EXHIBIT 99.1 2ND QUARTER 2007 FINANCIAL RESULTS
Published on July 18, 2007
Exhibit
99.1
CONTACT: Investor
Relations (214)
792-4415
SOUTHWEST
AIRLINES REPORTS SECOND QUARTER EARNINGS;
65th
CONSECUTIVE
QUARTER OF PROFITABILITY
DALLAS,
TEXAS – July 18, 2007 – Southwest Airlines (NYSE:LUV) today reported its second
quarter 2007 results. Net income for second quarter 2007 was $278
million, or $.36 per diluted share, compared to $333 million, or $.40 per
diluted share, for second quarter 2006. Economic net income for
second quarter 2007 was $195 million, or $.25 per diluted share, compared
to
$273 million, or $.33 per diluted share, for second quarter 2006. The
$.25 per diluted share in economic net income exceeds First Call’s mean estimate
of $.22 per diluted share for second quarter 2007. (Refer to the
reconciliation in the accompanying tables for further information regarding
economic results.)
Second
Quarter 2007 Financial Highlights:
|
·
|
Record
second quarter revenues of $2.6 billion, up 5.5
percent
|
|
·
|
Economic
net income of $195 million, down 28.6
percent
|
|
·
|
Economic
net income per diluted share of $.25, down 24.2
percent
|
|
·
|
Repurchased
32 million shares of common stock for $464
million
|
Gary
C.
Kelly, CEO, stated: “The anticipated decline in our year-over-year second
quarter earnings performance reflects a continued rise in fuel costs and
difficult unit revenue comparisons. As we recently outlined, specific
initiatives are well underway to adapt to higher jet fuel cost
levels. Through these initiatives, we believe that we can maintain
our low fare, low cost leadership while achieving substantially enhanced
incremental revenues over the next several years.
"While
we
reported record operating revenues of $2.6 billion for the second quarter
2007,
our unit revenue production has not kept pace with rising fuel
costs. Our operating unit revenue of 10.34 cents fell below the
exceptional year ago performance. Although softer revenue trends were
consistent throughout the second quarter, demand strengthened somewhat in
June,
and we reported an all-time record load factor of 82.1 percent for the
month. Traffic trends and bookings thus far in July are strong,
suggesting unit revenue comparisons for third quarter 2007 will be better
year-over-year than second quarter 2007's performance.
/more
“Our
economic fuel cost per gallon of $1.62 was up 14.1 percent from a year
ago. Favorable cash settlements resulting from our prudent fuel
hedging program were $173 million for second quarter 2007. We
have derivative contracts for approximately 90 percent of our third quarter
2007
estimated fuel consumption, capped at an average crude-equivalent price of
approximately $51 per barrel (compared to approximately 81 percent at
approximately $41 per barrel for third quarter 2006). Based on this
derivative position and current market prices, we currently expect our third
quarter 2007 economic fuel costs per gallon to be in the $1.70
range. We currently have derivative contracts for approximately
90 percent of our estimated fuel consumption for the fourth quarter 2007
at an
average crude-equivalent price of approximately $51 per barrel. We
have derivative contracts for approximately 65 percent of our estimated fuel
consumption in 2008 at an average crude-equivalent price of $49 per
barrel.
“Excluding
fuel, second quarter 2007 economic unit costs decreased 1.2 percent from
a year
ago, primarily due to lower profitsharing expense. While our
Employees have done a commendable job improving efficiency, we must persistently
find ways to control costs, including salaries, wages, and benefits, due
to
continual increases in jet fuel prices. As such, we recently offered
certain Employees a voluntary early-out program. Employees
eligible under this program must make their election to participate by August
10, 2007. Excluding any charge from this program, we currently expect
our third quarter 2007 economic unit costs, excluding fuel, to exceed third
quarter 2006’s 6.38 cents.
“We
look
forward to resuming service to San Francisco International Airport on
August 26th. We are also very pleased with Customer response to our
continued growth in key markets such as Denver, Ft. Myers, New Orleans,
Philadelphia, Pittsburgh, and Washington Dulles. We are elated with
the strong Customer demand for our new low fare service added to and from
Dallas
Love Field as a result of the Wright Amendment Reform Act of 2006, which
increased second quarter 2007 revenues by almost $30 million.
