EXHIBIT 99.1 3RD QUARTER 2007 FINANCIAL RESULTS
Published on October 18, 2007
Exhibit
99.1
CONTACT:
Investor
Relations (214) 792-4415
SOUTHWEST
AIRLINES REPORTS THIRD QUARTER EARNINGS;
66th
CONSECUTIVE
QUARTER OF PROFITABILITY
DALLAS,
TEXAS – October 18, 2007 – Southwest Airlines (NYSE:LUV) today reported its
third quarter 2007 results. Net income for third quarter 2007 was
$162 million, or $.22 per diluted share, compared to $48 million, or $.06
per
diluted share, for third quarter 2006. Economic net income for
third quarter 2007 was $133 million, or $.18 per diluted share, compared
to $154
million, or $.19 per diluted share, for third quarter 2006. (Refer to
the reconciliation in the accompanying tables for further information regarding
economic results.) The third quarter 2007 results include the
following two charges, which were not reflected in First Call's mean estimate
for economic net income of $.21 per diluted share:
|
|
·
$25 million charge ($.02 per diluted share impact, net of
profitsharing and income tax effects) related to the Company's
recent
voluntary early-out program
|
|
|
·
$11 million income tax charge ($.01 per diluted share impact)
related to a change in Illinois state income tax
law
|
Gary
C.
Kelly, CEO, stated: “Our fourth quarter 2007 revenue initiatives are well
underway and on track with our planned implementation schedule. We
began slowing our capacity growth rate this month and have trimmed our route
system. We are very enthused by the response to our new Customer
boarding method, which will be implemented system-wide on November 8,
2007. In connection with that, we have begun our "extreme gate
makeover" to improve the Customer airport experience with an anticipated
completion date of mid-year 2008. We will soon announce enhancements
to our fare structure and Rapid Rewards frequent flyer program, supported
by a
new marketing and advertising campaign. We will also begin enhancing
our revenue management structure, technology, techniques, and processes in
fourth quarter 2007. We are continuing efforts to provide travel
agent and professional travel manager partners with increased and cost effective
access to our fares and inventory. We are particularly pleased with
the recent expansion of our agreement with Travelport's Galileo
to include Worldspan, another of Travelport's global distribution
systems. We are very excited about these major revenue initiatives as
well as our longer term ancillary and codeshare revenue opportunities, and
are
determined to overcome higher fuel costs and achieve our financial
targets.
/more
"With
respect to our third quarter 2007 revenue performance, we are pleased that
operating unit revenue comparisons turned positive. While
year-over-year comparisons were favorably impacted by the August 2006 terrorist
threat and related carryon restrictions, third quarter 2007 operating revenues
of $2.6 billion were a record. This performance was driven by a
record third quarter 2007 load factor of 76.6 percent, which resulted from
strong demand for low fares. Based on current revenue trends,
bookings, and planned revenue initiatives, and barring a slowdown in the
domestic economy, we expect fourth quarter 2007 operating unit revenues to
exceed year ago levels.
“Market
crude oil prices hitting all-time high levels further accentuates our cost
challenge. Despite favorable cash settlements from our fuel
hedging program of $189 million for third quarter 2007, our economic fuel
cost
per gallon of $1.69 rose 7.6 percent from a year ago. We have
derivative contracts in place for approximately 90 percent of our fourth
quarter
2007 estimated fuel consumption, capped at an average crude-equivalent price
of
approximately $51 per barrel (compared to approximately 85 percent at
approximately $43 per barrel for fourth quarter 2006). Based on this
derivative position and present market prices, we are currently
estimating our fourth quarter 2007 economic fuel costs per gallon to be in
the $1.80 range.
“We
have
derivative contracts for approximately 70 percent of our estimated 2008 fuel
consumption at an average crude-equivalent price of approximately $51 per
barrel; approximately 55 percent of our estimated 2009 fuel consumption at
an
average crude-equivalent price of approximately $51 per barrel; over 25 percent
of our estimated 2010 fuel consumption at an average crude-equivalent price
of
approximately $63 per barrel; and over 15 percent of our estimated 2011 and
2012
fuel consumption at an average crude-equivalent price of approximately $64
and
$63 per barrel, respectively.
