-----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, UnSlKEr1wukq2Pe9sYm1oOYgJNVfWoQVx3lvDBlHz0Uyweyz+aoKmvVpS9xhbMzx hdX9jY9Z7NmFaYWMt6i2pA== 0000092380-96-000013.txt : 19960816 0000092380-96-000013.hdr.sgml : 19960816 ACCESSION NUMBER: 0000092380-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07259 FILM NUMBER: 96612642 BUSINESS ADDRESS: STREET 1: 2702 LOVE FIELD DR CITY: DALLAS STATE: TX ZIP: 75235 BUSINESS PHONE: 2149044000 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 10-Q 1 2QTR96 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 1996 OR ____TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________ Commission file No. 1-7259 SOUTHWEST AIRLINES CO. (Exact name of registrant as specified in its charter) TEXAS 74-1563240 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 36611, Dallas, Texas 75235-1611 (Address of principal executive offices) (Zip Code) (214) 792-4000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares of Common Stock outstanding as of the close of business on August 9, 1996: 144,915,798 SOUTHWEST AIRLINES CO. FORM 10-Q Part I - FINANCIAL INFORMATION Item 1. Financial Statements Southwest Airlines Co. CONDENSED CONSOLIDATED BALANCE SHEET (in thousands) (unaudited)
June 30, 1996 December 31, 1995 ASSETS Current assets: Cash and cash equivalents $478,285 $317,363 Accounts receivable 98,963 79,781 Inventories of parts and supplies 49,857 41,032 Deferred income taxes 11,289 10,476 Prepaid expenses and other current assets 26,159 24,484 Total current assets 664,553 473,136 Property and equipment: Flight equipment 3,297,951 3,024,702 Ground property and equipment 478,998 435,822 Deposits on flight equipment purchase contracts 229,323 323,864 4,006,272 3,784,388 Less allowance for depreciation 1,102,754 1,005,081 2,903,518 2,779,307 Other assets 3,441 3,679 $3,571,512 $3,256,122 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $107,545 $116,530 Accrued liabilities 423,024 349,419 Air traffic liability 216,110 131,156 Current maturities of long-term debt 11,618 13,516 Total current liabilities 758,297 610,621 Long-term debt less current maturities 655,726 661,010 Deferred income taxes 309,961 281,650 Deferred gains from sale and leaseback of aircraft 257,425 245,154 Other deferred liabilities 36,192 30,369 Stockholders' equity: Common Stock 144,790 144,033 Capital in excess of par value 173,402 162,704 Retained earnings 1,235,719 1,120,581 Total stockholders' equity 1,553,911 1,427,318 $3,571,512 $3,256,122
See accompanying notes. Southwest Airlines Co. CONDENSED CONSOLIDATED STATEMENT OF INCOME (in thousands except per share amounts) (unaudited)
Three months ended Six months ended June 30, June 30, 1996 1995 1996 1995 Operating revenues: Passenger $876,322 $710,275 $1,617,422 $1,307,103 Freight 20,011 16,120 38,991 31,005 Other 13,975 11,810 26,424 21,096 Total operating revenues 910,308 738,205 1,682,837 1,359,204 Operating expenses: Salaries, wages, and benefits 258,078 217,258 495,443 420,830 Fuel and oil 115,652 88,880 219,519 172,056 Maintenance materials and repairs 66,834 52,580 129,033 104,253 Agency commissions 37,576 31,230 69,402 60,745 Aircraft rentals 45,922 42,065 90,919 80,480 Landing fees and other rentals 45,401 39,443 90,844 79,976 Depreciation 46,111 38,209 90,125 75,556 Other operating expenses 152,528 125,115 297,953 238,474 Total operating expenses 768,102 634,780 1,483,238 1,232,370 Operating income 142,206 103,425 199,599 126,834 Other expenses (income): Interest expense 15,022 15,087 29,924 28,773 Capitalized interest (5,817) (8,415) (12,721) (16,900) Interest income (5,345) (5,518) (9,398) (7,410) Nonoperating losses (gains), net (1,643) 1,470 (2,966) 1,536 Total other expenses 2,217 2,624 4,839 5,999 Income before income taxes 139,989 100,801 194,760 120,835 Provision for income taxes 54,673 41,077 76,443 49,285 Net income $85,316 $59,724 $118,317 $ 71,550 Weighted average common and common equivalent shares outstanding 153,675 147,348 153,039 146,940 Net income per common and common equivalent share $ .56 $ .41 $ .77 $ .49
See accompanying notes. Southwest Airlines Co. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (unaudited)