"Our
estimated year-over-year available seat mile (ASM) growth for third quarter
2007
is eight percent. However, in our continuing efforts to restore
profit growth, we have adjusted both our fourth quarter 2007 and full year
2008
capacity plans to grow ASMs year-over-year by approximately six percent, or
about two percentage points slower than previously planned.
"Prior
to
adjusting our growth rate, we had 34 737-700 aircraft (33 firm and one option)
scheduled for delivery from Boeing in 2008. Now, we plan to grow our
fleet by 19 aircraft, 15 fewer than originally planned. We have an
agreement with Boeing to defer five of our 2008 deliveries (four firm and
one
option) to firm orders in 2013, resulting in 29 firm aircraft deliveries
from
Boeing next year. In addition to deferring five of the 2008
Boeing deliveries, we are currently exploring a variety of alternatives to
reduce our fleet growth by another ten aircraft in 2008, which will bring
our
2008 planned additions to 19 net aircraft. As part
of the agreement with Boeing, we have also agreed to exercise 25
737-700 options (including the one 2008 deferred option) originally scheduled
for 2008 through 2011 for delivery in 2013 and 2014, bringing our firm orders
from 2008 through 2014 to 106. In addition, we have 86 options, with
delivery positions available in 2009 through 2012, and 54 purchase rights
for
delivery through December 31, 2014. (See accompanying Revised 737-700
Delivery Schedule).
/more
“Although
we face earnings challenges, primarily due to escalating fuel costs, we are
confident in our future and the Employees of Southwest Airlines. We remain
dedicated to upholding our high Customer Satisfaction record and are proud
that
we were recently recognized by City Business Journals Network as the #1
Brand in the travel segment of the 2007 American Brand Excellence
Awards. Southwest Airlines was also named the top U.S. airline on the
University of Michigan’s American Customer Satisfaction Index, as we have been
every year since the index began in 1994.”
Southwest
will discuss its second quarter 2007 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=IR_071807.
Operating
Results
Total
operating revenues for second quarter 2007 increased 5.5 percent to $2.58
billion, compared to $2.45 billion for second quarter 2006. Total
second quarter 2007 operating expenses were $2.26 billion, compared to $2.05
billion in second quarter 2006. Operating income for second quarter
2007 was $328 million compared to $402 million in second quarter
2006. Economic operating income was $328 million in second quarter
2007 compared to $429 million last year.
“Other
income” was $119 million for
second quarter 2007, compared to $113 million for second quarter
2006. The $6 million increase primarily resulted from unrealized
“other (gains) losses” associated with Statement of Financial Accounting
Standard (SFAS) 133, “Accounting for Derivative Instruments and Hedging
Activities,” as amended. The cost of the hedging program (which
includes the premium costs of derivative contracts) of $14 million in second
quarter 2007 and $12 million in second quarter 2006 is also included in "other
(gains) losses."
The
second quarter 2007 income tax rate of 37.8 percent was higher than last
year’s
second quarter rate of 35.3 percent, which reflected a $13 million net
adjustment to reduce deferred taxes related to a revision in the State of
Texas
Franchise Tax law enacted during second quarter 2006.
/more
Net
cash
provided by operations for the six months ended June 30, 2007 was $1.6
billion, which included a $535 million increase in fuel derivative collateral
deposits related to future periods, and capital expenditures were $663
million. The Company repurchased 32 million shares of its common
stock for $464 million during the second quarter, of which $291 million,
or 20
million shares, completed the $300 million repurchase authorization in March
by
the Company’s Board of Directors. The remaining $173 million related
to the $500 million repurchase program authorized in May. As of
yesterday, the Company had repurchased 20 million shares of its common stock
for
a total of $295 million under this latest authorization. This brings
the total repurchases of common stock to $1.6 billion, or 102 million shares,
since January 1, 2006.
The
Company ended second quarter 2007 with $2.1 billion in cash and short-term
investments, which included $1.1 billion in fuel derivative collateral
deposits. In addition, the Company had a fully available unsecured
revolving credit line of $600 million. The Company will repay
approximately $100 million in debt during third quarter 2007.
