Southwest Airlines Reports Second Quarter Earnings
DALLAS, July 29 /PRNewswire-FirstCall/ -- Southwest Airlines (NYSE: LUV) today reported second quarter 2010 net income of $112 million, or $.15 per diluted share, compared to net income of $91 million, or $.12 per diluted share, for second quarter 2009. Both years’ results included special items related to non-cash, mark-to-market, and other items associated with a portion of the Company’s fuel hedge portfolio. Excluding special items for both periods, second quarter 2010 net income was $216 million, or $.29 per diluted share, compared to $59 million, or $.08 per diluted share, for second quarter 2009. The second quarter 2010 net income, excluding special items, of $.29 per diluted share exceeded Thomson’s First Call mean estimate of $.27 per diluted share. Additional information regarding special items is included in this release and in the accompanying reconciliation tables.
Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated: “We are extremely pleased with our second quarter results. Second quarter net income (excluding special items) dramatically improved over second quarter last year, largely due to another record revenue performance. Total operating revenues reached an all-time quarterly record of $3.2 billion, a year-over-year increase of 21 percent. On a unit basis, our revenues increased approximately 22 percent, compared to second quarter last year, also an all-time quarterly record. Second quarter pretax margin (excluding special items) was 11 percent. Our second quarter 2010 earnings performance (excluding special items) was second-best in our history, behind second quarter 2006. This was, indeed, a strong performance, despite significantly higher fuel prices and other cost pressures.
“We have made excellent progress toward generating revenue levels sufficient to reach our 15 percent pretax return on invested capital target. Although business demand has not fully recovered, it has strengthened, and consumer travel demand is robust. We experienced record traffic levels during the quarter, despite flat year-over-year capacity, demonstrating a continuing and significant market share shift to Southwest, in part due to our unique and successful ‘Bags Fly Free’ policy. Further, we led the industry with our year-over-year domestic passenger revenue and corresponding unit revenue performance. It is, without question, our Employees who make it possible for Southwest to remain such a great Company, and I am very grateful for their hard work and steadfast delivery of outstanding Service to our Customers.
“After an array of revenue records set over the past three quarters, and based on current traffic and booking trends, an all-time record load factor is possible for July. We have built considerable, industry-leading revenue momentum that began in second half 2009. We see no signs that the momentum will stall in second half 2010. Based on traffic and revenue trends to date, we expect strong year-over-year unit revenue growth in third quarter 2010. Our year-over-year growth rates will face more and more difficult comparisons, of course, due to the rapid revenue recovery that began at Southwest a year ago. Each of the three years preceding 2009 experienced more normal seasonal trends and provide a better gauge of second half 2010 potential revenue health.”
Second quarter 2010 unit costs, excluding special items, increased 13.6 percent from second quarter 2009, largely due to a 32.4 percent increase in economic fuel costs to $2.37 per gallon. Second quarter 2010 economic fuel costs included $39 million in unfavorable cash settlements for fuel derivative contracts. As of July 26th, the Company had derivative contracts in place for approximately 55 percent of its estimated third quarter 2010 fuel consumption at varying crude-equivalent prices up to approximately $100 per barrel; approximately 30 percent if market prices settle in the $100 to $120 per barrel range; and approximately 45 percent if market prices exceed $120 per barrel. Based on this fuel hedge position and market prices (as of July 26th), the Company estimates economic fuel costs, including fuel taxes, for third quarter 2010 will be in the $2.40 per gallon range.
For fourth quarter 2010, the Company has derivative contracts in place for approximately 40 percent of its estimated fuel consumption at varying crude-equivalent prices up to approximately $95 per barrel; approximately 10 percent if market prices settle in the $95 to $120 per barrel range; and approximately 30 percent if market prices exceed $120 per barrel. The Company has derivative contracts in place for approximately 70 percent of its 2011 consumption at varying crude-equivalent prices up to approximately $95 per barrel; approximately 50 percent if market prices settle between $95 and $105 per barrel; and approximately 70 percent if market prices exceed $105 per barrel. Beyond 2011, the Company has coverage of approximately 60 percent of its estimated fuel consumption in 2012; approximately 50 percent in 2013; and approximately 45 percent in 2014 at varying price levels. The total market value (as of July 26th) of the Company's net fuel derivative contracts for the remainder of 2010 through 2014 reflects a net liability of approximately $227 million.