Three months ended Six months ended June 30, June 30, 1996 1995 1996 1995 Net cash provided by operating activities $222,176 $193,792 $363,891 $298,203 Investing activities: Net purchases of property and equipment (201,393) (157,012) (333,747) (358,286) Financing activities: Issuance of long-term debt - - - 98,811 Payment of long-term debt and capital lease obligations (1,498) (1,615) (8,056) (5,027) Payment of cash dividends (1,592) (1,436) (4,621) (4,303) Proceeds from aircraft sale and leaseback transactions 132,000 191,650 132,000 191,650 Proceeds from Employee stock plans 3,912 2,770 11,455 5,312 Net cash provided by financing activities 132,822 191,369 130,778 286,443 Net increase in cash and cash equivalents 153,605 228,149 160,922 226,360 Cash and cash equivalents at beginning of period 324,680 172,749 317,363 174,538 Cash and cash equivalents at end of period $478,285 $400,898 $478,285 $400,898 Cash payments for: Interest, net of amount capitalized $510 - $17,944 $11,111 Income taxes $21,495 $5,996 $21,891 $7,827
See accompanying notes. SOUTHWEST AIRLINES CO. Notes to Condensed Consolidated Financial Statements 1. Basis of presentation - The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The condensed consolidated financial statements for the interim periods ended June 30, 1996 and 1995 include all adjustments (which include only normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. Operating results for the three and six month periods ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Southwest Airlines Co. annual report on Form 10-K for the year ended December 31, 1995. 2. Dividends - During the three month periods ended June 30, 1996, March 31, 1996, June 30, 1995, and March 31, 1995, $.01 per share in dividends were declared on the 144,715,343, 144,452,894, 143,648,993, and 143,411,223 shares of common stock then outstanding, respectively. 3. Leases - During second quarter 1996, the Company completed transactions for the sale and leaseback of four new Boeing 737 aircraft. The lease terms, which require periodic lease payments through 2019, increased the Company's commitments for operating leases by $233.1 million. 4. Common stock - Effective July 18, 1996, the Company amended and restated its Common Stock Rights Agreement dated July 14, 1986 (the Agreement). The principal purpose of the amendment and restatement was to extend the Agreement by 10 years. For further information regarding the Agreement, refer to footnote 8 to the consolidated financial statements included in the Southwest Airlines Co. annual report on Form 10-K for the year ended December 31, 1995. 5. Reclassifications - Certain prior year amounts have been reclassified for comparison purposes. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Comparative Consolidated Operating Statistics Relevant operating statistics for the three and six month periods ended June 30, 1996 and 1995 are as follows:
Three months ended Six months ended June 30, June 30, 1996 1995 1996 1995 Revenue passengers carried 12,574,740 11,513,556 23,979,977 21,617,113 Revenue passenger miles (RPMs) (000s) 6,809,336 5,992,044 12,646,455 11,198,329 Available seat miles (ASMs) (000s) 10,165,470 8,923,859 19,806,873 17,447,197 Load factor 67.0% 67.1% 63.8% 64.2% Average length of passenger haul 542 520 527 518 Trips flown 187,704 170,010 366,809 333,795 Average passenger fare $69.69 $61.69 $67.45 $60.47 Passenger revenue yield per RPM $.1287 $.1185 $.1279 $.1167 Operating revenue yield per ASM $.0895 $.0827 $.0850 $.0779 Operating expenses per ASM $.0756 $.0711 $.0749 $.0706 Fuel cost per gallon (average) $.6280 $.5437 $.6101 $.5374 Number of employees at period-end 21,907 18,985 21,907 18,985 Size of fleet at period-end 237 210 237 210
