EXHIBIT 99
Published on April 21, 2003
CONTACT: Investor Relations Public Relations
(214) 792-4415 (214) 792-4847
SOUTHWEST AIRLINES REPORTS FIRST QUARTER EARNINGS OF $24 MILLION;
DILUTED EARNINGS PER SHARE OF $.03
DALLAS, TEXAS -- April 21, 2003 -- Southwest Airlines' net income for
first quarter 2003 was $24 million, compared to first quarter 2002 net income
of $21 million, an increase of 14.3 percent. Diluted net income per share was
$.03 in both first quarter 2003 and first quarter 2002. These results were in
line with First Call's consensus estimate of $.03 for first quarter 2003.
Total operating revenues for first quarter 2003 increased 7.5 percent to
$1.35 billion, compared to $1.26 billion for first quarter 2002. Revenue
passenger miles (RPMs) increased 4.8 percent in first quarter 2003, compared to
a 5.3 percent increase in available seat miles (ASMs), resulting in a load
factor of 62.6 percent versus the first quarter 2002 load factor of 62.9
percent. The passenger revenue yield per RPM increased 2.6 percent to 11.99
cents from 11.69 cents in first quarter 2002. Operating revenue yield per ASM
increased 2.1 percent to 7.77 cents from 7.61 cents in first quarter 2002.
Operating expenses per ASM for first quarter 2003 increased 2.6 percent
to 7.50 cents from 7.31 cents in first quarter 2002, primarily due to higher
labor and jet fuel costs, net of hedging gains. The Company's hedging program
resulted in the recognition of approximately $77 million in gains during first
quarter 2003, of which $64 million was recorded in "Fuel and oil." The
remaining gains are included in "Other (gains) losses, net" in accordance with
Statement of Financial Accounting Standard No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS 133), as amended. Excluding fuel,
operating expenses per ASM for first quarter 2003 were 6.30 cents,
approximately the same as first quarter 2002.
James F. Parker, Vice Chairman and Chief Executive Officer, stated:
"Considering the current financial crisis of the airline industry and the
adverse effects world events continue to have on demand for air travel, we are
grateful to report a 14.3 percent increase in our first quarter 2003 earnings
to $24 million. This earnings performance marks our 48th consecutive quarterly
profit, which represents an enormous accomplishment for our Shareholders and
Shareholder-Employees.
"Although our financial performance has been exceptional relative to the
airline industry as a whole, Southwest, too, has been severely impacted by the
lingering effects of the 2001 terrorist attacks and the war in Iraq. Although
our revenues were showing signs of recovery during fourth quarter 2002 and into
first quarter 2003, those trends were disrupted.
"Since the war began, bookings for second quarter 2003 have softened
further. Currently, we expect only modest revenue growth, if any, compared to
last year's second quarter revenue of $1.47 billion, which included $36 million
in additional revenue related to a reduction in estimated refunds and exchanges
included in air traffic liability.
"On the cost side, we were able to mitigate significantly higher energy
costs by hedging 100 percent of our first quarter fuel requirements, saving
Southwest approximately $77 million pretax in first quarter of 2003. For second
quarter 2003, we are 100 percent hedged in the $24 per barrel range. We are 85
percent hedged for the second half of 2003 with caps under $24 per barrel. We
remain 80 percent hedged for 2004, with caps approximating $23 per barrel.
"Excluding fuel, we were pleased with our better than expected unit cost
performance. Although we continue to face certain cost challenges, our unit
cost growth was very modest, partly due to our Employees' disciplined cost
/more
reduction efforts. Based on first quarter 2003 costs, we expect modest year over
year unit cost growth again in second quarter of 2003.
"The Emergency Wartime Supplemental Appropriations Act ("Act") was
recently enacted. Among other items, the legislation includes a $2.3 billion
cash reimbursement for security fees remitted to the Transportation Security
Administration since the 2001 terrorist attacks. Southwest expects to receive
its proportional share during second quarter 2003.
