SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 11-K

FOR ANNUAL REPORTS OF EMPLOYEE STOCK REPURCHASE SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

x                              ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the year ended December 31, 2006

or

o                                 TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    .

Commission File No. 000-14719

SKYWEST, INC. EMPLOYEES’ RETIREMENT PLAN

(Full title of the plan)

SKYWEST, INC.

444 South River Road

St. George, Utah 84790

(Name of issuer of the securities held pursuant to the

Plan and the address of its principal executive office)

 

 

SKYWEST, INC. EMPLOYEES’ RETIREMENT PLAN

Index to Financial Statements and Schedule

		Page
Reports of Independent Registered Public Accounting Firms		1-2
Financial Statements:
Statements of Assets Available for Benefits as of December 31, 2006 and 2005		3
Statement of Changes in Assets Available for Benefits for the Year Ended December 31, 2006		4
Notes to Financial Statements		5-10
Supplemental Schedule:
Schedule H, Part IV, Line 4i—Schedule of Assets (Held at End of Year) December 31, 2006*		11-12

 

*Other supplementary schedules required by section 2520-103.10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Security Act of 1974 have been omitted because they are not applicable.

 

Report of Independent Registered Public Accounting Firm

The Administrator of the
SkyWest, Inc. Employees’ Retirement Plan

We have audited the accompanying statement of assets available for benefits of the SkyWest, Inc. Employees’ Retirement Plan (the Plan) as of December 31, 2006 and the related statement of changes in assets available for benefits for the year ended December 31, 2006. These financial statements are the responsibility of the Plan’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the assets available for benefits of the SkyWest, Inc. Employees’ Retirement Plan as of December 31, 2006, and the changes in assets available for benefits for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As described in Note 2, the Plan adopted Financial Accounting Standards Board Staff Position AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans, as of December 31, 2006.

Our audit of the financial statements was performed for the purpose of forming an opinion on the basic financial statements taken as a whole.  The supplemental Schedule of Assets (Held at End of Year) as of December 31, 2006, is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the United States Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.  The supplemental schedule is the responsibility of the Plan’s management and has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ Tanner LC

Salt Lake City, Utah
July 13, 2007

 

1

 

Report of Independent Registered Public Accounting Firm

The Trustees of the SkyWest, Inc.
Employees’ Retirement Plan:

We have audited the accompanying statement of assets available for benefits of the SkyWest, Inc. Employees’ Retirement Plan (the “Plan”) as of December 31, 2005.  This financial statement is the responsibility of the Plan’s management.  Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly, in all material respects, the assets available for benefits of the Plan at December 31, 2005 in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Salt Lake City, Utah

June 27, 2006, except for Note 2
as to which the date is July 13, 2007

 

2

SKYWEST, INC. EMPLOYEES’ RETIREMENT PLAN

Statements of Assets Available for Benefits

December 31, 2006 and 2005

 

		2006			2005
Assets:
Investments, at fair value		$	193,753,933		$	158,474,466
Assets available for benefits, at fair value		193,753,933			158,474,466
Adjustment from fair value to contract value for fully benefit-responsive investment contract		181,192			19,858
Assets available for benefits		$	193,935,125		$	158,494,324

 

See accompanying notes to financial statements.

 

3

 

SKYWEST, INC. EMPLOYEES’ RETIREMENT PLAN

Statement of Changes in Assets Available for Benefits

Year ended December 31, 2006

Additions:
Contributions:
Participants		$	16,108,385
Employer		7,300,644
Total contributions		23,409,029
Investment income:
Interest and dividends		10,383,432
Net realized and unrealized gains in fair value of investments		11,365,733
Total investment income		21,749,165
Total additions		45,158,194
Deductions:
Distributions to participants		(9,543,858		)
Administrative expenses		(173,535		)
Total deductions		(9,717,393		)
Increase in assets available for benefits		35,440,801
Assets available for benefits:
Beginning of the year		158,494,324
End of year		$	193,935,125

 

See accompanying notes to financial statements

 

4

SKYWEST, INC. EMPLOYEES’ RETIREMENT PLAN

Notes to Financial Statements

(1)           Plan Description

The following description of the SkyWest, Inc. Employees’ Retirement Plan (the “Plan”) is provided for general information purposes only.  Participants should refer to the Plan document and summary plan description for a more complete description of the Plan’s provisions.

(a)           Participation

SkyWest, Inc. (the “Company” or “Plan Sponsor”) adopted the Plan, effective April 1, 1977.  The Plan is a defined contribution plan and is intended to be a qualified retirement plan under Section 401(a) of the Internal Revenue Code (“IRC”) of 1986 as amended.  It is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  The Plan has been amended at various times.