Excluding fuel, second quarter 2010 unit costs increased 6.4 percent from a year ago, which was a smaller increase than anticipated primarily due to lower advertising and an $18 million refund of excess security fees charged by the Transportation Security Administration since 2005. Based on current cost trends, the Company expects a similar year-over-year increase in its third quarter 2010 nonfuel unit costs as compared to third quarter 2009’s 7.11 cents, which excluded a charge related to the Company's 2009 early-out program.
“We are very pleased with the Customer response to our service to Panama City Beach, which commenced on May 24, 2010 with eight daily nonstop departures to four cities: Nashville, Houston Hobby, Orlando, and Baltimore/Washington,” stated Kelly. “During the quarter, we also celebrated the one-year anniversary of our successful introduction of the Southwest brand to the New York market out of LaGuardia, and we announced our intent to serve South Carolina with service to Charleston and Greenville-Spartanburg in 2011.
"Given the current economic outlook and trends, we continue to approach route expansion through optimizing our flight schedule rather than fleet growth. We remain committed to reaching our financial targets before we return to any significant level of fleet growth. For 2010, our capacity will remain essentially flat with last year. For 2011, we are estimating a modest year-over-year capacity increase with no fleet growth. Although it is too early to commit, at present, we have no plans to grow the fleet in 2012, either. We will continue to monitor trends for changes and are prepared to adjust our schedule, accordingly.”
The Company has updated its schedule to replace its 737 Classic fleet to improve its operational and economic efficiency and, accordingly, also updated its future firm orders and options with the Boeing Company with no net change to its fleet plans. The Boeing schedule revisions included conversion of six purchase rights to 2014 options, acceleration of three options (two from 2015 to 2013; one from 2016 to 2014), and exercise of 25 737-700 options for firm delivery in 2011 through 2016. In addition, the Company now has 98 purchase rights through 2021. Please refer to the revised delivery schedule included in this release for further information.
Southwest Airlines’ recent recognitions and honors include:
-- For the seventeenth year in a row, Southwest led the airline industry in
Customer Satisfaction according to the American Customer Satisfaction
Index.
-- Executive Travel Magazine and their 2010 Leading Edge Awards recently
honored Southwest by naming the Company the best North American Low Cost
Carrier for its outstanding Customer Service.
-- Southwest ranked seventh among the top ten companies in MSN Money’s
2010 Customer Service Hall of Fame.
-- For the second year in a row, City Business Journals Network named
Southwest the 2010 Grand Award winner in the travel category of the
seventh annual American Brand Excellence Awards.
-- Computerworld named Southwest one of the 100 Best Places to Work in IT
in 2010, a category which includes organizations that excel at providing
Employees with great opportunities and benefits while demonstrating
leadership through the use of information technology and strategic
vision to align technology with business goals.
-- Airfarewatchdog recently announced the results of its 2010 survey of
more than 2,100 savvy flyers, and Southwest Airlines ranked highest in
two categories, "Best Bang for Your Buck" and "Friendliest Flight
Attendants.”
Southwest will discuss its second quarter 2010 results on a conference call at 11:30 a.m. Eastern Time today. A live broadcast of the conference call will also be available at southwest.com/investor_relations.
Operating Results
Total operating revenues for second quarter 2010 increased 21.1 percent to $3.2 billion, compared to $2.6 billion for second quarter 2009. Total second quarter 2010 operating expenses were $2.8 billion, compared to $2.5 billion in second quarter 2009. Operating income for second quarter 2010 was $363 million, compared to $123 million in second quarter 2009. Excluding special items, operating income was $414 million in second quarter 2010, compared to $183 million for the same period last year. Second quarter 2010 operating margin was 11.5 percent, and excluding special items was 13.1 percent.