“Excluding
fuel, third quarter 2007 economic unit costs increased 2.2 percent from a
year
ago, including the $25 million charge related to our recent voluntary early-out
program. Based on current trends and various cost pressures, we
presently expect our fourth quarter 2007 economic unit costs, excluding fuel,
to
exceed third quarter 2007’s 6.52 cents.
"As
previously announced, we are pruning our flight schedule in fourth quarter
2007
and slowing our fourth quarter 2007 and full year 2008 available seat mile
growth to the five to six percent range on a year-over-year basis. We
have nine and 29 firm Boeing 737-700 aircraft deliveries in fourth quarter
2007
and full year 2008, respectively. We currently plan to reduce 2008
fleet growth by at least ten aircraft, bringing 2008 planned additions to
no
more than 19 net aircraft.
/more
"We
are
pleased with the Bay area's response to our renewed San
Francisco International Airport service, which started in
August. We are also pleased with the strong Customer demand for our
new low fare service offered at Dallas Love Field as a result of the Wright
Amendment Reform Act of 2006, which increased third quarter 2007 revenues
by
approximately $32 million.
“As
our Employees strive to counter higher fuel costs, they remain dedicated
to
upholding our superb Customer Satisfaction record, and they consistently
receive
high marks in Ontime Performance. Recent Southwest honors
include being named the top airline brand for customer experience in the
nationwide study performed by RTC Relationship Marketing. The
study correlated brand performance, treatment of customers, and sense of
community as the major drivers of overall brand experience. We also
received the Frost & Sullivan 2007 CEO Choice Award for the Overall Best
Airline in the United States. We are very proud that Southwest Cargo
recently received its 13th consecutive
Quest
for Quality Award, placing first in Ontime Performance, Value and Customer
Service.”
Southwest
Airlines was also included in InformationWeek 500’s annual listing
honoring Southwest Airlines' extraordinary ability to deliver business value
through technology innovation and execution and was included in Hispanic
Business Magazine’s Diversity Elite 60.
Southwest
will discuss its third 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 southwest.com.
Operating
Results
Total
operating revenues for third quarter 2007 increased 10.5 percent to $2.59
billion, compared to $2.34 billion for third quarter 2006. Total
third quarter 2007 operating expenses were $2.34 billion, compared to $2.08
billion in third quarter 2006. Operating income for third quarter
2007 was $251 million compared to $261 million in third quarter
2006. Economic operating income was $252 million in third quarter
2007 compared to $260 million last year. Third quarter 2007 operating
results include a $25 million charge ($.02 per diluted share impact, net
of
profitsharing and income tax effects) related to the Company's recent voluntary
early-out program.
“Other
income” was $26 million for
third quarter 2007, compared to “other expenses” of $183 million for third
quarter 2006. The $209 million positive swing 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, slightly offset by a $9 million adverse swing
in net interest expense. The cost of the hedging program (which
includes the premium costs of derivative contracts) of $14 million in third
quarter 2007 and $13 million in third quarter 2006 is also included in "other
(gains) losses."
/more
The
third
quarter 2007 income tax rate of 41.5 percent was higher than last year’s third
quarter rate of 38.9 percent due to a change in the State of Illinois income
tax
law enacted in August 2007, resulting in an $11 million increase in the deferred
tax liability.
Net
cash
provided by operations for the nine months ended September 30, 2007 was
$1.8
billion, which included a $600 million increase in fuel derivative collateral
deposits related to future periods, and capital expenditures were $981
million. The Company repurchased 21 million shares of its common
stock for $327 million during the third quarter, which completed the $500
million repurchase authorization in May by the Company’s Board of
Directors. This brings the total repurchases of common stock to $1.8
billion, or 116 million shares, since January 1, 2006.
The
Company ended third quarter 2007 with $1.6 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 repaid $100
million in notes during the third quarter. In October 2007, the
Company issued $500 million in Pass Through Certificates, secured by 16
aircraft.