Material Changes in Results of Operations Consolidated net income for the three months ended June 30, 1996 was $85.3 million ($.56 per share) compared with $59.7 million ($.41 per share) earned in second quarter 1995. Consolidated operating revenues increased 23.3 percent for the second quarter of 1996 and 23.8 percent for the six months ended June 30, 1996 as compared to the corresponding periods of the prior year, primarily as a result of a 23.4 percent and 23.7 percent increase, respectively, in consolidated passenger revenues. The increase in passenger revenues resulted from 13.6 percent and 12.9 percent increases in revenue passenger miles (RPMs) for the three and six month periods ended June 30, 1996, respectively, coupled with 8.6 percent and 9.6 percent increases in passenger revenue yield per RPM over these same periods. Passenger revenue yield per RPM increased from $.1185 and $.1167 in the three and six month periods ended June 30, 1995, respectively, to $.1287 and $.1279, respectively. This improved performance is primarily due to increased fares and the December 31, 1995 expiration of the ten percent federal ticket tax. In August 1996, Congress approved legislation which re- enacts the ten percent federal ticket tax through December 31, 1996, effective seven days after enactment of the legislation. The enactment date (the date the legislation is signed by the President of the United States) has not been determined, but most likely will occur before August 31, 1996. Extension of the tax past December 31, 1996 is uncertain at this time and requires additional legislation. If the federal ticket tax is reimposed as planned, it will affect revenues for the period from late August until December 31, 1996 for tickets sold and flown during that period. While we believe the ten percent tax can be "passed on" to Customers in some markets, effectively as a price increase, Southwest cannot predict future fares with any certainty, which are set competitively and dependent upon the underlying demand for air travel. Available seat miles (ASMs) increased 13.9 percent and 13.5 percent in second quarter 1996 and the six month period ended June 30, 1996, respectively, resulting in load factors of 67.0 percent and 63.8 percent for these same periods. The increase in ASMs resulted primarily from the addition of 27 aircraft since second quarter 1995. In celebration of the Company's 25th Anniversary, Southwest launched a fare sale on July 12, 1996 continuing through July 23, 1996 for travel between August 19 and October 31, 1996. The sale was extremely popular and resulted in record advance bookings, with more than four and a half million seats sold. While the Company anticipates strong third quarter 1996 traffic, July's load factor of 68.1 percent fell below last year's performance of 71.8 percent, primarily due to telephone line congestion during our sale. Based on traffic results thus far, the Company also expects August's load factor to fall below year-ago levels due to the impact of telephone line congestion experienced during the sale. However, given current booking levels and booking trends, we anticipate positive load factor comparisons in September and October. (The immediately preceding three sentences are forward- looking statements which involve uncertainties that could result in actual results differing materially from expected results. Some significant factors include, but may not be limited to, competitive pressure such as fare sales and capacity changes by other carriers, general economic conditions, and variations in advanced booking trends.) As a result of the fare sale combined with the likely reinstatement of the ten percent federal ticket tax, the Company cannot accurately predict third quarter 1996 revenue yields at this time. Consolidated freight revenues increased 24.1 percent in the second quarter of 1996 and 25.8 percent for the six months ended June 30, 1996 as compared to the same periods of the prior year, primarily due to increased capacity and an increase in U.S. mail revenue. Other revenues increased 18.3 percent in the second quarter 1996 and 25.3 percent for the six months ended June 30, 1996, primarily due to increased charter activity. Operating expenses per ASM increased 6.3 percent for the three months and 6.1 percent for the six months ended June 30, 1996, primarily due to significantly higher jet fuel prices; the 4.3 cent per gallon federal jet fuel tax implemented September 30, 1995; increased Profitsharing and Employee savings plan contributions; and higher aircraft engine overhaul costs. Excluding jet fuel costs and related taxes, operating expenses per ASM for the three and six month periods ended June 30, 1996, were up 3.6 percent. Southwest Airlines Co. Consolidated Operating Expenses per ASM (in cents except percent change)
