Southwest Airlines Reports Fourth Quarter Profit and 37th Consecutive Year of Profitability
DALLAS, Jan. 21 /PRNewswire-FirstCall/ -- Southwest Airlines (NYSE: LUV) today reported its fourth quarter and full year 2009 results. Net income for fourth quarter 2009 was $116 million, or $.16 per diluted share, compared to a net loss of $56 million, or $.08 loss per diluted share, for fourth quarter 2008. Fourth quarter 2009 results included special items (net of profitsharing and taxes) of $42 million, related to non-cash, mark-to-market gains and other items associated with a portion of the Company’s fuel hedge portfolio. Excluding special items for both years, fourth quarter 2009 net income was $74 million, or $.10 per diluted share, compared to $61 million, or $.08 per diluted share, in fourth quarter 2008. The fourth quarter 2009 results, excluding special items, of $.10 per diluted share exceeded Thomson's First Call mean estimate of $.07 per diluted share. Additional information regarding special items is included in this release and in the accompanying reconciliation tables.
For the full year 2009, net income was $99 million, or $.13 per diluted share, compared to $178 million, or $.24 per diluted share, for full year 2008. Full year 2009 results included special items (net of profitsharing and taxes) consisting of a $35 million charge recorded in third quarter 2009, relating to the Company's voluntary early-out program and a net loss of $9 million, relating 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 years, full year 2009 net income was $143 million, or $.19 per diluted share, compared to $294 million, or $.40 per diluted share, for full year 2008.
Gary C. Kelly, CEO, stated: “In what has been, perhaps, the most difficult revenue environment the airline industry has ever faced, we are extremely proud to report our 2009 earnings, which represents our 37th consecutive year of profitability. To report any profit in these times is a major accomplishment, and I could not be more proud of our Employees who worked so hard to finish the year strong with a fourth quarter and full year profit. Our People responded swiftly and successfully to the dramatic fall-off in demand for business travel precipitated by the recession. We introduced and implemented new products, programs, and processes, some that were unplanned at the start of last year, to drive revenues and enhance our already strong Brand and Customer Experience. We made significant advancements in our revenue management and network optimization capabilities; opened four new cities; introduced EarlyBird Check-in; implemented changes to our Unaccompanied Minor program; introduced our Pets Are Welcome on Southwest product; introduced the initial phases of a new and improved southwest.com; and made major advancements in our core technology to support future Rapid Rewards program upgrades and international codesharing.
"With our successful Bags Fly Free program and every day low fares, we bring tremendous value to our Customers. We estimate our share of the domestic market rose at least one percent in 2009, despite offering fewer seats in 2009. Our monthly load factors have been at record levels since July 2009, beating long-standing records, and our unit revenue trends continue to significantly outperform the industry, with a fourth quarter year-over-year increase of 7.4 percent. Despite record load factors, we had an exceptional year of operations, delivering superb Customer Service. According to the most current statistics published by the U.S. Department of Transportation, we consistently rank at the top for Customer Satisfaction for having the lowest Customer complaint ratio. During 2009, we also achieved among the highest marks for our Ontime Performance, and we had fewer flight cancellations than 2008's outstanding performance, canceling less than one percent of all flights scheduled. In addition, our mishandled baggage numbers improved dramatically in 2009 and are among the best in our history. With strong revenue and booking trends continuing thus far into 2010, we expect another year-over-year increase in unit revenue for first quarter 2010.
"While we will continue our disciplined route strategy, and currently do not have plans to grow capacity in 2010, we were still able to expand our cities served in 2009 without adding aircraft due to our successful route optimization efforts. Minneapolis/St. Paul, New York LaGuardia, Boston Logan, and Milwaukee are all 2009 additions and off to a great start, and we continue to grow important existing markets like St. Louis and Denver. We are excited to announce today that we will be adding four additional flights to/from Denver beginning on June 13. The new service includes one additional flight to each of the following four markets that we already serve from Denver: Ft. Lauderdale, Boise, Ontario, and Houston Hobby. We are pleased with the results of our expansion efforts and look forward to expanding into Panama City Beach, Florida in May 2010.