Total
operating revenues for the nine months ended September 30, 2007 increased
8.2
percent to $7.37 billion, while total operating expenses increased 10.8 percent
to $6.71 billion, resulting in operating income of $664 million versus $760
million in 2006. Economic operating income was $651 million and $802
million, respectively, for the nine months ended September 30, 2007 and
2006. Net income for the nine months ended September 30, 2007 was
$533 million, or $.69 per diluted share, compared to $442 million, or $.53
per
diluted share, for the same period last year. Economic net income for
the nine months ended September 30, 2007 was $362 million, or $.47 per diluted
share, compared to $491 million, or $.59 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
(i) the Company's revenues initiatives and its related plans to enhance
technology, techniques, and processes; (ii) the Company’s expected results of
operations for fourth quarter 2007 and full year 2008; and (iii) the
Company’s plans for fleet growth. 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, and other
techniques and processes 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
|
Nine
months ended
|
|||||||||||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||||||||||
|
Percent
|
Percent
|
|||||||||||||||||||||||
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
|
OPERATING
REVENUES:
|
||||||||||||||||||||||||
|
Passenger
|
$ |
2,482
|
$ |
2,258
|
9.9
|
$ |
7,069
|
$ |
6,558
|
7.8
|
||||||||||||||
|
Freight
|
32
|
30
|
6.7
|
95
|
103
|
(7.8 | ) | |||||||||||||||||
|
Other
|
74
|
54
|
37.0
|
205
|
149
|
37.6
|
||||||||||||||||||
|
Total
operating revenues
|
2,588
|
2,342
|
10.5
|
7,369
|
6,810
|
8.2
|
||||||||||||||||||
|
OPERATING
EXPENSES:
|
||||||||||||||||||||||||
|
Salaries,
wages, and benefits
|
832
|
771
|
7.9
|
2,413
|
2,273
|
6.2
|
||||||||||||||||||
|
Fuel
and oil
|
660
|
563
|
17.2
|
1,831
|
1,581
|
15.8
|
||||||||||||||||||
|
Maintenance
materials and repairs
|
160
|
117
|
36.8
|
450
|
341
|
32.0
|
||||||||||||||||||
|
Aircraft
rentals
|
38
|
39
|
(2.6 | ) |
116
|
119
|
(2.5 | ) | ||||||||||||||||
|
Landing
fees and other rentals
|
145
|
128
|
13.3
|
422
|
374
|
12.8
|
||||||||||||||||||
|
Depreciation
and amortization
|
140
|
131
|
6.9
|
411
|
381
|
7.9
|
||||||||||||||||||
|
Other
operating expenses
|
362
|
332
|
9.0
|
1,062
|
981
|
8.3
|
||||||||||||||||||
|
Total
operating expenses
|
2,337
|
2,081
|
12.3
|
6,705
|
6,050
|
10.8
|
||||||||||||||||||
|
OPERATING
INCOME
|
251
|
261
|
(3.8 | ) |
664
|
760
|
(12.6 | ) | ||||||||||||||||
|
OTHER
EXPENSES (INCOME):
|
||||||||||||||||||||||||
|
Interest
expense
|
28
|
32
|
(12.5 | ) |
86
|
100
|
(14.0 | ) | ||||||||||||||||
|
Capitalized
interest
|
(13 | ) | (12 | ) |
8.3
|
(39 | ) | (38 | ) |
2.6
|
||||||||||||||
|
Interest
income
|
(9 | ) | (23 | ) | (60.9 | ) | (36 | ) | (62 | ) | (41.9 | ) | ||||||||||||
|
Other
(gains) losses, net
|
(32 | ) |
186
|
n.a.
|
(221 | ) |
71
|
n.a.
|
||||||||||||||||
|
Total
other expenses (income)
|
(26 | ) |
183
|
n.a.
|
(210 | ) |
71
|
n.a.