The Plan was established to provide employees with an opportunity to accumulate funds for retirement or disability and to provide death benefits for employees’ dependents and beneficiaries.  The Plan’s trustees included three employees of the Company until May 31, 2006, at which point Wells Fargo became the directed Trustee, and the three employees effectively resigned as trustees.  One of the three employees is an officer of the Company.

(b)           Eligibility

Employees who have completed 90 days of service are eligible to participate in the Plan.  Participation is available to all employees of the Company and its affiliates.  An eligible employee, who has enrolled, shall become a participant on the first day of the month coinciding with or following the date that the employee meets the eligibility requirements.  Employees must affirmatively elect to participate in the Plan.

(c)           Contributions

Participants elect both the amount of salary reduction contributions and the allocation of the salary reduction contributions among the various investment alternatives within the Plan.  Annual salary reduction contributions cannot exceed the lesser of 100% of the participant’s eligible compensation or the maximum amount allowable under the IRC, which was $15,000 during 2006 ($20,000 for participants age 50 and older).

Employees are eligible for the Company match when they have completed one year of service and have enrolled in the Plan.  Employees must be making contributions to the Plan in order to receive the employer match.  During 2006, the Company matched 100% of each eligible participant’s salary reduction contribution up to levels ranging from 2% to 6% of compensation, based on years of service.  Matching contributions are not available to highly compensated employees.  Additionally, each year the Company may make a discretionary contribution based on its earnings.  An employee is eligible to participate in the discretionary contribution program when he or she has completed two years of service and is 18 years of age or older.  The Company did not make a discretionary contribution in 2006.  Company discretionary contributions have been allocated based on the participants’ eligible compensation.

 

5

---

(d)           Participant-Directed Options for Investments

Participants direct the investment of their contributions and the Company matching contributions into various investments offered by the Plan.  Investment options include mutual funds, a common/collective trust fund, and SkyWest, Inc. common stock.  Participants may change their election or transfer monies between funds at any time.

Participants with common stock of SkyWest, Inc. in their accounts may direct the sale of the stock and the investment of the resulting monies into other investments offered by the Plan.

(e)           Vesting and Payment of Benefits

Participants are immediately vested 100% in their account balances.  Benefits are normally paid at retirement, disability, death, or other termination.  Benefit distributions may be made in a single lump sum payment, installments, or an annuity.  Participants may withdraw funds from the Plan while actively employed subject to specific restrictions set forth in the Plan agreement.

(f)            Participant Loans Receivable

The Plan agreement provides for loans to be made to participants and beneficiaries.  The loans must bear a reasonable rate of interest, have specific repayment terms and be adequately secured.  Under no circumstances can the amount of the loan exceed the lesser of $50,000 or 50% of the participant’s vested account balance.

(g)                                 Custodian and Record Keeper

Effective June 1, 2006, the plan Sponsor changed the advisory, record keeping and custodial services to Wells Fargo Institutional Trust Services.  Wells Fargo Institutional Trust Services also became a directed trustee on the same date.

(h)           Parties-in-Interest

The Company and Wells Fargo Institutional Trust Services (“Wells Fargo”) are considered Parties-in-interest to the Plan.  The Company’s common stock and Wells Fargo managed mutual funds are investment options in the Plan.  Wells Fargo is the asset custodian for the Plan.

(2)                                 Summary of Significant Accounting Policies

(a)                                 Basis of Accounting

The Plan’s financial statements are prepared on the accrual basis of accounting, in accordance with U.S. generally accepted accounting principles.

(b)                                 Change in accounting principle

In December 2005, the Financial Accounting Standards Board (“FASB”) issued a Staff Position (“FSP”), Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Heath and Welfare and Pension Plans.  This FSP amends the guidance in AICPA Statement of Position 94-4, Reporting of Investment Contracts Held by Health and Welfare Benefit Plans and Defined-Contribution Pension Plans, with respect to the definition of fully benefit-responsive investment contracts and the presentation and disclosure of fully benefit-responsive investment contracts in plan financial statements.  The FSP requires that investments in common/collective trusts that include benefit-responsive investment contracts be presented at fair value in the statement of assets available for benefits and that the amount representing the difference between fair value and contract value of these investments also be presented on the face of the statement of assets available for benefits.  The FSP is effective for financial statements for annual periods ending after December 15, 2006 and must

 

6

---

be applied retroactively to all prior periods presented.  Accordingly, the Plan has adopted the financial statement presentation and disclosure requirements effective December 31, 2006, and applied the provisions retroactively to the 2005 Statement of Assets Available for Benefits to present all investments at fair value, with the adjustment to contract value separately disclosed.  The adoption of the FSP had no impact on the Statement of Changes in Assets Available for Benefits.