“While fuel prices remain high, fourth quarter 2009 economic fuel costs decreased 3.1 percent year-over-year to $2.20 per gallon, including taxes, even with approximately $42 million in unfavorable cash settlements from derivative contracts. Excluding fuel and special items, our fourth quarter 2009 unit costs increased 8.6 percent from the same period a year ago, as expected, largely due to a 7.7 percent decline in fourth quarter year-over-year capacity. Based on current cost trends and an estimated five to six percent decline in first quarter year-over-year capacity, we anticipate first quarter 2010 unit costs, excluding fuel, will exceed fourth quarter 2009’s 7.45 cents. With cost pressures associated with no available seat mile growth for the full year 2010, we will increase our focus on productivity to protect our low cost advantage and Low Fare Brand.
“We continue to actively manage our fuel hedge portfolio and related program costs in this volatile fuel environment, and we recently restructured our 2010 fuel hedging positions, which provides insurance against fuel cost increases in this uncertain time. We currently have derivative contracts in place for approximately 50 percent of our estimated 2010 fuel consumption at prices up to approximately $100 per barrel. We recently sold call options, which decreased our protection to effectively 20 percent of estimated consumption if market prices settle in the $100 to $120 per barrel range. We added another layer of purchased call options to increase our protection to approximately 40 percent of estimated consumption if market prices exceed $120 per barrel. Based on our current 2010 fuel hedge position and market prices (as of January 20, 2010), the estimated economic fuel costs, including fuel taxes, for first quarter is approximately $2.35 per gallon. With the recent modifications to our hedge portfolio, we have lowered our first quarter 2010 expected hedging premium costs (included in "Other (gains) losses, net") to approximately $30 million, which is $15 million lower than the premium costs incurred in fourth quarter 2009.
“There is no doubt 2010 will be another challenging year. Thus far, the economic recovery is tepid, and we expect record high hedged jet fuel prices for the Company, given the current market and our hedge position. With the significant actions we have taken to grow revenues, strengthen liquidity, manage our fuel hedge portfolio, and enhance productivity, combined with our powerful Low Fare Brand and value proposition position, we believe we are well prepared for another challenging year. There is also no doubt, in my mind, our People did an extraordinary job in aggressively adjusting to a rapidly deteriorating demand environment. To produce a profit, without sacrificing our Culture or our Customer Service, was truly remarkable. While it was our 37th consecutive year of profits, it was also our 39th consecutive year of job security. Not surprisingly, others noticed as there were numerous recognitions and honors the Company received throughout the year."
2009 recognitions and honors include:
-- Named the seventh most admired Company in FORTUNE magazine’s ranking
of the 50 Most Admired Companies in the World; the only U.S. airline to
make the list and the 13th consecutive year that Southwest has been
named to the Most Admired List
-- Named the top U.S. airline on the University of Michigan’s American
Customer Satisfaction Index (ACSI)
-- Ranked among the top ten companies in MSN Money’s Customer Service
Hall of Fame
-- Recognized as Favorite Domestic Airline and ranked number one in Best
Customer Service, Best Airfare Prices, Best On-Time Service, Best
Baggage Service, and Best Value Frequent Flier Program, among others, in
the 2009 Reader’s Choice Awards by Smarter Travel
-- Topped the list of the 50 best U.S. places to work by Glassdoor.com
-- Recognized as the Best Domestic Value and having the Best Luggage Policy
and Top Website in the 2009 Airline Survey conducted by Zagat
-- Named Best Domestic Airline, Best Domestic Airline Customer Service, and
Best Low Cost Carrier by Executive Travel magazine’s 2009 Leading Edge
Awards
-- Named Best Low Cost/No Frills Airline in the 2009 OAG Airline Industry
Awards
-- Southwest Airlines’ Rapid Rewards program was again honored in
InsideFlyer magazine’s 2009 Annual Freddie Awards for Best Award
Redemption, a distinction awarded to Southwest every year since the
category was introduced in 1998
-- Included in BusinessWeek’s ranking of the 50 Most Innovative Companies
in the World
-- Ranked by Institutional Investor Magazine as America’s Most
Shareholder Friendly Company in the consumer-airlines segment
-- Ranked in the top 200 and highest among airlines in the Newsweek Green
Ranking of the 500 largest publicly traded companies in the U.S.
-- For the third year in a row, NutsAboutSouthwest.com took home the honor
of “Best Blog” at the PR News Platinum Awards
Southwest will discuss its fourth quarter 2009 results on a conference call at 11:30 a.m. Eastern Time today. A live broadcast of the conference call will be available at http://www.southwest.com/?src=INVRINV4QER000000100121.