|
||||||||||||||||
|
INCOME
BEFORE INCOME TAXES
|
277
|
78
|
255.1
|
874
|
689
|
26.9
|
||||||||||||||||||
|
PROVISION
FOR INCOME TAXES
|
115
|
30
|
283.3
|
341
|
247
|
38.1
|
||||||||||||||||||
|
NET
INCOME
|
$ |
162
|
$ |
48
|
237.5
|
$ |
533
|
$ |
442
|
20.6
|
||||||||||||||
|
NET
INCOME PER SHARE:
|
||||||||||||||||||||||||
|
Basic
|
$.22
|
$.06
|
$.70
|
$.56
|
||||||||||||||||||||
|
Diluted
|
$.22
|
$.06
|
$.69
|
$.53
|
||||||||||||||||||||
|
WEIGHTED
AVERAGE SHARES OUTSTANDING:
|
||||||||||||||||||||||||
|
Basic
|
739
|
789
|
765
|
796
|
||||||||||||||||||||
|
Diluted
|
752
|
821
|
777
|
827
|
||||||||||||||||||||
/more
|
RECONCILIATION
OF REPORTED AMOUNTS TO NON-GAAP ITEMS (SEE NOTE)
|
||||||||||||||||||||||||
|
(in
millions, except per share amounts)
|
||||||||||||||||||||||||
|
(unaudited)
|
||||||||||||||||||||||||
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||||||||||
|
|
Percent
|
|
Percent
|
|||||||||||||||||||||
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
|
Fuel
and oil expense - unhedged
|
$ |
848
|
$ |
764
|
$ |
2,270
|
$ |
2,096
|
||||||||||||||||
|
Less:
Fuel hedge gains included in fuel and oil expense
|
(188 | ) | (201 | ) | (439 | ) | (515 | ) | ||||||||||||||||
|
GAAP
fuel and oil expense, as reported
|
660
|
563
|
17.2
|
1,831
|
1,581
|
15.8
|
||||||||||||||||||
|
Add/(Deduct):
Impact from current period settled contracts
|
||||||||||||||||||||||||
|
included
in Other (gains) losses, net
|
7
|
32
|
(45 | ) | (3 | ) | ||||||||||||||||||
|
Add/(Deduct):
Fuel contract impact recognized in earnings
|
||||||||||||||||||||||||
|
in
prior periods for contracts settling in the current period
|
(8 | ) | (31 | ) |
58
|
(39 | ) | |||||||||||||||||
|
Fuel
and oil expense - economic basis
|
$ |
659
|
$ |
564
|
16.8
|
$ |
1,844
|
$ |
1,539
|
19.8
|
||||||||||||||
|
Operating
income, as reported
|
$ |
251
|
$ |
261
|
$ |
664
|
$ |
760
|
||||||||||||||||
|
Add/(Deduct):
Impact from current period settled contracts
|
||||||||||||||||||||||||
|
included
in Other (gains) losses, net
|
(7 | ) | (32 | ) |
45
|
3
|
||||||||||||||||||
|
Add/(Deduct):
Fuel contract impact recognized in earnings
|
||||||||||||||||||||||||
|
in
prior periods for contracts settling in the current period
|
8
|
31
|
(58 | ) |
39
|
|||||||||||||||||||
|
Operating
income - economic fuel basis
|
$ |
252
|
$ |
260
|
(3.1 | ) | $ |
651
|
$ |
802
|
(18.8 | ) | ||||||||||||
|
Other
(gains) losses, net, as reported
|
$ | (32 | ) | $ |
186
|
$ | (221 | ) | $ |
71
|
||||||||||||||
|
Add/(Deduct):
Mark-to-market impact from fuel contracts
|
||||||||||||||||||||||||
|
settling
in future periods
|
44
|
(123 | ) |
216
|
(18 | ) | ||||||||||||||||||
|
Add/(Deduct):
Ineffectiveness from fuel hedges settling in future
periods
|
11
|
(18 | ) |
4
|
(22 | ) | ||||||||||||||||||
|
Add/(Deduct):
Impact from current period settled contracts
|
||||||||||||||||||||||||
|
included
in Other (gains) losses, net
|
(7 | ) | (32 | ) |
45
|
3
|
||||||||||||||||||
|
Other
(gains) losses, net - economic fuel basis
|
$ |
16
|
$ |
13
|
n.a.
