-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IoJxC5avOqLAQxOb5I2AskzknoTArl9KHpsqGXIAbj1M9VhP+lTrrShBguoGO81O A3bPEgEemKtSWUHYjktaxg== 0000092380-04-000006.txt : 20040415 0000092380-04-000006.hdr.sgml : 20040415 20040415084907 ACCESSION NUMBER: 0000092380-04-000006 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040331 ITEM INFORMATION: FILED AS OF DATE: 20040415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHWEST AIRLINES CO CENTRAL INDEX KEY: 0000092380 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 741563240 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07259 FILM NUMBER: 04734678 BUSINESS ADDRESS: STREET 1: 2702 LOVE FIELD DR STREET 2: P O BOX 36611 CITY: DALLAS STATE: TX ZIP: 75235 BUSINESS PHONE: 2147924000 MAIL ADDRESS: STREET 1: PO BOX 36611 CITY: DALLAS STATE: TX ZIP: 75235-1611 FORMER COMPANY: FORMER CONFORMED NAME: AIR SOUTHWEST CO DATE OF NAME CHANGE: 19760108 8-K 1 earnings8k1q04.txt 8K COVER PAGE SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 15, 2004 SOUTHWEST AIRLINES CO. (Exact name of registrant as specified in its charter) TEXAS (State or other jurisdiction of incorporation) 1-7259 74-1563240 (Commission File Number) (IRS Employer Identification No.) P. O. Box 36611, Dallas, Texas 75235-1611 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (214) 792-4000 N/A (Former name or former address, if changed since last report) Item 12. Results of Operations and Financial Condition. On April 15, 2004, the Registrant issued a press release announcing its financial results for the first quarter of 2004. The press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference. The information furnished in this Item 12 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Exchange Act of 1933, as amended, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SOUTHWEST AIRLINES CO. (Registrant) By: /s/ Gary C. Kelly Gary C. Kelly Executive Vice President - Chief Financial Officer Date: April 15, 2004
INDEX TO EXHIBITS Exhibit No. Exhibit 99.1 Registrant's First Quarter 2004 Earnings Release.
EX-1 3 ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 CONTACT: Investor Relations (214) 792-4415 SOUTHWEST AIRLINES REPORTS FIRST QUARTER EARNINGS OF $26 MILLION DALLAS, TEXAS -- April 15, 2004 -- Southwest Airlines' net income for first quarter 2004 was $26 million, compared to first quarter 2003 net income of $24 million, an increase of 8.3 percent. Net income per diluted share was $.03 in both first quarter 2004 and first quarter 2003. The Company's first quarter 2004 net income included $18 million of expenses related to the consolidation of its reservation operations, which was excluded from First Call's mean estimate of $.04 for first quarter 2004. Total operating revenues for first quarter 2004 increased 9.8 percent to $1.48 billion, compared to $1.35 billion for first quarter 2003. Revenue passenger miles (RPMs) increased 8.2 percent in first quarter 2004, compared to a 5.6 percent increase in available seat miles (ASMs), resulting in a load factor of 64.2 percent versus the first quarter 2003 load factor of 62.6 percent. The passenger revenue yield per RPM increased 1.0 percent to 12.11 cents from 11.99 cents in first quarter 2003. Operating revenue yield per ASM (RASM) increased 3.9 percent to 8.07 cents from 7.77 cents in first quarter 2003. Total first quarter 2004 operating expenses were $1.44 billion, an increase of 10.2 percent, compared to $1.31 billion for the same year ago period. Effective February 28, 2004, the Company consolidated its nine reservation centers into six, which resulted in an $18 million increase in total operating expenses for the first quarter. These expenses primarily related to Employee severance and relocation packages. Operating expenses per ASM (CASM) for first quarter 2004 increased 4.3 percent to 7.82 cents from 7.50 cents in first quarter 2003. In addition to the $18 million in costs associated with the consolidation of the Company's reservation operations, the CASM increase was primarily due to higher labor, airport, and jet fuel costs, net of hedging gains and improved fuel efficiency, partially offset by lower commission expense. The Company's hedging program resulted in the recognition of $63 million and $64 million in effective hedging gains in first quarter fuel and oil expense in 2004 and 2003, respectively. /more "Other expenses" were $5 million and $7 million for first quarter 2004 and 2003, respectively. Interest expense declined 26.9 percent due to lower effective interest rates and the October 2003 redemption of $100 million of senior unsecured 8 3/4 percent Notes. Capitalized interest increased to $10 million from $7 million in first