Operating Results
Total operating revenues for fourth quarter 2009 decreased 0.8 percent to $2.7 billion compared to fourth quarter 2008, while total operating expenses decreased 4.5 percent to $2.5 billion. Operating income for fourth quarter 2009 was $167 million, compared to operating income of $70 million in fourth quarter 2008. Excluding special items, operating income increased 32.0 percent in fourth quarter 2009 to $198 million, compared to $150 million in fourth quarter 2008.
Operating revenues for the year ended December 31, 2009, decreased 6.1 percent from 2008 to $10.4 billion, while operating expenses decreased 4.6 percent to $10.1 billion. Operating income for 2009 was $262 million, compared to $449 million last year. Excluding special items, operating income for 2009 was $540 million, a decrease of 15.1 percent compared to last year.
"Other expenses" were $98 million for the year ended December 31, 2009, compared to $171 million for the same period in 2008. This $73 million decrease in “Other expenses” primarily resulted from a $146 million favorable swing in other (gains) losses partially offset by a $56 million increase in interest expense from financing transactions the Company completed in late 2008 and during 2009. “Other gains” of $54 million were recognized in 2009, compared to $92 million in “other losses” in 2008. In both periods, these “other (gains) losses” primarily resulted from unrealized gains/losses associated with fuel derivatives. The cost of the Company’s hedging program (the premium costs of derivative contracts) was $148 million in 2009 and $69 million in 2008, which is also included in "other (gains) losses”. Interest income also decreased by $13 million versus the prior year primarily due to lower market interest rates and lower rates earned from more conservative investments. Lower Boeing aircraft progress payments also generated less capitalized interest in 2009 compared to the prior year.
The full year 2009 income tax rate was approximately 40 percent compared to a rate of 36 percent for full year 2008. The 2008 rate reflects a $12 million benefit related to a change in Illinois state income tax laws.
Net cash provided by operations for 2009 was $985 million, substantially driven by the $99 million in net income and $616 million in non-cash depreciation and amortization expense. Capital expenditures for 2009 were $585 million. During 2009, the Company completed several financing transactions to significantly boost its liquidity, including $381 million from the sale and leaseback of eleven 737-700 aircraft and $455 million in proceeds from secured term loan agreements. The Company repaid $183 million in debt during 2009 and has $190 million in current maturities of long-term debt in 2010, of which $75 million is expected to be repaid by tendering certain investments held in auction rate securities. During 2009, the Company also repaid the $400 million it had borrowed during 2008 under its revolving credit agreement. In addition to a fully available, unsecured, revolving credit facility of $600 million, as of yesterday, the Company had approximately $2.4 billion in cash and short-term investments, which excludes $335 million in cash collateral held by its fuel hedge counterparties.
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 growth plans and operating strategies and related expectations; (ii) its initiatives to control costs; (iii) its fleet plans; and (iv) its expectations regarding future 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) the price and availability of aircraft fuel, the impact of hedge accounting, and any changes to the Company’s strategies for addressing fuel price volatility; (ii) continued economic uncertainty, which could continue to impact the demand for air travel; (iii) the impact of fuel prices and economic conditions on the Company’s overall business plan and strategies; (iv) competitor capacity decisions; and (v) 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, 2008, and under the heading “Forward-looking statements” in the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009, June 30, 2009, and September 30, 2009.
SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
Three months ended Year ended
December 31, December 31,
Percent Percent
2009 2008 Change 2009 2008 Change
OPERATING REVENUES:
Passenger $2,584 $2,622 (1.4) $9,892 $10,549 (6.2)
Freight 31 37 (16.2) 118 145 (18.6)
Other 97 75 29.3 340 329 3.3
Total operating revenues 2,712 2,734 (0.8) 10,350 11,023 (6.1)
OPERATING EXPENSES:
Salaries, wages, and
benefits 861 846 1.8 3,468 3,340 3.8
Fuel and oil 794 918 (13.5) 3,044 3,713 (18.0)
Maintenance materials and
repairs 162 198 (18.2) 719 721 (0.3)
Aircraft rentals 46 39 17.9 186 154 20.8
Landing fees and other
rentals 182 165 10.3 718 662 8.5
Depreciation and
amortization 154 154 - 616 599 2.8
Other operating expenses 346 344 0.6 1,337 1,385 (3.5)
Total operating expenses 2,545 2,664 (4.5) 10,088 10,574 (4.6)
OPERATING INCOME 167 70 138.6 262 449 (41.6)
OTHER EXPENSES (INCOME):
Interest expense 46 34 35.3 186 130 43.1
Capitalized interest (5) (5) - (21) (25) (16.0)
Interest income (3) (7) (57.1) (13) (26) (50.0)
Other (gains) losses, net (56) 131 n.a. (54) 92 n.a.