Three months ended June 30, Increase Percent 1996 1995 (decrease) change Salaries, wages, and benefits 2.21 2.15 .06 2.8 Profitsharing and Employee savings plans .33 .28 .05 17.9 Fuel and oil 1.14 1.00 .14 14.0 Maintenance materials and repairs .66 .59 .07 11.9 Agency commissions .37 .35 .02 5.7 Aircraft rentals .45 .47 <.02> <4.3> Landing fees and other rentals .45 .44 .01 2.3 Depreciation .45 .43 .02 4.7 Other operating expenses 1.50 1.40 .10 7.1 Total 7.56 7.11 .45 6.3
Six Months ended June 30, Increase Percent 1996 1995 (decrease) change Salaries, wages and benefits 2.24 2.21 .03 1.4 Profitsharing and Employee savings plans .26 .20 .06 30.0 Fuel and oil 1.11 .99 .12 12.1 Maintenance materials and repairs .65 .60 .05 8.3 Agency commissions .35 .35 - - Aircraft rentals .46 .46 - - Landing fees and other rentals .46 .46 - - Depreciation .46 .43 .03 7.0 Other operating expenses 1.50 1.36 .14 10.3 Total 7.49 7.06 .43 6.1
Salaries, wages, and benefits per ASM increased 2.8 percent and 1.4 percent for the three and six month periods ended June 30, 1996, respectively, as compared to the same periods of the prior year, primarily due to an increase in Reservation Sales Agent wages and higher health costs. The Company's flight attendants are subject to an agreement with the Transport Workers Union of America, AFL-CIO (TWU), which became amendable May 31, 1996. Southwest is currently in negotiations with TWU for a new contract. Profitsharing and Employee savings plans expense per ASM increased 17.9 percent and 30.0 percent for the three and six month periods ended June 30, 1996, respectively, as compared to the corresponding periods of the prior year primarily due to higher earnings subject to profitsharing in 1996. Fuel and oil expense per ASM increased 14.0 percent and 12.1 percent in second quarter 1996 and the six month period then ended due to higher jet fuel prices. The average price paid for jet fuel in the three month and six month periods ended June 30, 1996 was $.6280 and $.6101 per gallon, respectively, compared to $.5437 and $.5374 for the corresponding periods in 1995. Since the end of the second quarter 1996, fuel prices have averaged approximately $.6156 per gallon. Maintenance materials and repairs per ASM increased 11.9 percent and 8.3 percent for the three and six month periods ended June 30, 1996, respectively, as compared to the corresponding periods of 1995, primarily as a result of higher engine overhaul costs and increased scheduled airframe inspections during second quarter 1996. Agency commissions per ASM increased by 5.7 percent for second quarter 1996 and remained unchanged for the six months ended June 30, 1996. The second quarter increase is primarily due to an increase in passenger revenues per ASM and a consistent mix of travel agency sales. Aircraft rentals per ASM decreased 4.3 percent for second quarter 1996 and remained unchanged for the six months ended June 30, 1996. The decrease in the second quarter was primarily due to a lower percentage of the aircraft fleet being leased. Depreciation expense per ASM increased 4.7 percent for second quarter 1996 and 7.0 percent for the six months ended June 30, 1996 as compared to the same periods of 1995 due to leased aircraft representing a lower percentage of the total fleet as discussed above. Other operating expenses per ASM increased 7.1 percent and 10.3 percent for the three and six month periods ended June 30, 1996, respectively. These increases were primarily due to the recently implemented jet fuel tax, which resulted in approximately $8.4 million and $15.9 million of additional expense for the three and six month periods ended June 30, 1996. Other expenses (income) for the three and six month periods ended June 30, 1996, included interest expense, interest income, and nonoperating gains and losses. Interest expense increased in the first half of 1996 as compared to the first half of 1995 due to the March 1995 issuance of $100 million of 8 percent senior unsecured Notes due March 2005. Capitalized interest decreased for the three month and six month periods ended June 30, 1996, as a result of certain amendments to aircraft purchase contracts