Remaining |  | Weighted Average |  | Number |  | Weighted Average |
Range of Exercise Prices |  | Outstanding |  | Contractual Life |  | Exercise Price |  | Exercisable |  | Exercise Price |
$8.00 | to | $12.99 |  | 79,990 |  | 3.1 | years |  | $ | 12.06 |  | 79,990 |  | $ | 12.06 |
$13.00 | to | $14.99 |  | 371,480 |  | 4.2 | years |  |  | 14.02 |  | 173,481 |  |  | 13.67 |
$15.00 | to | $19.00 |  | 6,633 |  | 4.8 | years |  |  | 17.77 |  | 721 |  |  | 15.03 |
$8.00 | to | $19.00 |  | 458,103 |  | 4.0 | years |  | $ | 13.73 |  | 254,192 |  | $ | 13.17 |
Restricted Stock Units During the year ended December 31, 2017, the Company granted 160,137 restricted stock units to certain of the Company’s employees under the 2010 Incentive Plan. The restricted stock units granted during the year ended December 31, 2017 have a three‑year cliff-vesting period, during which the recipient must remain employed with the Company or its subsidiaries. The weighted average fair value of the restricted stock units at the date of grants made during the year ended December 31, 2017 was $35.81 per share. The following table summarizes the activity of restricted stock units granted to certain Company employees for the years ended December 31, 2017, 2016 and 2015:
During the year ended December 31, 2016, the Company granted 380,358 shares of restricted stock units to certain Company’s employees under the 2010 Incentive Plan. The restricted stock units granted during the year ended December 31, 2016 have a three‑year vesting period, during which the recipient must remain employed with the Company or its subsidiaries. The weighted average fair value of the restricted stock units the date of grants made during the year ended December 31, 2016 was $14.81 per share. The following table summarizes the activity of restricted stock units granted to certain Company employees as of December 31, 2016, 2015 and 2014: |  |  |  |  |  |
|  |  |  |  | Weighted-Average |
|  |  |  |  | Grant-Date Fair |
|  | Number of Shares |  |  | Value |
Non-vested shares outstanding at December 31, 2014 |  | 723,176 |  | $ | 12.70 |
Granted |  | 408,163 |  |  | 13.57 |
Vested |  | (215,856) |  |  | 13.06 |
Cancelled |  | (106,184) |  |  | 13.52 |
Non-vested shares outstanding at December 31, 2015 |  | 809,299 |  | $ | 13.13 |
Granted |  | 384,148 |  |  | 14.81 |
Vested |  | (215,146) |  |  | 13.29 |
Cancelled |  | (51,370) |  |  | 13.72 |
Non-vested shares outstanding at December 31, 2016 |  | 926,931 |  | $ | 13.65 |
Granted |  | 160,137 |  |  | 35.81 |
Vested |  | (230,903) |  |  | 12.01 |
Cancelled |  | (40,575) |  |  | 15.78 |
Non-vested shares outstanding at December 31, 2017 |  | 815,590 |  | $ | 18.35 |
Performance Stock Units During the year ended December 31, 2017, the Compensation Committee granted performance share units, which are performance based restricted stock units, to certain Company employees with three-year performance-based financial metrics that the Company must meet before those awards may be earned and the performance period is measured for the three years ending December 31, 2019. The Compensation Committee will determine the achievement of performance results and corresponding vesting of performance shares for each year’s grant in 2015, 2016 and 2017. At the end of each performance period, the number of shares awarded can range from 0% to 200% of the original granted amount for performance share units granted in 2017 and can range from 0% to 150% of the original granted amount for performance shares granted in 2015 and 2016, depending on the performance against the pre-established targets. The following table summarizes the activity of performance share units granted at target as of December 31, 2017.
|  |  |  |  | Weighted-Average
|  |  |  |  | Grant-Date Fair
|  | Number of Shares |  |  | Value
Non-vested shares outstanding at December 31, 2014 |  | — |  | $ | —
Granted |  | 222,583 |  |  | 13.61
Vested |  | — |  |  | —
Cancelled |  | (19,754) |  |  | 13.51
Non-vested shares outstanding at December 31, 2015 |  | 202,829 |  | $ | 13.62
Granted |  | 183,577 |  |  | 14.89
Vested |  | — |  |  | —
Cancelled |  | (22,413) |  |  | 14.16
Non-vested shares outstanding at December 31, 2016 |  | 363,993 |  | $ | 14.23
Granted |  | 119,315 |  |  | 35.81
Vested |  | — |  |  | —
Cancelled |  | (14,732) |  |  | 15.00
Non-vested shares outstanding at December 31, 2017 |  | 468,576 |  | $ | 19.70
During the years ended December 31, 2017, 2016 and 2015 the Company granted fully‑vested shares of common stock to the Company’s directors in the amounts of 22,617, 42,624 and 36,950 shares, respectively, with a weighted average grant‑date fair value of $35.81, $14.78, and $14.05, respectively. During the year ended December 31, 2017, 2016 and 2015, the Company recorded equity‑based compensation expense of $10.6 million, $7.6 million and $5.4 million, respectively. As of December 31, 2017, the Company had $10.6 million of total unrecognized compensation cost related to non‑vested stock options, non‑vested restricted stock grants and non-vested performance stock units. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. The Company expects to recognize this cost over a weighted average period of 1.7 years. Taxes The Company’s treatment of stock option grants of non‑qualified options, restricted stock units and performance shares results in the creation of a deferred tax asset, which is a temporary difference, until the time that the option is exercised or the restrictions lapse.

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- Definition Disclosure of pertinent details related to preferred stock authorized and the entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References No definition available. + Details
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