“Other expenses” were $179 million for second quarter 2010, compared to $16 million for second quarter 2009. The $163 million increase in total other expenses primarily resulted from $146 million in “other losses” recognized in second quarter 2010 versus $23 million in “other gains” recognized in second quarter 2009. In both periods, these “other (gains) losses” primarily resulted from unrealized gains/losses associated with the Company’s fuel hedging program. The cost of the hedging program (the premium costs of derivative contracts) is also included in "other (gains) losses”, and was $30 million in second quarter 2010 and $37 million in second quarter 2009. Second quarter 2010 interest expense decreased $5 million from second quarter 2009 primarily due to lower rates.
The second quarter 2010 effective tax rate was 39 percent compared to 15 percent for the same period last year. The second quarter 2009 tax rate was impacted by the Company’s projections for full year 2009 financial results and the related impact that permanent tax differences were expected to have on those projections.
Net cash provided by operations for first half 2010 was $913 million, and capital expenditures were $298 million, resulting in over $600 million in free cash flow. The Company expects to generate free cash flow for all of 2010, based on current trends and projected 2010 capital expenditures of less than $600 million. In addition to a fully available, unsecured, revolving credit facility of $600 million, as of July 26th, the Company had $3.4 billion in cash and short-term investments, which does not include $185 million in cash collateral held by its fuel hedge counterparties. The Company’s total fuel hedge collateral obligations, as of July 26th, also required approximately $165 million of aircraft collateral.
Total operating revenues for the six months ended June 30, 2010 increased 16.6 percent to $5.8 billion, while total operating expenses increased 9.8 percent to $5.4 billion, resulting in operating income in first half 2010 of $417 million, versus $73 million in first half 2009. Excluding special items in both periods, operating income for first half 2010 was $516 million, compared to $213 million for the same period last year. Net income for first half 2010 was $123 million, or $.17 per diluted share, compared to breakeven results for the same period last year. Excluding special items, net income for first half 2010 was $239 million, or $.32 per diluted share, compared to $38 million, or $.05 per diluted share, for the same period last year.
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Specific forward-looking statements include, without limitation, statements relating to (i) the Company’s financial and operating strategies and goals; (ii) its growth strategies and expectations, including fleet, route, and capacity plans; (iii) its plans for managing risk associated with changing jet fuel prices and related expectations; and (iv) its projected results of operations. These forward-looking statements are based on the Company's current intent, expectations, and projections and are not guarantees of future performance. These statements involve risks, uncertainties, assumptions, and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in or indicated by them. Factors include, among others, (i) changes in the price of aircraft fuel, the impact of hedge accounting, and any changes to the Company’s fuel hedging strategies and positions; (ii) economic uncertainty, which can impact the demand for air travel and related revenues; (iii) the impact of fuel prices and economic conditions on the Company’s overall business plan and strategies; (iv) actions of competitors, including without limitation pricing, scheduling, and capacity decisions, and consolidation and alliance activities; (v) the Company’s ability to timely and effectively implement, transition, and maintain the necessary information technology systems and infrastructure to support its operations and initiatives; (vi) the impact of governmental regulations on the Company’s operations; and (vii) other factors, as described in the Company's filings with the Securities and Exchange Commission, including the detailed factors discussed under the heading "Risk Factors" in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and under the heading “Forward-looking statements” in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.
SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(in millions, except per
share amounts)
(unaudited)
Three months ended Six months ended
June 30, June 30,
Percent Percent
2010 2009 Change 2010 2009 Change
OPERATING REVENUES:
Passenger $ 3,016 $ 2,506 20.4 $ 5,511 $ 4,758 15.8
Freight 33 29 13.8 63 58 8.6
Other 119 81 46.9 224 156 43.6
Total operating revenues 3,168 2,616 21.1 5,798 4,972 16.6
OPERATING EXPENSES:
Salaries, wages, and
benefits 946 863 9.6 1,810 1,699 6.5
Fuel and oil 933 726 28.5 1,754 1,423 23.3
Maintenance materials and
repairs 194 190 2.1 360 373 (3.5)
Aircraft rentals 45 47 (4.3) 92 93 (1.1)
Landing fees and other
rentals 206 179 15.1 396 345 14.8
Depreciation and
amortization 154 150 2.7 308 300 2.7
Other operating expenses 327 338 (3.3) 661 666 (0.8)
Total operating expenses 2,805 2,493 12.5 5,381 4,899 9.8
OPERATING INCOME 363 123 195.1 417 73 n.a.
OTHER EXPENSES (INCOME):
Interest expense 42 47 (10.6) 83 92 (9.8)
Capitalized interest (5) (5) - (10) (11) (9.1)
Interest income (4) (3) 33.3 (6) (8) (25.0)
Other (gains) losses, net 146 (23) n.a. 150 - n.a.
Total other expenses 179 16 n.a. 217 73 197.3
INCOME BEFORE INCOME TAXES 184 107 72.0 200 - n.a.
PROVISION FOR INCOME TAXES 72 16 n.a. 77 - n.a.
NET INCOME $ 112 $ 91 23.1 $ 123 $ - n.a.
NET INCOME PER SHARE:
Basic $ .15 $ .12 $ .17 $ -
Diluted $ .15 $ .12 $ .17 $ -
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 745 741 744 741
Diluted 746 741 745 741
SOUTHWEST AIRLINES CO.
RECONCILIATION OF REPORTED AMOUNTS TO NON-GAAP ITEMS
(SEE NOTE REGARDING USE OF NON-GAAP FINANCIAL MEASURES)
(in millions, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
Percent Percent
2010 2009 Change 2010 2009 Change
Fuel and oil expense -
unhedged $ 843 $ 607 $ 1,573 $ 1,158
Less: Fuel hedge losses
included in fuel and oil
expense 90 119 181 265
Fuel and oil expense - as
reported $ 933 $ 726 28.5 $ 1,754 $ 1,423 23.3
Add/(Deduct): Net impact
from fuel contracts (1) (51) (60) (99) (140)
Fuel and oil expense -
economic $ 882 $ 666 32.4 $ 1,655 $ 1,283 29.0
Operating income (loss), as
reported $ 363 $ 123 $ 417 $ 73
Add/(Deduct): Net impact
from fuel contracts (1) 51 60 99 140
Operating income - non-GAAP $ 414 $ 183 126.2 $ 516 $ 213 142.3
Operating margin - as
reported (2) 11.5% 4.7% 7.2% 1.5%
Add/(Deduct): Net impact
from fuel contracts 1.6% 2.3% 1.7% 2.8%
Operating margin - non-GAAP 13.1% 7.0% 6.1 pts 8.9% 4.3% 4.6 pts
Other losses, net, as
reported $ 146 $ (23) $ 150 $ -
Add/(Deduct): Net impact
from fuel contracts (1) (115) 63 (88) 73
Other losses, net, non-GAAP $ 31 $ 40 (22.5) $ 62 $ 73 (15.1)
Net income, as reported $ 112 $ 91 $ 123 $ -
Add/(Deduct): Net impact
from fuel contracts (1) 166 (3) 187 67
Income tax impact of fuel
contracts (62) (29) (71) (29)
Net income, non-GAAP $ 216 $ 59 266.1 $ 239 $ 38 528.9
Income before income taxes,
as reported $ 184 $ 107 $ 200 $ -
Add/(Deduct): Net impact
from fuel contracts (1) 166 (3) 187 67
Income before income taxes,
non-GAAP $ 350 $ 104 236.5 $ 387 $ 67 477.6
Pretax margin - as reported
(3) 5.8% 4.1% 3.4% 0.0%
Add/(Deduct): Net impact
from fuel contracts 5.2% (0.1)% 3.3% 1.3%
Pretax margin - non-GAAP 11.0% 4.0% 7.0 pts 6.7% 1.3% 5.4 pts
Net income per share,
diluted, as reported $ .15 $ .12 $ .17 $ -
Add/(Deduct): Net impact
from fuel contracts .14 (.04) .15 .05
Net income per share,
diluted, non-GAAP $ .29 $ .08 262.5 $ .32 $ .05 540.0
Operating expense per ASM
(cents) $ 11.01 $ 9.76 $ 11.19 $ 9.85
Deduct: Fuel expense
divided by ASMs (3.66) (2.85) (3.65) (2.86)
Operating expense per ASM,
excluding fuel (cents) $ 7.35 $ 6.91 6.4 $ 7.54 $ 6.99 7.9
(1) See Reconciliation of Impact from Fuel Contracts
(2) Operating income - as reported divided by Total operating revenues
(3) Income before income taxes - as reported divided by Total operating
revenues
SOUTHWEST AIRLINES CO.
