EXHIBIT 99.1 4TH QUARTER AND YEAR END 2007 FINANCIAL RESULTS
Published on January 23, 2008
Exhibit
99.1
CONTACT: Investor
Relations
(214) 792-4415
SOUTHWEST
AIRLINES REPORTS FOURTH QUARTER EARNINGS AND
35TH
CONSECUTIVE YEAR OF PROFITABILITY
DALLAS,
TEXAS – January 23, 2008 – Southwest Airlines (NYSE:LUV) today reported its
fourth quarter and full year 2007 results. Net income for fourth
quarter 2007 was $111 million, or $.15 per diluted share, compared to $57
million, or $.07 per diluted share, for fourth quarter
2006. Excluding special items, fourth quarter 2007 net income
was $87 million compared to $100 million in fourth quarter 2006, or $.12
per
diluted share in both years. The fourth quarter 2007 results,
excluding special items, exceed First Call’s mean estimate of $.10 per diluted
share. Refer to the reconciliation in the accompanying tables
for further information regarding special items.
For
the
full year 2007, net income was $645 million, or $.84 per diluted share, compared
to $499 million, or $.61 per diluted share, for 2006. Excluding
special items, full year 2007 net income was $471 million, or $.61 per diluted
share, compared to $578 million, or $.70 per diluted share for full year
2006.
Gary
C.
Kelly, CEO, stated: “While fourth quarter and full year results fell short of
our earnings goals, I am very proud of what our Employees accomplished during
2007. Although we were well prepared, 2007 was much more difficult
than anticipated due to rising energy prices throughout the year and softer
demand for domestic air travel. Given higher energy costs and signs
of domestic economic weakness, we took the necessary steps to slow our planned
aircraft fleet growth. In June, we reduced our planned growth for
fourth quarter 2007 and for 2008. In December, we further reduced our
2008 planned growth, pruning our flight schedule for May 2008.
“I
am
especially proud of our operations during 2007. Despite air traffic
congestion, unusually difficult weather, and security-related challenges,
we had
an exceptional year of operations, delivering excellent Customer
Service. We also have made great progress with our efforts to further
enhance our already outstanding Customer Experience. In fall 2007, we
launched our new Business Select product; Rapid Rewards frequent flyer program
enhancements; new boarding method; and our extreme gate
makeover. We are delighted with the Customer response.
“We
are
also excited to announce today our agreement with Row 44 to install equipment
on
four aircraft this summer to test inflight internet
connectivity. This is just one more way Southwest Airlines intends to
make Customers more productive.
"In
addition to our efforts to further strengthen our exceptional brand, we continue
to optimize our capital structure, repurchasing 66 million shares of common
stock for a total of $1.0 billion during 2007. Last week, we
announced a new share repurchase program to acquire up to $500 million of
the
Company's common stock. While we have more hard work ahead and a
cautious view on the economy, I am extremely proud of what our People have
accomplished, and we remain committed to our long-term financial targets
and
maximizing Shareholder value.
/more
“Turning
to our fourth quarter 2007 earnings performance, our net income per share,
excluding special items, was flat year-over-year at $.12 per diluted
share. Despite a softer domestic economy and our available seat mile
(ASM) growth of 5.6 percent, we grew our operating unit revenues 3.7
percent. We are encouraged by our year-over-year comparative trends,
which improved each month during fourth quarter 2007. Our new
Business Select product and other revenue management initiatives are on
track and contributing to favorable unit revenue comparisons thus
far in first quarter 2008.
“Our
fourth quarter 2007 unit costs, excluding special items, increased 4.1 percent
from a year ago to 9.15 cents, which was driven in large part by higher jet
fuel
costs. Even with a superb fuel hedging position and higher than
expected realized cash hedging gains of $300 million, our fourth quarter
2007
jet fuel costs increased 10.3 percent from a year ago to $1.72 per gallon
(economic). We have derivative contracts in place for approximately
75 percent of our first quarter 2008 estimated fuel consumption, capped at
an
average crude-equivalent price of approximately $51 per barrel. Based
on this derivative position and present market prices, we currently anticipate
our first quarter 2008 jet fuel costs (economic) will approximate $2.00 per
gallon. For the full year 2008, we have derivative contracts for
approximately 70 percent of our estimated fuel consumption at an average
crude-equivalent price of approximately $51 per barrel.