Total
operating revenues for the six months ended June 30, 2007 increased 7.0 percent
to $4.78 billion, while total operating expenses increased 10.1 percent to
$4.37
billion, resulting in operating income in first half 2007 of $412 million
versus
$500 million in first half 2006. Economic operating income was $398
million and $544 million, respectively, for the six months ended June 30,
2007
and 2006. Net income for the six months ended June 30, 2007 was $371
million, or $.47 per diluted share, compared to $394 million, or $.47 per
diluted share, for the same period last year. Economic net income for
the six months ended June 30, 2007 was $228 million, or $.29 per diluted
share,
compared to $338 million, or $.41 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, Section 21E of the Securities Exchange Act of 1934,
as
amended, and the Private Securities Litigation Reform Act of 1995. Specific
forward-looking statements include, without limitation, statements relating
to
the Company's results of operations and its growth plans and related
initiatives, strategies, and revenues expectations. 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; (ii) the Company's ability to timely and
effectively prioritize its revenues initiatives and its related ability to
timely implement and maintain the necessary information technology systems
and
infrastructure to support these initiatives; (iii) the extent and timing
of the
Company’s investment of incremental operating expenses and capital expenditures
to develop and implement its initiatives and its corresponding ability to
effectively control its operating expenses; (iv) the Company's dependence
on
third party arrangements to assist with the implementation of certain of
its
initiatives; (v) competitor capacity and load factors; and (vi) 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, 2006, and subsequent filings with the Securities and Exchange
Commission. 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 news release.
/more
|
CONDENSED
CONSOLIDATED STATEMENT OF INCOME
|
||||||||||||||||||||||||
|
(in
millions except per share amounts)
|
||||||||||||||||||||||||
|
(unaudited)
|
||||||||||||||||||||||||
|
Three
months ended
|
Six
months ended
|
|||||||||||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||||||||||
|
Percent
|
Percent
|
|||||||||||||||||||||||
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
|
OPERATING
REVENUES:
|
||||||||||||||||||||||||
|
Passenger
|
$ |
2,475
|
$ |
2,362
|
4.8
|
$ |
4,587
|
$ |
4,300
|
6.7
|
||||||||||||||
|
Freight
|
33
|
38
|
(13.2 | ) |
63
|
74
|
(14.9 | ) | ||||||||||||||||
|
Other
|
75
|
49
|
53.1
|
131
|
95
|
37.9
|
||||||||||||||||||
|
Total
operating revenues
|
2,583
|
2,449
|
5.5
|
4,781
|
4,469
|
7.0
|
||||||||||||||||||
|
OPERATING
EXPENSES:
|
||||||||||||||||||||||||
|
Salaries,
wages, and benefits
|
814
|
786
|
3.6
|
1,581
|
1,502
|
5.3
|
||||||||||||||||||
|
Fuel
and oil
|
607
|
518
|
17.2
|
1,171
|
1,019
|
14.9
|
||||||||||||||||||
|
Maintenance
materials and repairs
|
154
|
119
|
29.4
|
291
|
224
|
29.9
|
||||||||||||||||||
|
Aircraft
rentals
|
40
|
39
|
2.6
|
79
|
80
|
(1.3 | ) | |||||||||||||||||
|
Landing
fees and other rentals
|
140
|
126
|
11.1
|
276
|
246
|
12.2
|
||||||||||||||||||
|
Depreciation
and amortization
|
137
|
127
|
7.9
|
272
|
250
|
8.8
|
||||||||||||||||||
|
Other
operating expenses
|
363
|
332
|
9.3
|
699
|
648
|
7.9
|
||||||||||||||||||
|
Total
operating expenses
|
2,255
|
2,047
|
10.2
|
4,369
|
3,969
|
10.1
|
||||||||||||||||||
|
OPERATING
INCOME
|
328
|
402
|
(18.4 | ) |
412
|
500
|
(17.6 | ) | ||||||||||||||||
|
OTHER
EXPENSES (INCOME):
|
||||||||||||||||||||||||
|
Interest
expense
|
29
|
34
|
(14.7 | ) |
58
|
68
|
(14.7 | ) | ||||||||||||||||
|
Capitalized
interest
|
(14 | ) | (14 | ) |
-
|
(27 | ) | (26 | ) |
3.8
|
||||||||||||||
|
Interest
income
|
(14 | ) | (21 | ) | (33.3 | ) | (27 | ) | (39 | ) | (30.8 | ) | ||||||||||||
|
Other
(gains) losses, net
|
(120 | ) | (112 | ) |
n.a.