Total other expenses
(income) (18) 153 n.a. 98 171 n.a.
INCOME (LOSS) BEFORE INCOME
TAXES 185 (83) n.a. 164 278 (41.0)
PROVISION (BENEFIT) FOR
INCOME TAXES 69 (27) n.a. 65 100 (35.0)
NET INCOME (LOSS) $116 $ (56) n.a. $99 $178 (44.4)
NET INCOME (LOSS) PER SHARE:
Basic $.16 $(.08) $.13 $.24
Diluted $.16 $(.08) $.13 $.24
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 742 740 741 735
Diluted 742 740 741 739
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 Year Ended
December 31, December 31,
Percent Percent
2009 2008 Change 2009 2008 Change
Fuel and oil expense -
unhedged $721 $870 $2,577 $4,819
Less: Fuel hedge (gains)
losses included in fuel and
oil expense 73 48 467 (1,106)
Fuel and oil expense - GAAP $794 $918 (13.5) $3,044 $3,713 (18.0)
Add/(Deduct): Net impact
from fuel contracts (1) (31) (80) (222) (187)
Fuel and oil expense -
economic $763 $838 (8.9) $2,822 $3,526 (20.0)
Operating income, as
reported $167 $70 $262 $449
Add/(Deduct): Net impact
from fuel contracts (1) 31 80 222 187
Operating income - economic $198 $150 $484 $636
Add: Charge from voluntary
early-out program, net - - 56 -
Operating income, non-GAAP $198 $150 32.0 $540 $636 (15.1)
Other (gains) losses, net,
as reported $ (56) $131 $ (54) $92
Add/(Deduct): Net impact
from fuel contracts (1) 96 (110) 208 (19)
Other losses, net, non-GAAP $40 $21 90.5 $154 $73 111.0
Net income (loss), as
reported $116 $ (56) $99 $178
Add/(Deduct): Net impact
from fuel contracts (1) (65) 190 14 206
Income tax impact of fuel
contracts 23 (73) (5) (78)
$74 $61 $108 $306
Add: Charge from voluntary
early-out program, net - - 35 -
Add (Deduct): Change in
Illinois state income tax
law, net - - - (12)
Net income, non-GAAP $74 $61 21.3 $143 $294 (51.4)
Net income (loss) per share,
diluted, as reported $.16 $ (.08) $.13 $.24
Add/(Deduct): Net impact
from fuel contracts (.06) .16 .02 .17
$.10 $.08 $.15 $.41
Add: Impact of special
items, net - - .04 (.01)
Net income per share,
diluted, non-GAAP $.10 $.08 25.0 $.19 $.40 (52.5)
(1) See Reconciliation of Impact from Fuel Contracts
SOUTHWEST AIRLINES CO.
RECONCILIATION OF IMPACT FROM FUEL CONTRACTS (SEE NOTE REGARDING USE OF
NON-GAAP FINANCIAL MEASURES)
(in millions)
(unaudited)
Three Months Ended Year Ended
December 31, December 31,
2009 2008 2009 2008
Fuel & Oil Expense
Add/(Deduct): Reclassification between
Fuel & Oil and Other (gains)
losses, net, associated with current
period settled contracts $ (3) $ (3) $ (38) $ (80)
Add/(Deduct): Contracts settling in the
current period, but for which gains
and/or (losses) have been recognized in a
prior period* (27) (80) (181) (141)
Add/(Deduct): Contracts settling in the
current period, but for which the
underlying hedged fuel has not yet been
consumed - 3 - 3
Add/(Deduct): Contracts settling in a
prior period, but for which the
underlying hedged fuel has been consumed
in the current period (1) - (3) 31
Impact from fuel contracts to Fuel & Oil
Expense $ (31) $ (80) $ (222) $ (187)
Operating Income
Add/(Deduct): Reclassification between
Fuel & Oil and Other (gains)
losses, net, associated with current
period settled contracts $3 $3 $38 $80
Add/(Deduct): Contracts settling in the