“Our
fourth quarter 2007 unit costs, excluding fuel, increased 1.7 percent from
a
year ago to 6.57 cents, which was somewhat better than
expected. Based on current cost trends and, especially,
increasing aircraft engine maintenance costs, we expect our first quarter
2008
unit costs, excluding fuel and anticipated gains from the sale of aircraft,
to
exceed fourth quarter 2007’s 6.57 cents.
"We
are
intensely focused on improving the efficiency and profitability of our flight
schedule, while continuing to bring low, friendly fares to our
markets. Although we are taking a cautious approach to our overall
fleet growth in 2008, we currently plan to grow our ASMs four to five percent
on
a year-over-year basis and remain well-positioned to respond quickly to
favorable market opportunities. We will accept 29 new Boeing
737-700s scheduled for 2008 delivery, and currently plan to reduce our existing
fleet by 22 aircraft, ending 2008 with 527 aircraft. Since third
quarter 2007, we have exercised three Boeing 737-700 options for delivery
in
2009, bringing our 2009 firm orders and options to 21 and seven,
respectively.
“As
we
enter 2008, I am pleased with our longer-term prospects and could not be
prouder
of our Employees. They are the heart and soul of our great Company,
and they continue to demonstrate the Warrior Spirit necessary to maintain
our
industry-leading competitive position and financial strength. Recent
Southwest recognitions include receiving the distinctive honor of the Best
Domestic Airline award by Travel
Weekly. In addition, the Company ranked number one in
the airline category of Corporate Research International’s customer service
survey. Finally, the Company received top ranking in the Zagat Survey
of Global Airlines in the categories for Frequent Flyer program and domestic
website.”
Southwest
will discuss its fourth quarter 2007 results on a conference call at11:30
a.m. Eastern Time today. A live broadcast of the conference call will
be available at southwest.com.
/more
Operating
Results
Total
operating revenues for fourth quarter 2007 increased 9.5 percent to $2.49
billion, compared to $2.28 billion for fourth quarter 2006. Total
fourth quarter 2007 operating expenses were $2.37 billion, compared to $2.10
billion in fourth quarter 2006. Operating income for fourth quarter
2007 was $126 million, a decrease of 27.6 percent as compared to $174 million
in
fourth quarter 2006. Excluding special items, operating income
increased 4.0 percent in fourth quarter 2007, to $180 million from $173 million
in fourth quarter 2006.
Operating
revenues for the year ended December 31, 2007 increased 8.5 percent, to $9.86
billion, from 2006, while operating expenses increased 11.3 percent to $9.07
billion, resulting in operating income of $791 million, a decrease of $143
million or 15.3 percent. Excluding special items, operating income
was $853 million, a decrease of $122 million, or 12.5 percent. The
Company’s 2007 jet fuel costs per
gallon (economic) increased 11.3 percent to $1.67 from the same period in
2006,
reflecting cash hedging gains of $727 million and $675 million in 2007 and
2006,
respectively.
"Other income" was $267 million for 2007 versus "other expenses" of $144
million
for 2006. The $411 million swing in total other expenses (income) primarily
resulted from $292 million in “other gains” recognized in 2007 versus $151
million in “other losses” recognized in 2006. In both periods, these
“other (gains) losses” primarily resulted from unrealized 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 $58 million in 2007 and $52 million in
2006 is
also included in "other (gains) losses”. Net interest expense
increased $32 million in 2007 compared to 2006, primarily due to decreased
interest income resulting from a decrease in average cash and short-term
investment balances on which the Company earns interest.
The
fourth quarter and full year 2007 income tax rates were both approximately
39
percent compared to approximately 44 and 37 percent for fourth quarter and
full
year 2006, respectively. The fourth quarter 2006 income tax rate of
44 percent reflects a $4 million increase to income tax expense,
which related to the State of Texas Franchise Tax law enacted in
2006. For the full year 2006, income tax expense decreased by $9
million due to this state law change. An August 2007 increase under a
State of Illinois income tax law was reversed by the State of Illinois in
January 2008. As a result of this 2008 change in Illinois state tax
law, there will be a decrease to the first quarter 2008 deferred tax liability
of approximately $11 million.
/more
Net
cash
provided by operations for 2007 was $2.85 billion, which included a $1.46
billion increase in fuel derivative collateral deposits related to future
periods. For the full year 2007, capital expenditures were $1.33
billion, and the Company also repurchased 66 million shares of its common
stock
for a total of $1.0 billion. On January 17, 2008, the Company’s Board
of Directors authorized a new share repurchase program to acquire up to $500
million of the Company’s common stock. This new program represents
the sixth authorized since January 2006. Over the past two years,
Southwest has repurchased 116 million shares of common stock for a total
of $1.8
billion.