RECONCILIATION OF IMPACT FROM FUEL CONTRACTS
(SEE NOTE REGARDING USE OF NON-GAAP FINANCIAL MEASURES)
(in millions)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2010 2009 2010 2009
Fuel & Oil Expense
Add/(Deduct): Reclassification between
Fuel & Oil and Other (gains)
losses, net, associated with current
period settled contracts $ 7 $ (2) $ 11 $ (23)
Add/(Deduct): Contracts settling in the
current period, but for which gains
and/or (losses) have been recognized in a
prior period* (58) (58) (110) (113)
Add/(Deduct): Contracts settling in a
prior period, but for which the
underlying hedged fuel has been consumed
in the current period - - - (4)
Impact from fuel contracts to Fuel & Oil
Expense $ (51) $ (60) $ (99) $ (140)
Operating Income
Add/(Deduct): Reclassification between
Fuel & Oil and Other (gains)
losses, net, associated with current
period settled contracts $ (7) $ 2 $ (11) $ 23
Add/(Deduct): Contracts settling in the
current period, but for which gains
and/or (losses) have been recognized in a
prior period* 58 58 110 113
Add/(Deduct): Contracts settling in a
prior period, but for which the
underlying hedged fuel has been consumed
in the current period - - - 4
Impact from fuel contracts to Operating
Income $ 51 $ 60 $ 99 $ 140
Other (gains) losses
Add/(Deduct): Mark-to-market impact from
fuel contracts
settling in future periods $ (57) $ 37 $ (31) $ 39
Add/(Deduct): Ineffectiveness from fuel
hedges settling in future periods (51) 24 (46) 11
Add/(Deduct): Reclassification between
Fuel & Oil and Other (gains)
losses, net, associated with current
period settled contracts (7) 2 (11) 23
Impact from fuel contracts to Other losses $ (115) $ 63 $ (88) $ 73
Net Income
Add/(Deduct): Mark-to-market impact from
fuel contracts
settling in future periods $ 57 $ (37) $ 31 $ (39)
Add/(Deduct): Ineffectiveness from fuel
hedges settling in future periods 51 (24) 46 (11)
Add/(Deduct): Other net impact of fuel
contracts settling in the
current or a prior period (excluding
reclassifications) 58 58 110 117
Impact from fuel contracts to Net income
** $ 166 $ (3) $ 187 $ 67
* As a result of prior hedge ineffectiveness and/or contracts marked to market
through earnings
** Excludes income tax impact of unrealized items
SOUTHWEST
AIRLINES CO.
COMPARATIVE
CONSOLIDATED
OPERATING
STATISTICS
(unaudited)
Three months ended Six months ended
June 30, June 30,
2010 2009 Change 2010 2009 Change
Revenue
passengers
carried 22,883,422 22,676,171 0.9 % 42,860,257 42,435,861 1.0 %
Enplaned
passengers 27,554,201 26,505,438 4.0 % 51,248,665 49,555,428 3.4 %
Revenue
passenger
miles (RPMs)
(000s) 20,206,229 19,683,479 2.7 % 37,367,943 36,575,108 2.2 %
Available
seat miles
(ASMs)
(000s) 25,471,845 25,552,927 (0.3)% 48,091,305 49,724,602 (3.3)%
Load factor 79.3% 77.0% 2.3 pts. 77.7% 73.6% 4.1 pts.