quarter 2003 as a result of higher Boeing aircraft progress payments. James F. Parker, Vice Chairman and Chief Executive Officer, stated: "Considering record high energy costs and the challenging revenue environment our industry faced in first quarter 2004, we are grateful to report our 52nd consecutive quarterly profit. Although our revenue recovery has been inconsistent, currently we are encouraged by the tremendous Customer response to our first quarter 2004 fare sales. Our March 2004 load factor of 73.6 percent was a record for the month of March. Based on current traffic and bookings trends, we expect another strong load factor performance in April 2004. We have also been encouraged by the significant pickup in May and June bookings. Although RPM yields may be diluted with a higher mix of discounted fares, barring any adverse, uncontrollable external events, we expect unit revenues for second quarter 2004 to exceed second quarter 2003's performance of 8.47 cents. "Our first quarter 2004 unit cost increase of 4.3 percent was as expected. Even though we mitigated record high energy costs in first quarter 2004 with hedging gains of $63 million, our average jet fuel price for first quarter 2004 increased 6.4 percent to 79.6 cents per gallon. We remain over 80 percent hedged for the remainder of 2004 with prices capped below $24 per barrel. We are also approximately 80 percent hedged for 2005 with prices capped at approximately $25 per barrel. "In addition to our successful hedging program, we have continued our efforts to control costs. Effective December 15, 2003, we eliminated our travel agency commission, which will lower operating costs by approximately $40 million annually. Due to the popularity of southwest.com, we recently consolidated our reservation operations. Although, as a result of such consolidation, we incurred expenses of $18 million during first quarter 2004, savings for the balance of the year could recoup most or all of that amount and, then, exceed it thereafter. We are also in the process of adding Blended Winglets to our 737-700 aircraft. Southwest expects to save three to four percent of jet fuel gallons consumed annually for each aircraft outfitted with the winglets. "Southwest is committed to low fares, and we understand that maintaining our low cost structure is the way to protect our competitive advantage and maintain job security for our People. While we expect second /more quarter 2004 overall unit costs to be in line with first quarter's 7.82 cents, which reveals another year over year increase, unit cost pressures should ease in second half 2004. "We remain excited about our future growth opportunities and recently exercised options to acquire three more 737-700s in 2005, which brings our current 2005 firm aircraft orders and options to 31 and 3, respectively. We are very pleased with the overwhelming Customer response to our upcoming Philadelphia service. We will launch service on May 9, 2004 and will have 28 daily nonstop flights to 13 cities by mid-summer. "Southwest was once again recognized by FORTUNE as one of America's Most Admired Companies and America's most admired airline. We are very proud of the magnificent People of Southwest. Their greatness and accomplishments are unsurpassed in the airline industry." Net cash provided by operations was $417 million and capital expenditures were $360 million for first quarter 2004. During first quarter 2004, the Company repurchased approximately 8.5 million of its common shares for a total of approximately $125 million with present and anticipated proceeds from Employee stock option exercises. We ended first quarter 2004 with $1.8 billion cash on hand. Half of the Company's $575 million undrawn bank credit facility expires during April 2004 and the other half expires in April 2005. The Company has received commitments to fully replace these lines of credit and expects to close on a new three-year $575 million facility during April 2004. Southwest Airlines will conduct a conference call to discuss its quarterly earnings today at 11:30 a.m. Eastern Time. A live broadcast of the conference call will be available at 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 2003. 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 2004 2003 Change OPERATING REVENUES: Passenger $1,428 $1,306 9.3 Freight 25 22 13.6 Other 31 23 34.8 Total operating revenues 1,484 1,351 9.8 OPERATING EXPENSES: Salaries, wages, and benefits 589 516 14.1 Fuel and oil 230 208 10.6 Maintenance materials and repairs 114 106 7.5 Agency commissions 2 12 (83.3) Aircraft rentals 45 45 - Landing fees and other rentals 103 90 14.4 Depreciation and amortization 103 93 10.8 Other operating expenses 252 235 7.2 Total operating expenses 1,438 1,305 10.2 OPERATING INCOME 46 46 - OTHER EXPENSES (INCOME): Interest expense 19 26 (26.9) Capitalized interest (10) (7) 42.9 Interest income (4) (5) (20.0) Other (gains) losses, net - (7) n.a. Total other expenses (income) 5 7 n.a. INCOME BEFORE INCOME TAXES 41 39 5.1 PROVISION FOR INCOME TAXES 15 15 - NET INCOME $26 $24 8.3 NET INCOME PER SHARE: Basic $ .03 $ .03 Diluted $ .03 $ .03 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 785 778 Diluted 817 808