During
fourth quarter 2007, the Company issued $500 million in Pass Through
Certificates secured by 16 aircraft. The Company also repaid $122
million in debt during 2007. Southwest ended the
year
with $2.8 billion in cash and short-term investments, which includes $2.0
billion in fuel derivative collateral deposits. In addition, the
Company also had a fully available unsecured revolving credit line of $600
million.
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 revenue and cost cutting
initiatives; (ii) its financial targets and expectations regarding results
of
operations; and (iii) its 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
|
Year
ended
|
|||||||||||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||||||||||
|
Percent
|
Percent
|
|||||||||||||||||||||||
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
|
OPERATING
REVENUES:
|
||||||||||||||||||||||||
|
Passenger
|
$ | 2,388 | $ | 2,191 | 9.0 | $ | 9,457 | $ | 8,750 | 8.1 | ||||||||||||||
|
Freight
|
35 | 32 | 9.4 | 130 | 134 | (3.0 | ) | |||||||||||||||||
|
Other
|
69 | 53 | 30.2 | 274 | 202 | 35.6 | ||||||||||||||||||
|
Total
operating revenues
|
2,492 | 2,276 | 9.5 | 9,861 | 9,086 | 8.5 | ||||||||||||||||||
|
OPERATING
EXPENSES:
|
||||||||||||||||||||||||
|
Salaries,
wages, and benefits
|
800 | 779 | 2.7 | 3,213 | 3,052 | 5.3 | ||||||||||||||||||
|
Fuel
and oil
|
705 | 557 | 26.6 | 2,536 | 2,138 | 18.6 | ||||||||||||||||||
|
Maintenance
materials and repairs
|
166 | 126 | 31.7 | 616 | 468 | 31.6 | ||||||||||||||||||
|
Aircraft
rentals
|
41 | 39 | 5.1 | 156 | 158 | (1.3 | ) | |||||||||||||||||
|
Landing
fees and other rentals
|
138 | 121 | 14.0 | 560 | 495 | 13.1 | ||||||||||||||||||
|
Depreciation
and amortization
|
143 | 134 | 6.7 | 555 | 515 | 7.8 | ||||||||||||||||||
|
Other
operating expenses
|
373 | 346 | 7.8 | 1,434 | 1,326 | 8.1 | ||||||||||||||||||
|
Total
operating expenses
|
2,366 | 2,102 | 12.6 | 9,070 | 8,152 | 11.3 | ||||||||||||||||||
|
OPERATING
INCOME
|
126 | 174 | (27.6 | ) | 791 | 934 | (15.3 | ) | ||||||||||||||||
|
OTHER
EXPENSES (INCOME):
|
||||||||||||||||||||||||
|
Interest
expense
|
33 | 28 | 17.9 | 119 | 128 | (7.0 | ) | |||||||||||||||||
|
Capitalized
interest
|
(10 | ) | (13 | ) | (23.1 | ) | (50 | ) | (51 | ) | (2.0 | ) | ||||||||||||
|
Interest
income
|
(8 | ) | (22 | ) | (63.6 | ) | (44 | ) | (84 | ) | (47.6 | ) | ||||||||||||
|
Other
(gains) losses, net
|
(72 | ) | 80 |
n.a.
|
(292 | ) | 151 |
n.a.
|
||||||||||||||||
|
Total
other expenses (income)
|
(57 | ) | 73 |
n.a.
|
(267 | ) | 144 |
n.a.
|
||||||||||||||||
|
INCOME
BEFORE INCOME TAXES
|
183 | 101 | 81.2 | 1,058 | 790 | 33.9 | ||||||||||||||||||
|
PROVISION
FOR INCOME TAXES
|
72 | 44 | 63.6 | 413 | 291 | 41.9 | ||||||||||||||||||
|
NET
INCOME
|
$ | 111 | $ | 57 | 94.7 | $ | 645 | $ | 499 | 29.3 | ||||||||||||||
|
NET
INCOME PER SHARE:
|
||||||||||||||||||||||||
|
Basic
|
$.15 | $.07 | $.85 | $.63 | ||||||||||||||||||||
|
Diluted
|
$.15 | $.07 | $.84 | $.61 | ||||||||||||||||||||
|
WEIGHTED
AVERAGE SHARES OUTSTANDING:
|
||||||||||||||||||||||||
|
Basic
|
734 | 790 | 757 | 795 | ||||||||||||||||||||
|
Diluted
|
742 | 813 | 768 | 824 | ||||||||||||||||||||
/more
|
SOUTHWEST
AIRLINES CO.