|
$ |
44
|
$ |
34
|
n.a.
|
||||||||||||||
|
Net
income, as reported
|
$ |
162
|
$ |
48
|
$ |
533
|
$ |
442
|
||||||||||||||||
|
Add/(Deduct):
Mark-to-market impact from fuel contracts
|
||||||||||||||||||||||||
|
settling
in future periods
|
(44 | ) |
123
|
(216 | ) |
18
|
||||||||||||||||||
|
Add/(Deduct):
Ineffectiveness from fuel hedges settling in future
periods
|
(11 | ) |
18
|
(4 | ) |
22
|
||||||||||||||||||
|
Add/(Deduct):
Fuel contract impact recognized in earnings
|
||||||||||||||||||||||||
|
in
prior periods for contracts settling in the current period
|
8
|
31
|
(58 | ) |
39
|
|||||||||||||||||||
|
Income
tax impact of unrealized items
|
18
|
(66 | ) |
107
|
(30 | ) | ||||||||||||||||||
|
Net
income - economic fuel basis
|
$ |
133
|
$ |
154
|
(13.6 | ) | $ |
362
|
$ |
491
|
(26.3 | ) | ||||||||||||
|
Net
income per share, diluted, as reported
|
$ |
.22
|
$ |
.06
|
$ |
.69
|
$ |
.53
|
||||||||||||||||
|
Add/(Deduct):
Impact of fuel contracts, net of income taxes
|
(.04 | ) |
.13
|
(.22 | ) |
.06
|
||||||||||||||||||
|
Net
income per share, diluted - economic fuel basis
|
$ |
.18
|
$ |
.19
|
(5.3 | ) | $ |
.47
|
$ |
.59
|
(20.3 | ) | ||||||||||||
|
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
|
Nine
months ended
|
|||||||||||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||||||||||
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
|
Revenue
passengers carried
|
23,553,366
|
21,558,982
|
9.3 | % |
66,956,318
|
62,757,726
|
6.7 | % | ||||||||||||||||
|
Enplaned
passengers
|
27,242,613
|
24,880,646
|
9.5 | % |
77,035,110
|
72,202,988
|
6.7 | % | ||||||||||||||||
|
Revenue
passenger miles (RPMs) (000s)
|
19,685,690
|
17,767,128
|
10.8 | % |
54,813,530
|
50,891,473
|
7.7 | % | ||||||||||||||||
|
Available
seat miles (ASMs) (000s)
|
25,715,957
|
23,784,615
|
8.1 | % |
74,377,009
|
68,748,057
|
8.2 | % | ||||||||||||||||
|
Load
factor
|
76.6 | % | 74.7 | % |
1.9
|
pts. | 73.7 | % | 74.0 | % |
(0.3)
|
pts. | ||||||||||||
|
Average
length of passenger haul (miles)
|
836
|
824
|
1.5 | % |
819
|
811
|
1.0 | % | ||||||||||||||||
|
Average
aircraft stage length (miles)
|
633
|
625
|
1.3 | % |
630
|
620
|
1.6 | % | ||||||||||||||||
|
Trips
flown
|
297,782
|
279,032
|
6.7 | % |
865,329
|
812,428
|
6.5 | % | ||||||||||||||||
|
Average
passenger fare
|
$105.37
|
$104.75
|
0.6 | % |
$105.57
|
$104.50
|
1.0 | % | ||||||||||||||||
|
Passenger
revenue yield per RPM (cents)
|
12.61
|
12.71
|
(0.8 | )% |
12.90
|
12.89
|
0.1 | % | ||||||||||||||||
|
Operating
revenue yield per ASM (cents)
|
10.06
|
9.85
|
2.1 | % |
9.91
|
9.91
|
0.0 | % | ||||||||||||||||
|
Operating
expenses per ASM (GAAP, in cents)
|
9.09
|
8.75
|
3.9 | % |
9.01
|
8.80
|
2.4 | % | ||||||||||||||||
|
Operating
expenses per ASM (economic, in cents)
|
9.08
|
8.75
|
3.8 | % |
9.03
|
8.74
|
3.3 | % | ||||||||||||||||
|
Operating