|
(188 | ) | (114 | ) |
n.a.
|
||||||||||||||
|
Total
other expenses (income)
|
(119 | ) | (113 | ) |
n.a.
|
(184 | ) | (111 | ) |
n.a.
|
||||||||||||||
|
INCOME
BEFORE INCOME TAXES
|
447
|
515
|
(13.2 | ) |
596
|
611
|
(2.5 | ) | ||||||||||||||||
|
PROVISION
FOR INCOME TAXES
|
169
|
182
|
(7.1 | ) |
225
|
217
|
3.7
|
|||||||||||||||||
|
NET
INCOME
|
$ |
278
|
$ |
333
|
(16.5 | ) | $ |
371
|
$ |
394
|
(5.8 | ) | ||||||||||||
|
NET
INCOME PER SHARE:
|
||||||||||||||||||||||||
|
Basic
|
$
.36
|
$
.42
|
$
.48
|
$
.49
|
||||||||||||||||||||
|
Diluted
|
$
.36
|
$
.40
|
$
.47
|
$
.47
|
||||||||||||||||||||
|
WEIGHTED
AVERAGE SHARES OUTSTANDING:
|
||||||||||||||||||||||||
|
Basic
|
769
|
798
|
778
|
800
|
||||||||||||||||||||
|
Diluted
|
780
|
825
|
790
|
831
|
||||||||||||||||||||
/more
|
RECONCILIATION
OF REPORTED AMOUNTS TO NON-GAAP ITEMS (SEE NOTE)
|
||||||||||||||||||||||||
|
(in
millions, except per share amounts)
|
||||||||||||||||||||||||
|
(unaudited)
|
||||||||||||||||||||||||
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||||||||||
|
|
Percent
|
|
Percent
|
|||||||||||||||||||||
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
|
Fuel
and oil expense - unhedged
|
$ |
780
|
$ |
716
|
$ |
1,422
|
$ |
1,333
|
||||||||||||||||
|
Less:
Fuel hedge gains included in fuel and oil expense
|
(173 | ) | (198 | ) | (251 | ) | (314 | ) | ||||||||||||||||
|
GAAP
fuel and oil expense, as reported
|
607
|
518
|
17.2
|
1,171
|
1,019
|
14.9
|
||||||||||||||||||
|
Add/(Deduct):
Impact from current period settled contracts
|
||||||||||||||||||||||||
|
included
in Other (gains) losses, net
|
(9 | ) | (28 | ) | (26 | ) | (10 | ) | ||||||||||||||||
|
Add/(Deduct):
Fuel contract impact recognized in earnings
|
||||||||||||||||||||||||
|
in
prior periods for contracts settling in the current period
|
9
|
1
|
40
|
(34 | ) | |||||||||||||||||||
|
Fuel
and oil expense - economic basis
|
$ |
607
|
$ |
491
|
23.6
|
$ |
1,185
|
$ |
975
|
21.5
|
||||||||||||||
|
Operating
income, as reported
|
$ |
328
|
$ |
402
|
$ |
412
|
$ |
500
|
||||||||||||||||
|
Add/(Deduct):
Impact from current period settled contracts
|
||||||||||||||||||||||||
|
included
in Other (gains) losses, net
|
9
|
28
|
26
|
10
|
||||||||||||||||||||
|
Add/(Deduct):
Fuel contract impact recognized in earnings
|
||||||||||||||||||||||||
|
in
prior periods for contracts settling in the current period
|
(9 | ) | (1 | ) | (40 | ) |
34
|
|||||||||||||||||
|
Operating
income - economic fuel basis
|
$ |
328
|
$ |
429
|
(23.5 | ) | $ |
398
|
$ |
544
|
(26.8 | ) | ||||||||||||
|
Other
(gains) losses, net, as reported
|
$ | (120 | ) | $ | (112 | ) | $ | (188 | ) | $ | (114 | ) | ||||||||||||
|
Add/(Deduct):
Mark-to-market impact from fuel contracts
|
||||||||||||||||||||||||
|
settling
in future periods
|
129
|
88
|
200
|
130
|
||||||||||||||||||||
|
Add/(Deduct):
Ineffectiveness from fuel hedges settling
|
|
|||||||||||||||||||||||
| in future periods | (4 | ) | 7 | (9 | ) | (4 | ) | |||||||||||||||||
|
Add/(Deduct):
Impact from current period settled contracts
|
||||||||||||||||||||||||
|
included
in Other (gains) losses, net
|
9
|
28
|
26
|
10
|
||||||||||||||||||||
|
Other
(gains) losses, net - economic fuel basis
|
$ |
14
|
$ |
11
|
n.a.