|
||||||||||||||||||||||
|
RECONCILIATION
OF REPORTED AMOUNTS TO NON-GAAP ITEMS (SEE NOTE)
|
||||||||||||||||||||||
|
(in
millions, except per share amounts)
|
||||||||||||||||||||||
|
(unaudited)
|
||||||||||||||||||||||
|
Note
regarding use of non-GAAP financial measures
|
||||||||||||||||||||||
|
The
special items referred to in this news release are non-GAAP items
that are
provided as supplemental information. These items should not be relied
upon as
|
||||||||||||||||||||||
|
alternative
measures to Generally Accepted Accounting Principles (GAAP) and include
(i) items calculated on an "economic" basis, which excludes certain
items
|
||||||||||||||||||||||
|
that
are recorded as a result of SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended, and (ii) other special
items that management
|
||||||||||||||||||||||
|
believes
are necessary to provide it and its Investors the ability to measure
and
monitor the Company's performance on a consistent basis.
|
||||||||||||||||||||||
|
Items
calculated on an "economic" basis consist of gains or losses for
derivative instruments that settled in the current accounting period,
but
were either recognized
|
||||||||||||||||||||||
|
in
a prior period or will be recognized in a future period in GAAP
results. The items excluded from economic results primarily include
ineffectiveness, as defined, for
|
||||||||||||||||||||||
|
future
period instruments, and changes in market value for future period
derivatives that no longer qualify for special hedge accounting,
as
defined in SFAS 133.
|
||||||||||||||||||||||
|
Other
special items include a charge during third quarter 2007 related
to the
Company's voluntary early retirement program, a change in the Illinois
state income tax law
|
||||||||||||||||||||||
|
resulting
in an increase in income taxes during third quarter 2007, which increase
has already been reversed in first quarter 2008 due to the January
reversal of the
|
||||||||||||||||||||||
|
state
income tax law change in August 2007, and a 2006 change in the Texas
state
tax law related to franchise taxes. Management does not believe these
types of items
|
||||||||||||||||||||||
|
are
a meaningful indicator of the Company's ongoing
performance.
|
||||||||||||||||||||||
|
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.
|
||||||||||||||||||||||
|
Three
Months Ended
|
Year
Ended
|
|||||||||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||||||||
|
Percent
|
Percent
|
|||||||||||||||||||||
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||
|
Fuel
and oil expense - unhedged
|
$ | 951 | $ | 676 | $ | 3,222 | $ | 2,772 | ||||||||||||||
|
Less:
Fuel hedge gains included in fuel and oil expense
|
(246 | ) | (119 | ) | (686 | ) | (634 | ) | ||||||||||||||
|
Fuel
and oil expense - GAAP
|
$ | 705 | $ | 557 | 26.6 | $ | 2,536 | $ | 2,138 | 18.6 | ||||||||||||
|
Add/(Deduct):
Net impact from fuel contracts
|
(54 | ) | 1 | (41 | ) | (41 | ) | |||||||||||||||
|
Fuel
and oil expense - economic
|
$ | 651 | $ | 558 | 16.7 | $ | 2,495 | $ | 2,097 | 19.0 | ||||||||||||
|
Operating
income, as reported
|
$ | 126 | $ | 174 | $ | 791 | $ | 934 | ||||||||||||||
|
Add/(Deduct):
Net impact from fuel contracts
|
54 | (1 | ) | 41 | 41 | |||||||||||||||||
| $ | 180 | $ | 173 | $ | 832 | $ | 975 | |||||||||||||||
|
Add:
Charge from voluntary early out program, net
|
- | - | 21 | - | ||||||||||||||||||
|
Operating
income, non-GAAP
|
$ | 180 | $ | 173 | 4.0 | $ | 853 | $ | 975 | (12.5 | ) | |||||||||||
|
Other
(gains) losses, net, as reported
|
$ | (72 | ) | $ | 80 | $ | (292 | ) | $ | 151 | ||||||||||||
|
Add/(Deduct):
Net impact from fuel contracts
|
94 | (64 | ) | 360 | (101 | ) | ||||||||||||||||
|
Other
(gains) losses, net, excluding special items
|
$ | 22 | $ | 16 |
n.a.