"Although our revenue outlook remains uncertain, our costs remain under
control. As a consequence, and barring any unforeseen event, we expect to be
profitable in the second quarter of 2003. Given the current disruption in
revenue trends, however, and without consideration of funds received pursuant
to the Act, it will be difficult to match last year's second quarter profit of
$102 million, which included $36 million (pretax) related to a reduction in air
traffic liability.
"While many of our competitors have reduced their service due to the war
in Iraq, Southwest plans to grow our available seat mile capacity by roughly
four percent in 2003. In the course of cautiously growing our fleet, we
recently exercised options to acquire four more 737-700s in 2004. This change
brings our total firm orders to 25 and options to nine for 2004.
"Although we are not entirely out of the woods, we have, thus far,
effectively weathered the post-September 11 industry crisis for one reason -
the People of Southwest Airlines. We have the most dedicated, resilient, and
finest group of Employees in the airline industry. Their unity and longterm
vision allows us to produce great results in good times so that we can survive
even in the worst of times. As a result of our Employees' remarkable efforts
and unwavering Southwest Spirit, Southwest was named one of FORTUNE magazine's
most admired companies in America and topped the airline category for the
seventh consecutive year. Southwest was also recognized again in Business
Ethics magazine's listing of "100 Best Corporate Citizens" and HISPANIC
magazine's listing of the 2003 Hispanic Corporate 100. I am also pleased that
Southwest was named the "Best Low Cost Airline" at the 2003 Official Airline
Guide Airline of the Year awards and selected by Air Transport World magazine
as its "Airline of the Year" for 2003. Congratulations to each and every
Southwest Employee for these wonderful accomplishments - you are indeed the very
best!"
Net cash provided by operations was $267 million and capital expenditures
were $193 million for first quarter 2003. We ended first quarter 2003 with
$1.89 billion cash on hand plus our available unsecured revolving credit line
of $575 million.
Southwest Airlines will conduct a conference call to discuss its
quarterly earnings today at 10:30 a.m. Eastern Time. A live broadcast of the
conference call will be available via the World Wide Web at www.southwest.com.
This news release contains forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995. All forward-looking
statements involve risks and uncertainties that could cause actual results to
differ materially from the plans, intentions, and expectations reflected in or
suggested by the forward-looking statements. Additional information concerning
the factors which could cause actual results to differ materially from the
forward-looking statements are contained in the Company's periodic filings with
the Securities and Exchange Commission, including without limitation, the
Company's Annual Report on Form 10-K for the year ended 2002. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements to reflect events or circumstances that may arise after the date of
this press release.
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SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in millions except per share amounts)
(unaudited)
Three months ended
March 31,
Percent
2003 2002 Change
OPERATING REVENUES:
Passenger $1,306 $1,215 7.5
Freight 22 21 4.8
Other 23 21 9.5
Total operating revenues 1,351 1,257 7.5
OPERATING EXPENSES:
Salaries, wages, and benefits 516 462 11.7
Fuel and oil 208 170 22.4
Maintenance materials and repairs 106 97 9.3
Agency commissions 12 14 (14.3)
Aircraft rentals 45 47 (4.3)
Landing fees and other rentals 90 83 8.4
Depreciation 93 85 9.4
Other operating expenses 235 250 (6.0)
Total operating expenses 1,305 1,208 8.0
OPERATING INCOME 46 49 (6.1)
OTHER EXPENSES (INCOME):
Interest expense 26 26 0.0
Capitalized interest (7) (4) 75.0
Interest income (5) (10) (50.0)
Other (gains) losses, net (7) 2 n.a.
Total other expenses (income) 7 14 n.a.
INCOME BEFORE INCOME TAXES 39 35 11.4
PROVISION FOR INCOME TAXES 15 14 7.1
NET INCOME $24 $21 14.3
NET INCOME PER SHARE:
Basic $ .03 $ .03
Diluted $ .03 $ .03
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 778 769
Diluted 808 811
SOUTHWEST AIRLINES CO.