|
$ |
29
|
$ |
22
|
n.a.
|
||||||||||||||
|
Net
income, as reported
|
$ |
278
|
$ |
333
|
$ |
371
|
$ |
394
|
||||||||||||||||
|
Add/(Deduct):
Mark-to-market impact from fuel contracts
|
||||||||||||||||||||||||
|
settling
in future periods
|
(129 | ) | (88 | ) | (200 | ) | (130 | ) | ||||||||||||||||
|
Add/(Deduct):
Ineffectiveness from fuel hedges settling in
|
|
|
|
|||||||||||||||||||||
| future periods | 4 | (7 | ) | 9 | 4 | |||||||||||||||||||
|
Add/(Deduct):
Fuel contract impact recognized in earnings
|
||||||||||||||||||||||||
|
in
prior periods for contracts settling in the current
|
|
|||||||||||||||||||||||
| period | (9 | ) | (1 | ) | (40 | ) | 34 | |||||||||||||||||
|
Income
tax impact of unrealized items
|
51
|
36
|
88
|
36
|
||||||||||||||||||||
|
Net
income - economic fuel basis
|
$ |
195
|
$ |
273
|
(28.6 | ) | $ |
228
|
$ |
338
|
(32.5 | ) | ||||||||||||
|
Net
income per share, diluted, as reported
|
$ |
.36
|
$ |
.40
|
$ |
.47
|
$ |
.47
|
||||||||||||||||
|
Add/(Deduct):
Impact of fuel contracts, net of income taxes
|
(.11 | ) | (.07 | ) | (.18 | ) | (.06 | ) | ||||||||||||||||
|
Net
income per share, diluted - economic fuel basis
|
$ |
.25
|
$ |
.33
|
(24.2 | ) | $ |
.29
|
$ |
.41
|
(29.3 | ) | ||||||||||||
|
Note
regarding use of non-GAAP financial measures
|
||||||||||||||||||||||||
|
The
non-GAAP items referred to in this news release are provided as
supplemental information, and should not be relied upon as alternative
measures to
|
||||||||||||||||||||||||
|
Generally
Accepted Accounting Principles (GAAP). These non-GAAP measures
include items calculated by the Company on an "economic" basis,
which
|
||||||||||||||||||||||||
|
excludes
certain unrealized items that are recorded as a result of SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities", as
amended.
|
||||||||||||||||||||||||
|
The
unrealized items consist of gains or losses for derivative instruments
that will settle in future accounting periods or gains or losses
that have
been
|
||||||||||||||||||||||||
|
recognized
in prior period results, but which have settled in the current
period. This includes ineffectiveness, as defined, for future period
instruments and
|
||||||||||||||||||||||||
|
the
change in market value for future period derivatives that no longer
qualified for special hedge accounting, as defined in SFAS
133.