Recently issued accounting standards

In September 2006, the FASB issued Statement No. 157, Fair value Measurements (“FAS 157”).  This statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  FAS 157 is effective for the Plan in the first quarter of 2008.  The Plan is currently evaluating the statement’s impact on its financial statements.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”). The fair value option established by FAS 159 permits entities to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. FAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Plan’s management does not believe that the adoption of FAS 159 will have a material impact on the Plan’s financial statements.

(c)                                  Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the reported amounts of assets available for benefits and disclosure of contingent assets and liabilities at the date of the financial statements and the reported changes in assets available for benefits during the reporting period.  Actual results could differ from these estimates.

(d)           Investment Valuation and Income Recognition

The Plan provides for investments in certain investment securities.  These securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risks.  Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and such changes could materially affect the amounts reported in the accompanying statements of assets available for benefits.

Mutual funds are valued at quoted market prices, which represent the net asset values of units held by the Plan at year-end.  The Company’s common stock is valued at the last reported sales price on the last business day of the Plan year.  Loans receivable from participants are valued at face value, which approximates the future principal and interest payments discounted at prevailing interest rates for similar instruments.  Unrealized appreciation or depreciation caused by fluctuations in the market value of investments is recognized in the statement of changes in assets available for benefits.  Dividends and interest are reinvested as earned.  Purchases and sales of investments are recorded on a trade-date basis.

The Plan invests in common/collective trusts, which primarily hold investments in fully benefit-responsive insurance contracts that provide that the Plan may make withdrawals at contract value for benefit-responsive requirements.  Accordingly, the Plan’s investment in units of the common/ collective trusts are presented at fair value in the Statements of Assets Available for Benefits, with an adjustment to its contract value separately disclosed as provided in the FSP.  The common/ collective trusts reported fair values are determined as the sum of (a) the fair value of the investments in

 

7

---

guaranteed insurance contracts and security-backed investment contracts that are wrapped by an insurance company, bank or other financial institution (collectively, the “Investment Contracts”), as determined by that fund’s trustee and (b) the fair value of that fund’s investments in externally managed collective investment funds as determined by those funds’ trustees.  The contract value represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses.  Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.   Certain events limit the ability of the Plan to transact at contract value with the issuer.  Such events include the following:  (i) amendments to the Plan documents (including complete or partial Plan termination or merger with another plan); (ii) changes to the Plan’s prohibition on competing investment options or deletion of equity wash provisions; (iii) bankruptcy of the Plan sponsor or other Plan sponsor events (e.g., divestitures or spin-offs of the trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under ERISA).  The Plan administrator does not believe that the occurrence of any such value event, which would limit the Plan’s ability to transact at contract a value with participants, is probable.

(e)                                  Distributions to Participants

Distributions to participants are recorded when paid.

(f)                                    Expenses

The Plan pays substantially all administrative expenses of the Plan, other than legal fees, which are paid by the Plan Sponsor.

(g)                                 Interest and Dividend Income

Interest income is recorded as earned on the accrual basis.  Dividend income is recorded on the ex-dividend date.

(h)                                 Termination of Plan

Although it has not expressed any intent to do so, the Company may terminate the Plan at any time subject to the provisions of the Plan and ERISA.  If the Plan is terminated, the participants have a non-forfeitable interest in their accounts.

(3)         Transactions with Parties-in-Interest

Transactions in shares of the Company’s common stock qualify as party-in-interest transactions under the provisions of ERISA.  The Plan held 179,120 and 163,097 shares of SkyWest, Inc. common stock with a fair value of $4,569,362 and $4,380,785 as of December 31, 2006 and 2005, respectively.

A former director of the Company is a shareholder of Soltis Investment Advisors, Inc. (“Soltis”).  Soltis provided investment advisory services to the Plan but provided no custodial services to the Plan during 2006.  During the year ended December 31, 2006, Soltis received no fees directly from the Company for its services; however,  the Plan paid Soltis directly for advisory fees which were deducted on a quarterly basis.  Each deduction for quarterly fees was reviewed by the Company’s management.  During the year ended December 31, 2006, Soltis received approximately $156,000 in fees for services rendered in connection with the Plan.

 

8

---

Certain Plan investments include mutual funds and a common collective trust fund managed by Wells Fargo, who is also the Plan trustee, and therefore a party-in-interest.  While transactions involving Plan assets with a party-in-interest are usually prohibited, these transactions are exempt under ERISA Section 408(b)(8).

Loans to Plan participants totaling $5,805,802 and $4,691,425 as of December 31, 2006 and 2005, respectively, are also considered party-in-interest transactions.

(4)                                 Tax Status

The Plan has received a determination letter from the Internal Revenue Service dated July 19, 2005, stating that the Plan is designed in accordance with applicable sections of the IRC and, therefore, the related trust is exempt from taxation.  As of December 31, 2006, the Plan was required to make certain corrective distributions in order to remain qualified under IRC 401(a).  Subsequent to December 31, 2006, the Plan made the corrective distributions in accordance with the IRS regulations.  Although the Plan has been amended since receiving the determination letter, the Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the IRC and, therefore, believes that the Plan, as amended, is qualified and the related trust is exempt.