COMPARATIVE CONSOLIDATED OPERATING STATISTICS
(unaudited)
Three months ended
March 31,
2003 2002 Change
Revenue passengers carried 15,077,537 14,463,282 4.2 %
Revenue passenger miles (RPMs) (000s) 10,895,701 10,392,590 4.8 %
Available seat miles (ASMs) (000s) 17,399,132 16,519,957 5.3 %
Load factor 62.6% 62.9% (0.3) pts.
Average length of passenger haul 723 719 0.6 %
Trips flown 233,087 231,195 0.8 %
Average passenger fare $86.64 $83.99 3.2 %
Passenger revenue yield per RPM (cents) 11.99 11.69 2.6 %
Operating revenue yield per ASM (cents) 7.77 7.61 2.1 %
Operating expenses per ASM (cents) 7.50 7.31 2.6 %
Operating expenses per ASM,
excluding fuel (cents) 6.30 6.28 0.3 %
Fuel costs per gallon,
excluding fuel tax (cents) 74.8 63.3 18.2 %
Fuel consumed, in gallons (millions) 277 268 3.4 %
Number of Employees at period-end 33,140 32,244 2.8 %
Size of fleet at period-end 377 359 5.0 %
SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
(unaudited)
March 31, December 31,
2003 2002
ASSETS
Current assets:
Cash and cash equivalents $1,889 $1,816
Accounts and other receivables 159 174
Inventories of parts and
supplies, at cost 95 86
Fuel hedge contracts 97 113
Prepaid expenses and other
current assets 36 43
Total current assets 2,276 2,232
Property and equipment, at cost:
Flight equipment 8,110 8,025
Ground property and equipment 1,062 1,042
Deposits on flight equipment
purchase contracts 468 389
Property & Equipment 9,640 9,456
Less allowance for depreciation 2,906 2,810
Property & Equipment
(less: Allow for Depr) 6,734 6,646
Other assets 94 76
Assets $9,104 $8,954
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $367 $362
Accrued liabilities 514 529
Air traffic liability 535 412
Current maturities of long-term debt 132 131
Total current liabilities 1,548 1,434
Long-term debt less current maturities 1,547 1,553
Deferred income taxes 1,243 1,227
Deferred gains from sale and
leaseback of aircraft 180 184
Other deferred liabilities 127 134
Stockholders' equity:
Common stock 778 777
Capital in excess of par value 146 136
Retained earnings 3,476 3,455
Accumulated other comprehensive income 59 54
Total stockholders' equity 4,459 4,422
Liabilities & Stockholders' Equity $9,104 $8,954
SOUTHWEST AIRLINES CO.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
Three months ended
March 31,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $24 $21
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation 93 85
Deferred income taxes 12 14
Amortization of deferred gains on sale and
leaseback of aircraft (4) (4)
Amortization of scheduled airframe
inspections & repairs 12 11
Changes in certain assets and liabilities:
Accounts and other receivables 16 (62)
Other current assets (1) 17
Accounts payable and accrued liabilities (7) (86)
Air traffic liability 123 111
Other (1) (14)
Net cash provided by operating activities 267 93
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (193) (109)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt - 385
Proceeds from trust arrangement - 59
Proceeds from Employee stock plans 12 20
Payments of long-term debt and capital
lease obligations (6) (5)
Payment of trust arrangement - (123)
Payment of revolving credit facility - (475)
Payments of cash dividends (7) (7)
Other, net 1 (4)
Net cash used in financing activities - (150)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 74 (166)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,815 2,280
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,889 $2,114
Southwest Airlines Co.
Boeing 737-700 Delivery Schedule
Prior Schedule Current Schedule
Firm Options* Firm Options*
2003** 17 - 17 -
2004 21 13 25 9
2005 24 18 24 18
2006 22 16 22 16
2007 25 29 25 29
2008 6 45 6 45
2009-2012 - 177 - 177
Total 115 298 119 294
*Includes purchase rights
**Includes two aircraft delivered in first quarter 2003