|
$ | 68 | $ | 50 |
n.a.
|
||||||||||||
|
Net
income, as reported
|
$ | 111 | $ | 57 | $ | 645 | $ | 499 | ||||||||||||||
|
Add/(Deduct):
Net impact from fuel contracts
|
(40 | ) | 63 | (319 | ) | 142 | ||||||||||||||||
|
Income
tax impact of unrealized items
|
16 | (24 | ) | 122 | (54 | ) | ||||||||||||||||
| $ | 87 | $ | 96 | $ | 448 | $ | 587 | |||||||||||||||
|
Add:
Charge from voluntary early out program, net
|
- | - | 12 | - | ||||||||||||||||||
|
Add:
Charge from change in Illinois state income tax law, net
|
- | - | 11 | - | ||||||||||||||||||
|
Add/(Deduct):
Change in Texas state tax law, net
|
- | 4 | - | (9 | ) | |||||||||||||||||
|
Net
income, non-GAAP
|
$ | 87 | $ | 100 | (13.0 | ) | $ | 471 | $ | 578 | (18.5 | ) | ||||||||||
|
Net
income per share, diluted, as reported
|
$ | .15 | $ | .07 | $ | .84 | $ | .61 | ||||||||||||||
|
Add/(Deduct):
Net impact from fuel contracts
|
(.03 | ) | .05 | (.26 | ) | .10 | ||||||||||||||||
| $ | .12 | $ | .12 | $ | .58 | $ | .71 | |||||||||||||||
|
Add:
Impact of special items, net
|
- | - | .03 | (.01 | ) | |||||||||||||||||
|
Net
income per share, diluted, non-GAAP
|
$ | .12 | $ | .12 | (0.0 | ) | $ | .61 | $ | .70 | (12.9 | ) | ||||||||||
/more
|
SOUTHWEST
AIRLINES CO.
|
||||||||||||||||
|
RECONCILIATION
OF IMPACT FROM FUEL CONTRACTS (SEE PREVIOUS NOTE)
|
||||||||||||||||
|
(in
millions, except per share amounts)
|
||||||||||||||||
|
(unaudited)
|
||||||||||||||||
|
Three
Months Ended
|
Year
Ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Fuel
&
Oil
Expense
|
||||||||||||||||
|
Add/(Deduct):
Impact from current period settled contracts
|
||||||||||||||||
|
included
in Other (gains) losses, net
|
$ | (11 | ) | $ | 2 | $ | (90 | ) | $ | 20 | ||||||
|
Add/(Deduct):
Fuel contract impact recognized in earnings in
|
||||||||||||||||
|
prior
or future periods for contracts settling in the current
period
|
(43 | ) | (1 | ) | 49 | (61 | ) | |||||||||
|
Impact
from fuel contracts to Fuel & Oil Expense
|
$ | (54 | ) | $ | 1 | $ | (41 | ) | $ | (41 | ) | |||||
|
Operating
Income
|
||||||||||||||||
|
Add/(Deduct):
Impact from current period settled contracts
|
||||||||||||||||
|
included
in Other (gains) losses, net
|
$ | 11 | $ | (2 | ) | $ | 90 | $ | (20 | ) | ||||||
|
Add/(Deduct):
Fuel contract impact recognized in earnings in
|
||||||||||||||||
|
prior
or future periods for contracts settling in the current
period
|
43 | 1 | (49 | ) | 61 | |||||||||||
|
Impact
from fuel contracts to Operating Income
|
$ | 54 | $ | (1 | ) | $ | 41 | $ | 41 | |||||||
|
Other
(gains)
losses
|
||||||||||||||||
|
Add/(Deduct):
Mark-to-market impact from fuel contracts
|
||||||||||||||||
|
settling
in future periods
|
$ | 38 | $ | (34 | ) | $ | 219 | $ | (42 | ) | ||||||
|
Add/(Deduct):
Ineffectiveness from fuel hedges settling in future
periods
|
45 | (28 | ) | 51 | (39 | ) | ||||||||||
|
Add/(Deduct):
Impact from current period settled contracts
|
||||||||||||||||
|
included
in Other (gains) losses, net
|
11 | (2 | ) | 90 | (20 | ) | ||||||||||
|
Impact
from fuel contracts to Other (gains) losses
|
$ | 94 | $ | (64 | ) | $ | 360 | $ | (101 | ) | ||||||
|
Net
Income
|
||||||||||||||||
|
Add/(Deduct):
Mark-to-market impact from fuel contracts
|
||||||||||||||||
|
settling
in future periods
|