|
||||||||||||||||||||||||
|
The
Company's management utilizes both the GAAP and the non-GAAP results
in
this news release to evaluate the Company's performance and
believes
|
||||||||||||||||||||||||
|
that
comparative analysis of results can be enhanced by excluding the
impact of
the unrealized items. Management believes in certain cases, the
Company's
|
||||||||||||||||||||||||
|
GAAP
results are not indicative of the Company's operating performance
for the
applicable period, nor should they be considered in developing trend
analysis
|
||||||||||||||||||||||||
|
for
future periods. In addition, since fuel expense is such a large part
of the Company's operating costs and is subject to extreme volatility,
the
Company
|
||||||||||||||||||||||||
|
believes
it is useful to provide investors with the Company's true economic
cost of
fuel for the periods presented, based on cash settlements from
hedging
|
||||||||||||||||||||||||
|
activities,
but excluding the unrealized impact of hedges that will settle in
future
periods or were recognized in prior periods.
|
||||||||||||||||||||||||
/more
|
COMPARATIVE
CONSOLIDATED OPERATING STATISTICS
|
||||||||||||||||||||||||
|
(unaudited)
|
||||||||||||||||||||||||
|
Three
months ended
|
Six
months ended
|
|||||||||||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||||||||||
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
|
Revenue
passengers carried
|
23,442,019
|
21,999,256
|
6.6 | % |
43,402,952
|
41,198,739
|
5.4 | % | ||||||||||||||||
|
Enplaned
passengers
|
26,889,424
|
25,306,858
|
6.3 | % |
49,792,497
|
47,322,342
|
5.2 | % | ||||||||||||||||
|
Revenue
passenger miles (RPMs) (000s)
|
19,018,769
|
17,843,848
|
6.6 | % |
35,127,840
|
33,124,345
|
6.0 | % | ||||||||||||||||
|
Available
seat miles (ASMs) (000s)
|
24,982,676
|
22,883,984
|
9.2 | % |
48,661,051
|
44,963,442
|
8.2 | % | ||||||||||||||||
|
Load
factor
|
76.1 | % | 78.0 | % |
(1.9)
|
pts. | 72.2 | % | 73.7 | % |
(1.5)
|
pts. | ||||||||||||
|
Average
length of passenger haul (miles)
|
811
|
811
|
0.0 | % |
809
|
804
|
0.6 | % | ||||||||||||||||
|
Average
aircraft stage length (miles)
|
630
|
619
|
1.8 | % |
628
|
618
|
1.6 | % | ||||||||||||||||
|
Trips
flown
|
290,647
|
270,947
|
7.3 | % |
567,547
|
533,396
|
6.4 | % | ||||||||||||||||
|
Average
passenger fare
|
$105.60
|
$107.38
|
(1.7 | )% |
$105.68
|
$104.38
|
1.2 | % | ||||||||||||||||
|
Passenger
revenue yield per RPM (cents)
|
13.02
|
13.24
|
(1.7 | )% |
13.06
|
12.98
|
0.6 | % | ||||||||||||||||
|
Operating
revenue yield per ASM (cents)
|
10.34
|
10.70
|
(3.4 | )% |
9.82
|
9.94
|
(1.2 | )% | ||||||||||||||||
|
Operating
expenses per ASM (GAAP, in cents)
|
9.03
|
8.95
|
0.9 | % |
8.98
|
8.83
|
1.7 | % | ||||||||||||||||
|
Operating
expenses per ASM (economic, in cents)
|
9.03
|
8.83
|
2.3 | % |
9.01
|
8.73
|
3.2 | % | ||||||||||||||||
|
Operating
expenses per ASM, excluding fuel (cents)
|
6.60
|
6.68
|
(1.2 | )% |
6.57
|
6.56
|
0.2 | % | ||||||||||||||||
|
Fuel
costs per gallon, excluding fuel tax (unhedged)
|
$2.08
|
$2.08
|
0.0 | % |
$1.95
|
$1.97
|
(1.0 | )% | ||||||||||||||||
|
Fuel
costs per gallon, excluding fuel tax (GAAP)
|
$1.61
|
$1.50
|
7.3 | % |
$1.61
|
$1.51
|
6.6 | % | ||||||||||||||||
|
Fuel
costs per gallon, excluding fuel tax (economic)
|
$1.62
|
$1.42
|
14.1 | % |
$1.63
|
$1.44
|
13.2 | % | ||||||||||||||||
|
Fuel
consumed, in gallons (millions)
|
374
|
344
|
8.7 | % |
726
|
673
|
7.9 | % | ||||||||||||||||
|
Fulltime
equivalent Employees at period-end
|
33,261
|
31,734
|
4.8 | % |
33,261
|
31,734
|
4.8 | % | ||||||||||||||||
|
Size
of fleet at period-end
|
500
|
462
|
8.2 | % |
500
|
462
|
8.2 | % | ||||||||||||||||
/more
|
SOUTHWEST
AIRLINES CO.