expenses per ASM, excluding fuel (cents)
|
6.52
|
6.38
|
2.2 | % |
6.55
|
6.50
|
0.8 | % | ||||||||||||||||
|
Fuel
costs per gallon, excluding fuel tax (unhedged)
|
$2.18
|
$2.12
|
2.8 | % |
$2.03
|
$2.03
|
0.0 | % | ||||||||||||||||
|
Fuel
costs per gallon, excluding fuel tax (GAAP)
|
$1.69
|
$1.56
|
8.3 | % |
$1.64
|
$1.53
|
7.2 | % | ||||||||||||||||
|
Fuel
costs per gallon, excluding fuel tax (economic)
|
$1.69
|
$1.57
|
7.6 | % |
$1.65
|
$1.48
|
11.5 | % | ||||||||||||||||
|
Fuel
consumed, in gallons (millions)
|
388
|
359
|
8.1 | % |
1,114
|
1,032
|
7.9 | % | ||||||||||||||||
|
Fulltime
equivalent Employees at period-end
|
33,787
|
32,144
|
5.1 | % |
33,787
|
32,144
|
5.1 | % | ||||||||||||||||
|
Size
of fleet at period-end
|
511
|
475
|
7.6 | % |
511
|
475
|
7.6 | % | ||||||||||||||||
/more
|
SOUTHWEST
AIRLINES CO.
|
||||||||
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
||||||||
|
(in
millions)
|
||||||||
|
(unaudited)
|
||||||||
|
September
30,
|
December
31,
|
|||||||
|
2007
|
2006
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ |
1,050
|
$ |
1,390
|
||||
|
Short-term
investments
|
507
|
369
|
||||||
|
Accounts
and other receivables
|
326
|
241
|
||||||
|
Inventories
of parts and supplies, at cost
|
204
|
181
|
||||||
|
Fuel
derivative contracts
|
697
|
369
|
||||||
|
Prepaid
expenses and other current assets
|
86
|
51
|
||||||
|
Total
current assets
|
2,870
|
2,601
|
||||||
|
Property
and equipment, at cost:
|
||||||||
|
Flight
equipment
|
12,698
|
11,769
|
||||||
|
Ground
property and equipment
|
1,458
|
1,356
|
||||||
|
Deposits
on flight equipment purchase contracts
|
655
|
734
|
||||||
|
14,811
|
13,859
|
|||||||
|
Less
allowance for depreciation and amortization
|
4,144
|
3,765
|
||||||
|
10,667
|
10,094
|
|||||||
|
Other
assets
|
987
|
765
|
||||||
| $ |
14,524
|
$ |
13,460
|
|||||
|
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ |
735
|
$ |
643
|
||||
|
Accrued
liabilities
|
1,972
|
1,323
|
||||||
|
Air
traffic liability
|
1,095
|
799
|
||||||
|
Current
maturities of long-term debt
|
24
|
122
|
||||||
|
Total
current liabilities
|
3,826
|
2,887
|
||||||
|
Long-term
debt less current maturities
|
1,555
|
1,567
|
||||||
|
Deferred
income taxes
|
2,404
|
2,104
|
||||||
|
Deferred
gains from sale and leaseback of aircraft
|
110
|
120
|
||||||
|
Other
deferred liabilities
|
360
|
333
|
||||||
|
Stockholders'
equity:
|
||||||||
|
Common
stock
|
808
|
808
|
||||||
|
Capital
in excess of par value
|
1,171
|
1,142
|
||||||
|
Retained
earnings
|
4,685
|
4,307
|
||||||
|
Accumulated
other comprehensive income
|
723
|
582
|
||||||
|
Treasury
stock, at cost
|
(1,118 | ) | (390 | ) | ||||
|
Total
stockholders' equity
|
6,269
|
6,449
|
||||||
| $ |
14,524
|
$ |
13,460
|
|||||
/more
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
||||||||||||||||
|
(in
millions)
|
||||||||||||||||
|
(unaudited)
|