Average
length of
passenger
haul (miles) 883 868 1.7 % 872 862 1.2 %
Average
aircraft
stage length
(miles) 650 647 0.5 % 642 641 0.2 %
Trips flown 287,222 289,573 (0.8)% 549,114 568,708 (3.4)%
Average
passenger
fare $131.82 $110.52 19.3 % $128.60 $112.13 14.7 %
Passenger
revenue
yield per
RPM (cents) 14.93 12.73 17.3 % 14.75 13.01 13.4 %
Operating
revenue
yield per
ASM (cents) 12.44 10.24 21.5 % 12.06 10.00 20.6 %
CASM, GAAP
(cents) 11.01 9.76 12.8 % 11.19 9.85 13.6 %
CASM, GAAP
excluding
fuel (cents) 7.35 6.91 6.4 % 7.54 6.99 7.9 %
CASM,
excluding
special
items
(cents) 10.81 9.52 13.6 % 10.98 9.57 14.7 %
CASM,
excluding
fuel and
special
items
(cents) 7.35 6.91 6.4 % 7.54 6.99 7.9 %
Fuel costs
per gallon,
including
fuel tax
(unhedged) $2.26 $1.63 38.7 % $2.24 $1.60 40.0 %
Fuel costs
per gallon,
including
fuel tax
(GAAP) $2.50 $1.95 28.2 % $2.49 $1.97 26.4 %
Fuel costs
per gallon,
including
fuel tax
(economic) $2.37 $1.79 32.4 % $2.35 $1.77 32.8 %
Fuel
consumed, in
gallons
(millions) 372 371 0.3 % 701 721 (2.8)%
Active
fulltime
equivalent
Employees 34,636 35,296 (1.9)% 34,636 35,296 (1.9)%
Aircraft in
service at
period-end 544 543 0.2 % 544 543 0.2 %
CASM (unit
costs) -
Operating
expenses per
ASM
SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
(unaudited)
June 30, December 31,
2010 2009
ASSETS
Current assets:
Cash and cash equivalents $ 989 $ 1,114
Short-term investments 2,135 1,479
Accounts and other receivables 277 169
Inventories of parts and supplies, at cost 226 221
Deferred income taxes 252 291
Prepaid expenses and other current assets 92 84
Total current assets 3,971 3,358
Property and equipment, at cost:
Flight equipment 13,923 13,719
Ground property and equipment 2,024 1,922
Deposits on flight equipment purchase contracts 235 247
16,182 15,888
Less allowance for depreciation and amortization 5,555 5,254
10,627 10,634
Other assets 389 277
$ 14,987 $ 14,269
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 787 $ 732
Accrued liabilities 942 729
Air traffic liability 1,486 1,044
Current maturities of long-term debt 123 190
Total current liabilities 3,338 2,695
Long-term debt less current maturities 3,324 3,325
Deferred income taxes 2,192 2,200
Deferred gains from sale and leaseback of aircraft 95 102
Other noncurrent liabilities 490 493
Stockholders' equity:
Common stock 808 808
Capital in excess of par value 1,221 1,216
Retained earnings 5,075 4,971
Accumulated other comprehensive loss (641) (578)
Treasury stock, at cost (915) (963)
Total stockholders' equity 5,548 5,454
$ 14,987 $ 14,269
SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS
(in millions)
(unaudited)
Three months ended Six months ended
June 30, June 30,
2010 2009 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 112 $ 91 $ 123 $ -
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 154 150 308 300
Unrealized (gain) loss on fuel derivative
instruments 166 (3) 187 67
Deferred income taxes 63 16 75 (5)
Amortization of deferred gains on sale and
leaseback of aircraft (3) (4) (7) (7)
Changes in certain assets and liabilities:
Accounts and other receivables (42) (6) (108) (28)
Other current assets 5 (28) (14) (18)
Accounts payable and accrued liabilities 279 104 195 104
Air traffic liability 86 (43) 442 244
Cash collateral received from (provided
to) fuel
derivative counterparties 130 (125) 135 (185)
Other, net (410) (17) (423) (52)
Net cash provided by operating activities 540 135 913 420
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (159) (187) (298) (272)
Purchases of short-term investments (1,800) (1,394) (3,180) (3,090)
Proceeds from sales of short-term
investments 1,349 1,203 2,546 2,347
Other, net - 1 - 1
Net cash used in investing activities (610) (377) (932) (1,014)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt - 332 - 332