|
||||||||
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
||||||||
|
(in
millions)
|
||||||||
|
(unaudited)
|
||||||||
|
June
30,
|
December
31,
|
|||||||
|
2007
|
2006
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ |
1,605
|
$ |
1,390
|
||||
|
Short-term
investments
|
509
|
369
|
||||||
|
Accounts
and other receivables
|
321
|
241
|
||||||
|
Inventories
of parts and supplies, at cost
|
182
|
181
|
||||||
|
Fuel
derivative contracts
|
633
|
369
|
||||||
|
Prepaid
expenses and other current assets
|
56
|
51
|
||||||
|
Total
current assets
|
3,306
|
2,601
|
||||||
|
Property
and equipment, at cost:
|
||||||||
|
Flight
equipment
|
12,330
|
11,769
|
||||||
|
Ground
property and equipment
|
1,423
|
1,356
|
||||||
|
Deposits
on flight equipment purchase contracts
|
741
|
734
|
||||||
|
14,494
|
13,859
|
|||||||
|
Less
allowance for depreciation and amortization
|
4,007
|
3,765
|
||||||
|
10,487
|
10,094
|
|||||||
|
Other
assets
|
1,060
|
765
|
||||||
| $ |
14,853
|
$ |
13,460
|
|||||
|
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ |
746
|
$ |
643
|
||||
|
Accrued
liabilities
|
2,094
|
1,323
|
||||||
|
Air
traffic liability
|
1,122
|
799
|
||||||
|
Current
maturities of long-term debt
|
123
|
122
|
||||||
|
Total
current liabilities
|
4,085
|
2,887
|
||||||
|
Long-term
debt less current maturities
|
1,518
|
1,567
|
||||||
|
Deferred
income taxes
|
2,328
|
2,104
|
||||||
|
Deferred
gains from sale and leaseback of aircraft
|
113
|
120
|
||||||
|
Other
deferred liabilities
|
382
|
333
|
||||||
|
Stockholders'
equity:
|
||||||||
|
Common
stock
|
808
|
808
|
||||||
|
Capital
in excess of par value
|
1,167
|
1,142
|
||||||
|
Retained
earnings
|
4,534
|
4,307
|
||||||
|
Accumulated
other comprehensive income
|
752
|
582
|
||||||
|
Treasury
stock, at cost
|
(834 | ) | (390 | ) | ||||
|
Total
stockholders' equity
|
6,427
|
6,449
|
||||||
| $ |
14,853
|
$ |
13,460
|
|||||
/more
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
||||||||||||||||
|
(in
millions)
|
||||||||||||||||
|
(unaudited)
|
||||||||||||||||
|
Three
months ended
|
Six
months ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||
|
Net
income
|
$ |
278
|
$ |
333
|
$ |
371
|
$ |
394
|
||||||||
|
Adjustments
to reconcile net income to
|
||||||||||||||||
|
cash
provided by operating activities:
|
||||||||||||||||
|
Depreciation
and amortization
|
137
|
127
|
272
|
250
|
||||||||||||
|
Deferred
income taxes
|
125
|
179
|
167
|
214
|
||||||||||||
|
Amortization
of deferred gains on sale and
|
||||||||||||||||
|
leaseback
of aircraft
|
(4 | ) | (4 | ) | (7 | ) | (8 | ) | ||||||||
|
Share-based
compensation expense
|
13
|
23
|
26
|
45
|
||||||||||||
|
Excess
tax benefits from share-based
|
||||||||||||||||
|
compensation
arrangements
|
1
|
(2 | ) | (29 | ) | (30 | ) | |||||||||
|
Changes
in certain assets and liabilities:
|
||||||||||||||||
|
Accounts
and other receivables
|
(43 | ) | (18 | ) | (80 | ) | (31 | ) | ||||||||
