Sky Harbour Group Corp. — FY2021 Form 10-K Summary
Business context and reporting period
The filing covers the fiscal year ended December 31, 2021. An important limitation: the audited financial statements in this 10-K are for Yellowstone Acquisition Company, the pre-combination SPAC, which had no substantive operating business or revenue. They are not Sky Harbour LLC’s operating financial statements. The filing says Sky’s audited 2021 financial statements and related MD&A would be provided in a separate Form 8-K amendment.
Sky develops, leases and manages private business-aircraft hangar campuses under long-term airport ground leases. The business combination closed January 25, 2022, after year-end; the company adopted an Up-C structure, with substantially all operating assets held by Sky.
Financial metrics
| Metric | FY2021 | Prior comparable period |
|---|---|---|
| Revenue | $0 for Yellowstone; no operating revenue before the combination | $0 for Yellowstone |
| Net income (loss) | $2.95 million | $(3.02) million from inception on August 25, 2020 through December 31, 2020 |
| Operating cash flow | $(1.97) million | $(0.71) million |
| Cash outside trust | $114,626 at year-end | $1.12 million |
| Assets held in trust | $138.76 million at year-end | $138.72 million |
| Total liabilities | $18.84 million, including $11.91 million warrant liability | $22.92 million, including $18.00 million warrant liability |
FY2021 net income was driven primarily by a $6.10 million gain from a decrease in the fair value of warrant liabilities, not operating performance. The 2020 comparison is a partial inception period, not a full year. Operating margins are not meaningful because Yellowstone generated no revenue. The filing does not provide clear Sky consolidated revenue, profit, margins or operating cash flow in this 10-K.
Sky’s September 2021 financing included $166.34 million of senior private activity bonds, with stated rates of 4.00% and 4.25% and maturities in 2036, 2041 and 2054. Bond covenants include a minimum 1.25 debt-service coverage ratio beginning with the quarter ending December 31, 2024, and restrictions on distributions. Sky’s undiscounted future lease payments were $228.37 million; the filing reports $61.29 million after imputed interest. These Sky figures are disclosed in the business and liquidity discussion, rather than in the audited Yellowstone balance sheet.
Material changes and business developments
- Sky reported a development portfolio at five airports—Sugar Land, Miami-Opa Locka, Nashville, Centennial and Phoenix Deer Valley—planned for 78 hangars and approximately 983,960 square feet. Estimated construction cost was $192.4 million, with projects at different stages; most facilities were not yet complete.
- At year-end, Sugar Land Phase I was complete; Miami and Nashville projects were in construction; Centennial was in bidding or predevelopment; and Deer Valley was in design or predevelopment. Project schedules and costs are estimates, subject to change.
- Sky issued the bonds in September 2021 and reported that proceeds, along with Series B preferred-unit financing, supported its development program and repayment of prior Sky indebtedness.
- At the January 25, 2022 business-combination closing, 12,061,041 public shares were redeemed. Boston Omaha invested $45 million through a PIPE; the company reported approximately $53.2 million of cash and $197.1 million of restricted cash after closing.
Outlook, risks and unusual items
Management’s strategy is to expand at airports with constrained private-hangar supply. Tenant leases are generally three to ten years, typically include 3% annual rent escalations, and are triple-net. The company reported an average rent of $27.17 per square foot under existing leases. These are business terms, not a quantified revenue or earnings forecast. FAA airport-operations forecasts cited in the filing are third-party airport forecasts, not company guidance; the filing cautions that some were produced before the pandemic and do not reflect its continuing effects.
- Construction and funding: Delays, cost overruns, permitting, labor or materials constraints, and difficulty raising additional capital could impede the development plan.
- Tenant concentration: The two largest tenants contributed a substantial portion of Sky’s revenue; their leases expire in December 2023 and November 2025, assuming no extensions. A specific concentration percentage is not provided here.
- Debt and ground leases: Bond defaults or covenant breaches could restrict distributions, accelerate debt or expose collateral to foreclosure. Sky depends on tenant rent to meet debt service and long-term ground-lease obligations.
- Industry and operations: COVID-19, economic weakness, competition, tenant defaults, interest rates, airport lease renewals, environmental requirements, fuel integrity and severe weather could adversely affect results.
- Corporate structure and dilution: The company depends on distributions from Sky; debt restrictions may limit them. The Up-C structure, Tax Receivable Agreement, dual-class control, warrants and redeemable Sky units create potential cash obligations, control concerns and dilution.
- Unusual accounting and control matters: The SPAC’s reported earnings were materially affected by warrant fair-value changes. Management said a previously reported internal-control material weakness was remediated and that controls were effective at December 31, 2021. KPMG gave an unqualified opinion on the Yellowstone financial statements.
Key investor verification points
- Review Sky’s audited consolidated 2021 financial statements and MD&A in the referenced Form 8-K amendment; this 10-K’s audited statements do not show Sky’s operating results.
- Confirm actual post-combination unrestricted cash, restricted cash, transaction uses and available construction funding.
- Track project completion, actual versus estimated costs, leasing progress and the Sugar Land Phase II lease deadline.
- Assess tenant concentration, lease expirations, renewals and rent collections against bond and ground-lease obligations.
- Review bond covenants, reserve requirements, distribution restrictions and the company’s ability to meet the 1.25 coverage test when it begins.
- Evaluate potential dilution from warrants and Sky-unit redemptions, and cash payments under the Tax Receivable Agreement.