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SOUTHWEST AIRLINES CO. COMPARATIVE CONSOLIDATED OPERATING STATISTICS (unaudited) Three months ended March 31, 2004 2003 Change Revenue passengers carried 15,995,061 15,077,537 6.1 % Enplaned passengers 18,190,404 17,169,572 5.9 % Revenue passenger miles (RPMs) (000s) 11,792,423 10,895,701 8.2 % Available seat miles (ASMs) (000s) 18,381,592 17,399,132 5.6 % Load factor 64.2% 62.6% 1.6 pts. Average length of passenger haul (miles) 737 723 1.9 % Average aircraft stage length (miles) 568 552 2.9 % Trips flown 238,469 233,087 2.3 % Average passenger fare $89.28 $86.64 3.0 % Passenger revenue yield per RPM (cents) 12.11 11.99 1.0 % Operating revenue yield per ASM (cents) 8.07 7.77 3.9 % Operating expenses per ASM (cents) 7.82 7.50 4.3 % Operating expenses per ASM, excluding fuel (cents) 6.57 6.30 4.3 % Fuel costs per gallon, excluding fuel tax (cents) 79.6 74.8 6.4 % Fuel consumed, in gallons (millions) 287 277 3.6 % Number of Employees at period-end 31,522 33,140 (4.9)% Size of fleet at period-end 393 377 4.2 %
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SOUTHWEST AIRLINES CO. CONDENSED CONSOLIDATED BALANCE SHEET (unaudited) March 31, December 31, (in millions) 2004 2003 ASSETS Current assets: Cash and cash equivalents $1,824 $1,865 Accounts and other receivables 178 132 Inventories of parts and supplies, at cost 105 93 Fuel hedge contracts 231 164 Prepaid expenses and other current assets 62 59 Total current assets 2,400 2,313 Property and equipment, at cost: Flight equipment 8,794 8,646 Ground property and equipment 1,100 1,117 Deposits on flight equipment purchase contracts 939 787 10,833 10,550 Less allowance for depreciation and amortization 3,150 3,107 7,683 7,443 Other assets 188 122 $10,271 $9,878 LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $443 $405 Accrued liabilities 731 650 Air traffic liability 700 462 Current maturities of long-term debt 307 206 Total current liabilities 2,181 1,723 Long-term debt less current maturities 1,270 1,332 Deferred income taxes 1,476 1,420 Deferred gains from sale and leaseback of aircraft 164 168 Other deferred liabilities 155 183 Stockholders' equity: Common stock 790 789 Capital in excess of par value 263 258 Retained earnings 3,896 3,883 Treasury stock (108) - Accumulated other comprehensive income 184 122 Total stockholders' equity 5,025 5,052 $10,271 $9,878
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SOUTHWEST AIRLINES CO. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) Three months ended March 31, (in millions) 2004 2003 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $26 $24 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 103 93 Deferred income taxes 16 12 Amortization of deferred gains on sale and leaseback of aircraft (4) (4) Amortization of scheduled airframe inspections & repairs 14 12 Changes in certain assets and liabilities: Accounts and other receivables (47) 16 Other current assets (15) (1) Accounts payable and accrued liabilities 123 (7) Air traffic liability 238 123 Other (37) (1) Net cash provided by operating activities 417 267 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment, net (360) (193) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt 29 - Proceeds from Employee stock plans 13 12 Payments of long-term debt and capital lease obligations (7) (6) Payments of cash dividends (7) (7) Repurchase of common stock (125) - Other, net (1) 1 Net cash provided by (used in) financing activities (98) - NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (41) 74 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,865 1,815 CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,824 $1,889
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Southwest Airlines Co. Boeing 737-700 Delivery Schedule As of March 31, 2004 Prior Schedule Current Schedule Firm Options* Firm Options* 2004 47 - 47 ** - 2005 28 6 31 3 2006 22 12 22 12 2007 25 29 25 29 2008 6 45 6 45 2009-2012 - 177 - 177 Total 128 269 131 266 *Includes purchase rights **Includes one leased aircraft and seven aircraft received during first quarter 2004
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