|
Other
current assets
|
(92 | ) | (88 | ) | (148 | ) | (73 | ) | ||||||||
|
Accounts
payable and accrued liabilities
|
447
|
255
|
830
|
571
|
||||||||||||
|
Air
traffic liability
|
112
|
29
|
322
|
309
|
||||||||||||
|
Other
|
6
|
(2 | ) | (127 | ) | (58 | ) | |||||||||
|
Net
cash provided by operating activities
|
980
|
832
|
1,597
|
1,583
|
||||||||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||
|
Purchases
of property and equipment, net
|
(338 | ) | (404 | ) | (663 | ) | (665 | ) | ||||||||
|
Purchases
of short-term investments
|
(1,158 | ) | (1,221 | ) | (2,072 | ) | (2,071 | ) | ||||||||
|
Proceeds
from sales of short-term investments
|
963
|
1,145
|
1,931
|
1,926
|
||||||||||||
|
Proceeds
from ATA Airlines, Inc. debtor in possession loan
|
-
|
-
|
-
|
20
|
||||||||||||
|
Other
investing activities, net
|
-
|
-
|
-
|
1
|
||||||||||||
|
Net
cash used in investing activities
|
(533 | ) | (480 | ) | (804 | ) | (789 | ) | ||||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||
|
Proceeds
from Employee stock plans
|
14
|
29
|
92
|
136
|
||||||||||||
|
Payments
of long-term debt and capital lease obligations
|
(6 | ) | (99 | ) | (15 | ) | (136 | ) | ||||||||
|
Payments
of cash dividends
|
(3 | ) | (4 | ) | (11 | ) | (11 | ) | ||||||||
|
Repurchase
of common stock
|
(464 | ) | (289 | ) | (674 | ) | (503 | ) | ||||||||
|
Excess
tax benefits from share-based
|
||||||||||||||||
|
compensation
arrangements
|
(1 | ) |
2
|
29
|
30
|
|||||||||||
|
Other,
net
|
-
|
1
|
1
|
2
|
||||||||||||
|
Net
cash provided by (used in) financing activities
|
(460 | ) | (360 | ) | (578 | ) | (482 | ) | ||||||||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(13 | ) | (8 | ) |
215
|
312
|
||||||||||
|
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
1,618
|
2,600
|
1,390
|
2,280
|
||||||||||||
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
$ |
1,605
|
$ |
2,592
|
$ |
1,605
|
$ |
2,592
|
||||||||
/more
|
REVISED
737-700 DELIVERY SCHEDULE
|
||||||||||||||||||||
|
The
Boeing Company
|
||||||||||||||||||||
|
Purchase
|
Previously
|
|||||||||||||||||||
|
Firm
|
Options
|
Rights
|
Owned
|
Total
|
||||||||||||||||
|
2007
|
37
|
2
|
39 | * | ||||||||||||||||
|
2008
|
29
|
29 | ** | |||||||||||||||||
|
2009
|
18
|
10
|
28
|
|||||||||||||||||
|
2010
|
10
|
24
|
34
|
|||||||||||||||||
|
2011
|
10
|
22
|
32
|
|||||||||||||||||
|
2012
|
10
|
30
|
40
|
|||||||||||||||||
|
2013
|
19
|
19
|
||||||||||||||||||
|
2014
|
10
|
10
|
||||||||||||||||||
|
Through
2014
|
54
|
54
|
||||||||||||||||||
|
Total
|
143
|
86
|
54
|
2
|
285
|
|||||||||||||||
|
*2007
delivery dates: eight in first quarter, eleven in second quarter,
eleven
|
||||||||||||||||||||
|
in third quarter and nine in fourth quarter.
|
||||||||||||||||||||
|
**
Currently exploring alternatives to reduce fleet growth by another
ten
|
||||||||||||||||||||
|
aircraft, bringing 2008 net additions to 19
|
||||||||||||||||||||
***