$ | (38 | ) | $ | 34 | $ | (219 | ) | $ | 42 | ||||||
|
Add/(Deduct):
Ineffectiveness from fuel hedges settling in future
periods
|
(45 | ) | 28 | (51 | ) | 39 | ||||||||||
|
Add/(Deduct):
Fuel contract impact recognized in earnings in
|
||||||||||||||||
|
prior
or future periods for contracts settling in the current
period
|
43 | 1 | (49 | ) | 61 | |||||||||||
|
Impact
from fuel contracts to Net Income *
|
$ | (40 | ) | $ | 63 | $ | (319 | ) | $ | 142 | ||||||
|
*
Excludes income tax impact of unrealized items
|
||||||||||||||||
/more
|
COMPARATIVE
CONSOLIDATED OPERATING STATISTICS
|
||||||||||||||||||||||||
|
(unaudited)
|
||||||||||||||||||||||||
|
Three
months ended
|
Year
ended
|
|||||||||||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||||||||||
|
2007
|
2006
|
Change
|
2007
|
2006
|
Change
|
|||||||||||||||||||
|
Revenue
passengers carried
|
21,757,154 | 21,057,097 | 3.3 | % | 88,713,472 | 83,814,823 | 5.8 | % | ||||||||||||||||
|
Enplaned
passengers
|
24,875,699 | 24,073,919 | 3.3 | % | 101,910,809 | 96,276,907 | 5.9 | % | ||||||||||||||||
|
Revenue
passenger miles (RPMs) (000s)
|
17,505,282 | 16,799,816 | 4.2 | % | 72,318,812 | 67,691,289 | 6.8 | % | ||||||||||||||||
|
Available
seat miles (ASMs) (000s)
|
25,258,958 | 23,914,966 | 5.6 | % | 99,635,967 | 92,663,023 | 7.5 | % | ||||||||||||||||
|
Load
factor
|
69.3 | % | 70.2 | % |
(0.9)
|
pts. | 72.6 | % | 73.1 | % |
(0.5)
|
pts. | ||||||||||||
|
Average
length of passenger haul (miles)
|
805 | 798 | 0.9 | % | 815 | 808 | 0.9 | % | ||||||||||||||||
|
Average
aircraft stage length (miles)
|
627 | 626 | 0.2 | % | 629 | 622 | 1.1 | % | ||||||||||||||||
|
Trips
flown
|
295,370 | 279,903 | 5.5 | % | 1,160,699 | 1,092,331 | 6.3 | % | ||||||||||||||||
|
Average
passenger fare
|
$109.77 | $104.07 | 5.5 | % | $106.60 | $104.40 | 2.1 | % | ||||||||||||||||
|
Passenger
revenue yield per RPM (cents)
|
13.64 | 13.04 | 4.6 | % | 13.08 | 12.93 | 1.2 | % | ||||||||||||||||
|
Operating
revenue yield per ASM (cents)
|
9.87 | 9.52 | 3.7 | % | 9.90 | 9.81 | 0.9 | % | ||||||||||||||||
|
CASM,
GAAP (cents)
|
9.37 | 8.79 | 6.6 | % | 9.10 | 8.80 | 3.4 | % | ||||||||||||||||
|
CASM,
GAAP excluding fuel (cents)
|
6.57 | 6.46 | 1.7 | % | 6.56 | 6.49 | 1.1 | % | ||||||||||||||||
|
CASM,
excluding special items (cents)
|
9.15 | 8.79 | 4.1 | % | 9.04 | 8.75 | 3.3 | % | ||||||||||||||||
|
CASM,
excluding fuel and special items (cents)
|
6.57 | 6.46 | 1.7 | % | 6.54 | 6.49 | 0.8 | % | ||||||||||||||||
|
Fuel
costs per gallon, excluding fuel tax (unhedged)
|
$2.52 | $1.89 | 33.3 | % | $2.16 | $1.99 | 8.5 | % | ||||||||||||||||
|
Fuel
costs per gallon, excluding fuel tax (GAAP)
|
$1.87 | $1.55 | 20.6 | % | $1.70 | $1.53 | 11.1 | % | ||||||||||||||||
|
Fuel
costs per gallon, excluding fuel tax (economic)
|
$1.72 | $1.56 | 10.3 | % | $1.67 | $1.50 | 11.3 | % | ||||||||||||||||
|
Fuel
consumed, in gallons (millions)
|
376 | 357 | 5.3 | % | 1,489 | 1,389 | 7.2 | % | ||||||||||||||||
|
Fulltime
equivalent Employees at period-end
|
34,378 | 32,664 | 5.2 | % | 34,378 | 32,664 | 5.2 | % | ||||||||||||||||
|
Size
of fleet at period-end
|
520 | 481 | 8.1 | % | 520 | 481 | 8.1 | % | ||||||||||||||||
|
CASM
(unit costs) - Operating expenses per ASM
|
||||||||||||||||||||||||
/more
|
SOUTHWEST
AIRLINES CO.