Proceeds from sale and leaseback
transactions - 208 - 381
Proceeds from Employee stock plans 23 4 35 8
Payments of long-term debt and capital
lease obligations (25) (7) (85) (41)
Payments of revolving credit facility - (400) - (400)
Payment of credit line borrowing (44) (91) (44) (91)
Payments of cash dividends (3) (3) (10) (10)
Other, net (2) - (2) (7)
Net cash provided by (used in) financing
activities (51) 43 (106) 172
NET DECREASE IN CASH AND CASH EQUIVALENTS (121) (199) (125) (422)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 1,110 1,145 1,114 1,368
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 989 $ 946 $ 989 $ 946
SOUTHWEST AIRLINES CO.
BOEING 737-700 DELIVERY SCHEDULE
AS OF JULY 28, 2010
PRIOR SCHEDULE
Purchase
Firm Options Rights Total
2010 10 10
2011 10 4 14
2012 13 10 23
2013 19 4 23
2014 13 7 20
2015 14 3 17
2016 12 11 23
2017 17 17
Through 2018 54 54
Total 91 56 54 201
CURRENT SCHEDULE
Purchase
Firm Options Rights Total
2010 10 10*
2011 14 14
2012 23 23
2013 19 6 25
2014 21 6 27
2015 14 1 15
2016 15 7 22
2017 17 17
Through 2021 98 98
Total 116 37 98 251
* Includes six aircraft delivered through July 28, 2010.
NOTE REGARDING USE OF NON-GAAP FINANCIAL MEASURES
The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). These GAAP financial statements include unrealized non-cash adjustments and reclassifications, which can be significant, as a result of accounting requirements and elections made under accounting pronouncements relating to derivative instruments and hedging.
The Company also provides financial information included in this press release that was not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP. The Company provides supplemental non-GAAP financial information that it sometimes refers to as “economic”, which the Company’s management utilizes to evaluate its ongoing financial performance and the Company believes provides greater transparency to investors as supplemental information to its GAAP results. The Company’s economic financial results differ from GAAP results in that they only include the actual cash settlements from fuel hedge contracts—all reflected within Fuel and oil expense in the period of settlement. Thus, Fuel and oil expense on an economic basis reflects the Company’s actual net cash outlays for Fuel during the applicable period, inclusive of settled fuel derivative contracts. Any net premium costs paid related to option contracts are reflected as a component of Other (gains) losses, net, for both GAAP and non-GAAP purposes. These economic results provide a better measure of the impact of the Company’s fuel hedges on its operating performance and liquidity since they exclude the unrealized, non-cash adjustments and reclassifications that are recorded in GAAP results in accordance with accounting pronouncements relating to derivative instruments and hedging, and they reflect all cash settlements related to fuel derivative contracts within Fuel and oil expense. This enables the Company’s management, as well as investors, to consistently assess its operating performance on a year-over-year or quarter-over-quarter basis after considering all programs in place to curtail fuel expense. However, because these measures are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, the aforementioned measures, as presented, may not be directly comparable to similarly titled measures presented by other companies.
Further information on (i) the Company’s fuel hedging program, (ii) the requirements and accounting associated with accounting for derivative instruments, and (iii) the causes of hedge ineffectiveness and/or mark-to-market gains or losses from derivative instruments is included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
SOURCE Southwest Airlines
Released July 29, 2010