EX-1 3 ex99.txt EXHIBIT 99 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. /more
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