|
||||||||
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
||||||||
|
(in
millions)
|
||||||||
|
(unaudited)
|
||||||||
|
December
31,
|
December
31,
|
|||||||
|
2007
|
2006
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 2,213 | $ | 1,390 | ||||
|
Short-term
investments
|
566 | 369 | ||||||
|
Accounts
and other receivables
|
279 | 241 | ||||||
|
Inventories
of parts and supplies, at cost
|
259 | 181 | ||||||
|
Fuel
derivative contracts
|
1,069 | 369 | ||||||
|
Prepaid
expenses and other current assets
|
57 | 51 | ||||||
|
Total
current assets
|
4,443 | 2,601 | ||||||
|
Property
and equipment, at cost:
|
||||||||
|
Flight
equipment
|
13,019 | 11,769 | ||||||
|
Ground
property and equipment
|
1,515 | 1,356 | ||||||
|
Deposits
on flight equipment purchase contracts
|
626 | 734 | ||||||
| 15,160 | 13,859 | |||||||
|
Less
allowance for depreciation and amortization
|
4,286 | 3,765 | ||||||
| 10,874 | 10,094 | |||||||
|
Other
assets
|
1,455 | 765 | ||||||
| $ | 16,772 | $ | 13,460 | |||||
|
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 759 | $ | 643 | ||||
|
Accrued
liabilities
|
3,107 | 1,323 | ||||||
|
Air
traffic liability
|
931 | 799 | ||||||
|
Current
maturities of long-term debt
|
41 | 122 | ||||||
|
Total
current liabilities
|
4,838 | 2,887 | ||||||
|
Long-term
debt less current maturities
|
2,050 | 1,567 | ||||||
|
Deferred
income taxes
|
2,535 | 2,104 | ||||||
|
Deferred
gains from sale and leaseback of aircraft
|
106 | 120 | ||||||
|
Other
deferred liabilities
|
302 | 333 | ||||||
|
Stockholders'
equity:
|
||||||||
|
Common
stock
|
808 | 808 | ||||||
|
Capital
in excess of par value
|
1,207 | 1,142 | ||||||
|
Retained
earnings
|
4,788 | 4,307 | ||||||
|
Accumulated
other comprehensive income
|
1,241 | 582 | ||||||
|
Treasury
stock, at cost
|
(1,103 | ) | (390 | ) | ||||
|
Total
stockholders' equity
|
6,941 | 6,449 | ||||||
| $ | 16,772 | $ | 13,460 | |||||
/more
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
||||||||||||||||
|
(in
millions)
|
||||||||||||||||
|
(unaudited)
|
||||||||||||||||
|
Three
months ended
|
Year
ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||
|
Net
income
|
$ | 111 | $ | 57 | $ | 645 | $ | 499 | ||||||||
|
Adjustments
to reconcile net income to
|
||||||||||||||||
|
cash
provided by operating activities:
|
||||||||||||||||
|
Depreciation
and amortization
|
143 | 134 | 555 | 515 | ||||||||||||
|
Deferred
income taxes
|
57 | 39 | 328 | 277 | ||||||||||||
|
Amortization
of deferred gains on sale and
|
||||||||||||||||
|
leaseback
of aircraft
|
(3 | ) | (4 | ) | (14 | ) | (16 | ) | ||||||||
|
Share-based
compensation expense
|
7 | 14 | 37 | 80 | ||||||||||||
|
Excess
tax benefits from share-based
|
||||||||||||||||
|
compensation
arrangements
|
2 | (5 | ) | (28 | ) | (60 | ) | |||||||||
|
Changes
in certain assets and liabilities:
|
||||||||||||||||
|
Accounts
and other receivables
|
47 | 24 | (38 | ) | (5 | ) | ||||||||||
|
Other
current assets
|
(11 | ) | 40 | (229 | ) | 87 | ||||||||||
|
Accounts
payable and accrued liabilities