||||||||||||||||
|
Three
months ended
|
Nine
months ended
|
|||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||
|
Net
income
|
$ |
162
|
$ |
48
|
$ |
533
|
$ |
442
|
||||||||
|
Adjustments
to reconcile net income to
|
||||||||||||||||
|
cash
provided by operating activities:
|
||||||||||||||||
|
Depreciation
and amortization
|
140
|
131
|
411
|
381
|
||||||||||||
|
Deferred
income taxes
|
105
|
24
|
272
|
238
|
||||||||||||
|
Amortization
of deferred gains on sale and
|
||||||||||||||||
|
leaseback
of aircraft
|
(4 | ) | (4 | ) | (11 | ) | (12 | ) | ||||||||
|
Share-based
compensation expense
|
4
|
20
|
30
|
66
|
||||||||||||
|
Excess
tax benefits from share-based
|
||||||||||||||||
|
compensation
arrangements
|
(2 | ) | (25 | ) | (30 | ) | (55 | ) | ||||||||
|
Changes
in certain assets and liabilities:
|
||||||||||||||||
|
Accounts
and other receivables
|
(5 | ) |
3
|
(85 | ) | (29 | ) | |||||||||
|
Other
current assets
|
(69 | ) |
121
|
(218 | ) |
47
|
||||||||||
|
Accounts
payable and accrued liabilities
|
(144 | ) | (744 | ) |
686
|
(173 | ) | |||||||||
|
Air
traffic liability
|
(27 | ) |
10
|
296
|
319
|
|||||||||||
|
Other,
net
|
(6 | ) |
97
|
(133 | ) |
39
|
||||||||||
|
Net
cash provided by (used in) operating activities
|
154
|
(319 | ) |
1,751
|
1,263
|
|||||||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||
|
Purchases
of property and equipment, net
|
(319 | ) | (381 | ) | (981 | ) | (1,046 | ) | ||||||||
|
Purchases
of short-term investments
|
(1,535 | ) | (1,277 | ) | (3,607 | ) | (3,348 | ) | ||||||||
|
Proceeds
from sales of short-term investments
|
1,538
|
1,319
|
3,469
|
3,245
|
||||||||||||
|
Proceeds
from ATA Airlines, Inc. debtor in possession loan
|
-
|
-
|
-
|
20
|
||||||||||||
|
Other,
net
|
-
|
-
|
-
|
1
|
||||||||||||
|
Net
cash used in investing activities
|
(316 | ) | (339 | ) | (1,119 | ) | (1,128 | ) | ||||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||
|
Proceeds
from Employee stock plans
|
36
|
90
|
128
|
226
|
||||||||||||
|
Payments
of long-term debt and capital lease obligations
|
(101 | ) | (1 | ) | (116 | ) | (137 | ) | ||||||||
|
Payments
of cash dividends
|
(3 | ) | (4 | ) | (14 | ) | (14 | ) | ||||||||
|
Repurchase
of common stock
|
(327 | ) | (98 | ) | (1,001 | ) | (600 | ) | ||||||||
|
Excess
tax benefits from share-based
|
||||||||||||||||
|
compensation
arrangements
|
2
|
25
|
30
|
55
|
||||||||||||
|
Other,
net
|
-
|
1
|
1
|
2
|
||||||||||||
|
Net
cash provided by (used in) financing activities
|
(393 | ) |
13
|
(972 | ) | (468 | ) | |||||||||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(555 | ) | (645 | ) | (340 | ) | (333 | ) | ||||||||
|
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
1,605
|
2,592
|
1,390
|
2,280
|
||||||||||||
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
$ |
1,050
|
$ |
1,947
|
$ |
1,050
|
$ |
1,947
|
||||||||
***