(5)           Investments

During 2006, the Plan’s investments (including investments purchased, sold, as well as held during the year) appreciated (depreciated) in fair value as determined by quoted market prices as follows:

 

The fair values of individual investments that represent 5 percent or more of the Plan’s assets are as follows:

 

*                    Amount was not greater than 5% of the Plan’s assets for the respective year.

 

9

---

(6)           Plan Amendments

During, 2006, the Plan was amended to change the approved method of testing for the actual deferral percentage and the actual contribution percentage test to the current year method.  Additionally, the Plan was amended to reduce the threshold for mandatory cash-out distributions from $5,000 to $1,000.

(7)           Reconciliation of Financial Statements to Form 5500

The following differences between the financial statements and the Form 5500 are due to the adjustment from fair value to contract value of the Wells Fargo Stable Return Fund, a fully benefit-responsive investment contract.

 

 

10

SKYWEST, INC. EMPLOYEES’ RETIREMENT PLAN
EIN 87-0292166, Plan 001

Form 5500, Schedule H, Part IV, Line 4i — Schedule of Assets (Held at End of Year)
December 31, 2006

(a)		(b) Identity of issue, borrower, lessor, or similar party		(c) Description of investment including maturity date, rate of interest, collateral, par, or maturity value		(e) CurrentValue			Number of Units
		Janus Capital Corp.		Janus Overseas Fund		$	24,378,575		526,535
*		Wells Fargo		Wells Fargo Stable Return		12,601,987			322,306
		Neuberger & Berman Management, Inc.		Neuberger Berman Genesis Fund		11,434,210			239,560
		Merrill Lynch		Merrill Lynch BlackRock		11,389,607			811,804
*		Wells Fargo		Wells Fargo Advantage Growth		10,786,219			611,117
		Harris Associates LP		Oakmark Select Fund		10,249,623			306,142
		Van Kampen		Van Kampen Comstock		6,676,703			346,842
		Davis		Davis NY Venture		6,427,728			166,867
*		Wells Fargo		Wells Fargo Advantage Small Cap Value		6,365,236			204,473
		Fidelity Investments Institutional Services Co.		Equity Income Fund		6,041,261			103,181
		Oak Mark		Oakmark Equity and Income		5,536,622			213,935
		STI		STI Classic Small Cap Growth		5,210,822			258,987
		Alliance Bernstein		Alliance Bernstein International Value		5,141,463			229,530
*		SkyWest, Inc.		SkyWest, Inc. Common Stock		4,569,362			179,120
		William Blair & Company		WM. Blair Funds International Growth Fund		4,088,080			147,584
		American Funds		American Funds Growth		4,079,030			124,894
		Wasatch Advisors Inc.		Wasatch Small Cap Growth Fund		4,073,007			110,439
		Pimco Total Return Administrative Shares		Total Return Administrative Shares		3,506,587			337,822
		The Vanguard Group		Vanguard Admiral Intermediate-Term Treasury Fund		1,996,001			185,502

 

11

---

 

		Turner Investment Partners, Inc.		Turner Mid Cap Growth Fund		1,954,799			66,922
		Calamos Investments LLC		Calamos Growth Fund		1,091,498			20,250
		Goldman Sachs		Goldman Sachs Mid Cap Value		450,074			11,651
		MFS		MFS High Yield Opportunities		308,381			40,470
		American Funds		American Funds Europacific		871,035			18,944
*		Wells Fargo		Conservative Portfolio		1,367,996			130,863
*		Wells Fargo		Moderate Portfolio		3,079,549			292,610
*		Wells Fargo		Growth Portfolio		6,942,939			651,752
*		Wells Fargo		Aggressive Portfolio		15,411,688			1,433,475
*		Wells Fargo		Very Aggressive Portfolio		11,918,049			1,100,798
*		Plan Participants		loans at 7% - 10% interest.
				with maturity dates through 2021 collateralized by
				respective participants’ account balances		5,805,802
						$	193,753,933

*                    Denotes party-in-interest

Column (d) is not required as all investments are participant-directed

See accompanying report of independent registered public accounting firm.

 

12

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:  July 13, 2007	SKYWEST, INC. EMPLOYEES’ RETIREMENT PLAN
	By:	SkyWest, Inc., Plan Sponsor
		/s/ Bradford R. Rich
		Bradford R. Rich
		Executive VP and Chief Financial Officer
		of SkyWest, Inc.

 

13

 

Exhibit Index

Exhibit Number		Description of Exhibit
23.1		Consent of Tanner LC
23.2		Consent of Ernst & Young, LLP

 

14