|
924 | (50 | ) | 1,609 | (223 | ) | ||||||||||
|
Air
traffic liability
|
(164 | ) | (169 | ) | 131 | 150 | ||||||||||
|
Other,
net
|
(19 | ) | 63 | (151 | ) | 102 | ||||||||||
|
Net
cash provided by (used in) operating activities
|
1,094 | 143 | 2,845 | 1,406 | ||||||||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||
|
Purchases
of property and equipment, net
|
(350 | ) | (353 | ) | (1,331 | ) | (1,399 | ) | ||||||||
|
Purchases
of short-term investments
|
(1,479 | ) | (1,161 | ) | (5,086 | ) | (4,509 | ) | ||||||||
|
Proceeds
from sales of short-term investments
|
1,419 | 1,147 | 4,888 | 4,392 | ||||||||||||
|
Proceeds
from ATA Airlines, Inc. debtor in possession loan
|
- | - | - | 20 | ||||||||||||
|
Other,
net
|
- | - | - | 1 | ||||||||||||
|
Net
cash used in investing activities
|
(410 | ) | (367 | ) | (1,529 | ) | (1,495 | ) | ||||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||
|
Issuance
of long-term debt
|
500 | 300 | 500 | 300 | ||||||||||||
|
Proceeds
from Employee stock plans
|
11 | 35 | 139 | 260 | ||||||||||||
|
Payments
of long-term debt and capital lease obligations
|
(6 | ) | (470 | ) | (122 | ) | (607 | ) | ||||||||
|
Payments
of cash dividends
|
- | - | (14 | ) | (14 | ) | ||||||||||
|
Repurchase
of common stock
|
- | (200 | ) | (1,001 | ) | (800 | ) | |||||||||
|
Excess
tax benefits from share-based
|
||||||||||||||||
|
compensation
arrangements
|
(2 | ) | 5 | 28 | 60 | |||||||||||
|
Other,
net
|
(24 | ) | (3 | ) | (23 | ) | - | |||||||||
|
Net
cash provided by (used in) financing activities
|
479 | (333 | ) | (493 | ) | (801 | ) | |||||||||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
1,163 | (557 | ) | 823 | (890 | ) | ||||||||||
|
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
1,050 | 1,947 | 1,390 | 2,280 | ||||||||||||
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
$ | 2,213 | $ | 1,390 | $ | 2,213 | $ | 1,390 | ||||||||
/more
|
REVISED
737-700 DELIVERY SCHEDULE
|
||||||||||||||||||||
|
AS
OF DECEMBER 31, 2007
|
||||||||||||||||||||
|
The
Boeing Company
|
||||||||||||||||||||
|
Purchase
|
Previously
|
|||||||||||||||||||
|
Firm
|
Options
|
Rights
|
Owned
|
Total
|
||||||||||||||||
|
2007
|
37 | 2 | 39 | |||||||||||||||||
|
2008
|
29 | 29 | * | |||||||||||||||||
|
2009
|
20 | 8 | 28 | ** | ||||||||||||||||
|
2010
|
10 | 24 | 34 | |||||||||||||||||
|
2011
|
10 | 22 | 32 | |||||||||||||||||
|
2012
|
10 | 30 | 40 | |||||||||||||||||
|
2013
|
19 | 19 | ||||||||||||||||||
|
2014
|
10 | 10 | ||||||||||||||||||
|
Through
2014
|
54 | 54 | ||||||||||||||||||
|
Total
|
145 | 84 | 54 | 2 | 285 | |||||||||||||||
|
*
Currently plan to reduce fleet by 22 aircraft, bringing 2008 net
additions
to 7 aircraft.
|
||||||||||||||||||||
|
2008
delivery dates: 12 in first quarter, 9 in second quarter, 5 in third
quarter and
|
||||||||||||||||||||
|
3
in fourth quarter.
|
||||||||||||||||||||
|
**
Exercised one option in January 2008, bringing 2009 firm orders and
options to
|
||||||||||||||||||||
|
21
and 7, respectively.
|
||||||||||||||||||||
/more