current period, but for which gains
and/or (losses) have been recognized in a
prior period* 27 80 181 141
Add/(Deduct): Contracts settling in the
current period, but for which the
underlying hedged fuel has not yet been
consumed - (3) - (3)
Add/(Deduct): Contracts settling in a
prior period, but for which the
underlying hedged fuel has been consumed
in the current period 1 - 3 (31)
Impact from fuel contracts to Operating
Income $31 $80 $222 $187
Other (gains) losses
Add/(Deduct): Mark-to-market impact from
fuel contracts
settling in future periods $56 $ (51) $73 $7
Add/(Deduct): Ineffectiveness from fuel
hedges settling in future periods 37 (62) 97 (106)
Add/(Deduct): Reclassification between
Fuel & Oil and Other (gains)
losses, net, associated with current
period settled contracts 3 3 38 80
Impact from fuel contracts to Other
(gains) losses $96 $ (110) $208 $ (19)
Net Income
Add/(Deduct): Mark-to-market impact from
fuel contracts
settling in future periods $ (56) $51 $ (73) $ (7)
Add/(Deduct): Ineffectiveness from fuel
hedges settling in future periods (37) 62 (97) 106
Add/(Deduct): Other net impact of fuel
contracts settling in the
current or a prior period (excluding
reclassifications) 28 77 184 107
Impact from fuel contracts to Net income
** $ (65) $190 $14 $206
* 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 Year ended
December 31, December 31,
2009 2008 Change 2009 2008 Change
Revenue
passengers
carried 21,498,778 20,788,058 3.4 % 86,310,229 88,529,234 (2.5)%
Enplaned
passengers 25,386,440 23,974,845 5.9 % 101,338,228 101,920,598 (0.6)%
Revenue
passenger
miles
(RPMs)
(000s) 18,175,024 17,265,177 5.3 % 74,456,710 73,491,687 1.3 %
Available
seat miles
(ASMs)
(000s) 23,505,932 25,455,786 (7.7)% 98,001,550 103,271,343 (5.1)%
Load
factor 77.3% 67.8% 9.5 pts. 76.0% 71.2% 4.8 pts.
Average
length of
passenger
haul
(miles) 845 831 1.7 % 863 830 4.0 %
Average
aircraft
stage
length
(miles) 632 638 (0.9)% 639 636 0.5 %
Trips
flown 272,740 292,392 (6.7)% 1,125,111 1,191,151 (5.5)%
Average
passenger
fare $120.21 $126.12 (4.7)% $114.61 $119.16 (3.8)%
Passenger
revenue
yield per
RPM
(cents) 14.22 15.19 (6.4)% 13.29 14.35 (7.4)%
Operating
revenue
yield per
ASM
(cents) 11.54 10.74 7.4 % 10.56 10.67 (1.0)%
CASM, GAAP
(cents) 10.83 10.47 3.4 % 10.29 10.24 0.5 %
CASM, GAAP
excluding
fuel
(cents) 7.45 6.86 8.6 % 7.19 6.64 8.3 %
CASM,
excluding
special
items
(cents) 10.70 10.15 5.4 % 10.01 10.06 (0.5)%
CASM,
excluding
fuel and
special
items
(cents) 7.45 6.86 8.6 % 7.13 6.64 7.4 %
Fuel costs
per
gallon,
including
fuel tax
(unhedged) $2.08 $2.36 (11.9)% $1.80 $3.18 (43.4)%
Fuel costs
per
gallon,
including
fuel tax
(GAAP) $2.29 $2.49 (8.0)% $2.12 $2.44 (13.1)%
Fuel costs
per
gallon,
including
fuel tax
(economic) $2.20 $2.27 (3.1)% $1.97 $2.32 (15.1)%
Fuel
consumed,
in gallons
(millions) 345 368 (6.3)% 1,428 1,511 (5.5)%
Fulltime
equivalent
Employees
at
period-end
* 34,726 35,506 (2.2)% 34,726 35,506 (2.2)%
Aircraft
in service
at
period-end 537 537 - 537 537 -
CASM (unit costs) - Operating expenses per ASM
RASM (unit revenue) - Operating revenue yield per ASM
* Headcount is defined as "Active" fulltime equivalent Employees for both
periods presented.
SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
(unaudited)
December 31, December 31,
2009 2008
ASSETS
Current assets:
Cash and cash equivalents $1,114 $1,368
Short-term investments 1,479 435
Accounts and other receivables 169 209
Inventories of parts and supplies, at cost 221 203
Deferred income taxes 291 365
Prepaid expenses and other current assets 84 73
Total current assets 3,358 2,653
Property and equipment, at cost:
Flight equipment 13,719 13,722
Ground property and equipment 1,922 1,769
Deposits on flight equipment purchase contracts 247 380
15,888 15,871
Less allowance for depreciation and amortization 5,254 4,831
10,634 11,040
Other assets 277 375
$14,269 $14,068
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $746 $668
Accrued liabilities 696 1,012
Air traffic liability 1,044 963
Current maturities of long-term debt 190 163
Total current liabilities 2,676 2,806
Long-term debt less current maturities 3,325 3,498
Deferred income taxes 2,207 1,904
Deferred gains from sale and leaseback of aircraft 102 105
Other noncurrent liabilities 493 802
Stockholders' equity:
Common stock 808 808
Capital in excess of par value 1,216 1,215
Retained earnings 4,983 4,919
Accumulated other comprehensive loss (578) (984)
Treasury stock, at cost (963) (1,005)
Total stockholders' equity 5,466 4,953
$14,269 $14,068
SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
Three months ended Year ended
December 31, December 31,
2009 2008 2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $116 $ (56) $99 $178
Adjustments to reconcile net income
(loss) to
cash provided by operating activities:
Depreciation and amortization 154 154 616 599
Unrealized (gain) loss on fuel derivative
instruments (65) 190 14 206
Deferred income taxes 69 (25) 72 56
Amortization of deferred gains on sale
and
leaseback of aircraft (1) (3) (12) (12)
Share-based compensation expense 3 5 13 18
Excess tax benefits (obligations) from
share-based
compensation arrangements 4 - (1) -
Changes in certain assets and
liabilities:
Accounts and other receivables 56 176 40 71
Other current assets (20) 78 (27) (21)
Accounts payable and accrued liabilities 101 (53) 59 (98)
Air traffic liability (170) (312) 81 32
Cash collateral received from (provided
to) fuel
derivative counterparties 95 (2,735) (90) (2,240)
Other, net 150 49 121 (310)
Net cash provided by (used in) operating
activities 492 (2,532) 985 (1,521)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (115) (158) (585) (923)
Purchases of short-term investments (1,308) (1,645) (6,106) (5,886)
Proceeds from sales of short-term
investments 1,165 2,260 5,120 5,831
Other, net - - 2 -
Net cash provided by (used in) investing
activities (258) 457 (1,569) (978)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt - 400 455 1,000
Proceeds from credit line borrowing - 91 83 91
Proceeds from Revolving credit facility - 400 - 400
Proceeds from sale and leaseback
transactions - 173 381 173
Proceeds from Employee stock plans 9 3 20 117
Payments of long-term debt and capital
lease obligations (22) (14) (86) (55)
Payments of revolving credit facility - - (400) -
Payment of credit line borrowing (7) - (97) -
Payments of cash dividends - - (13) (13)
Repurchase of common stock - - - (54)
Excess tax benefits (obligations) from
share-based
compensation arrangements (4) - 1 -
Other, net 2 - (14) (5)
Net cash provided by (used in) financing
activities (22) 1,053 330 1,654
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 212 (1,022) (254) (845)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 902 2,390 1,368 2,213
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $1,114 $1,368 $1,114 $1,368
SOUTHWEST AIRLINES CO.
BOEING 737-700 DELIVERY SCHEDULE
AS OF JANUARY 20, 2010
Purchase
Firm Options Rights Total
2010 10 10
2011 10 7 17
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 59 54 204
NOTE REGARDING USE OF NON-GAAP FINANCIAL MEASURES
The Company's financial statements are prepared in accordance with Generally Accepted Accounting Principles (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 Standards Codification Topic 815 (ASC 815, originally issued as SFAS 133).
As a result, 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 has termed "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 ASC 815, 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 ASC 815, 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, 2008.
In addition to its 'economic' financial measures as defined above, the Company has also provided other non-GAAP financial measures as a result of non-recurring items that the Company believes are not indicative of its ongoing operations. These include 1) charges associated with Freedom '09, an early retirement option offered to Employees resulting in a one-time third quarter 2009 charge, and 2) an adjustment to the Company's first quarter 2008 income tax provision due to a change in Illinois State income tax laws. The Company also believes that evaluation of its financial performance can be enhanced by a presentation of results that exclude the impact of these non-recurring items in order to evaluate results on a comparative basis with results in the current or prior periods that did not include such items and as a basis for expected operating results in future periods.
SOURCE Southwest Airlines
Released January 21, 2010