during third quarter 1995 that affected the timing of payments. Interest income increased for the six months ended June 30, 1996 due to higher invested cash balances. Material Changes in Financial Condition Net cash provided by operating activities was $222.2 million for the three months ended June 30, 1996. During June 1996, the Company generated $132.0 million from the sale/leaseback of four Boeing 737 aircraft. During the twelve months ended June 30, 1996, cash of $522.1 million was provided from operations. This cash was primarily used to finance aircraft-related capital expenditures and provide working capital. For the twelve months ended June 30, 1996, net capital expenditures were $704.1 million, which were primarily for the purchase of 27 new 737-300 aircraft and progress payments for future aircraft deliveries. The Company opened service to Orlando, Florida in April 1996, and recently announced expansion to Providence, Rhode Island beginning October 1996. As of June 30, 1996 and since 1990, the Company had authority from its Board of Directors to purchase 3,750,000 shares of its common stock from time-to-time on the open market. No shares have been purchased since 1990. The Company's contractual commitments at June 30, 1996, consist primarily of scheduled aircraft acquisitions. Seven 737- 300s are scheduled for delivery in the remainder of 1996, and seventeen in 1997. Four 737-700s are scheduled for delivery in 1997, 16 in 1998, 16 in 1999, 15 in 2000, and 12 in 2001. In addition, the Company has options to purchase up to sixty-seven 737-700s during 1998-2004. The Company has the option, which must be exercised two years prior to the contractual delivery date, to substitute 737-600s or 737-800s for the 737-700s delivered subsequent to 1999. Aggregate funding needed for these commitments was approximately $2,331.6 million at June 30, 1996 due as follows: $180.6 million in 1996; $575.4 million in 1997; $446.9 million in 1998; $551.2 million in 1999; $351.0 million in 2000; and $226.5 million in 2001. The Company believes Boeing will deliver two 737-300 aircraft in late December 1996 that were previously scheduled to be delivered in early January 1997. This change in the delivery schedule is not reflected in the commitment and funding amounts above. The Company has various options available to meet its capital and operating commitments, including cash on hand at June 30, 1996 of $478.3 million, internally generated funds, and a revolving credit line with a group of banks of up to $460 million (none of which had been drawn at June 30, 1996). In addition, the Company will also consider various borrowing or leasing options to maximize earnings and supplement cash requirements. The Company currently has outstanding shelf registrations for the issuance of $260.6 million public debt securities which it currently intends to substantially utilize for aircraft financings during the remainder of 1996. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company has received examination reports from the Internal Revenue Service proposing certain adjustments to Southwest's income tax returns for 1987 through 1991. The adjustments relate to certain types of aircraft financings consummated by Southwest, as well as other members of the aviation industry, during that time period. Southwest intends to vigorously protest the adjustments made with which it does not agree. The industry's difference with the IRS involves complex issues of law and fact which are likely to take a substantial period of time to resolve. Management believes that final resolution of such protest will not have a materially adverse effect upon the results of operations of Southwest. This forward-looking statement is based on management's current understanding of the relevant law and facts; it is subject to various contingencies including the views of legal counsel, changes in the IRS' position, the potential cost and risk associated with litigation and the actions of the IRS, judges and juries. Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Shareholders was held on May 16, 1996. At the meeting the following matters were voted on by security holders: 1. 94,329,231 shares of stock were voted against a shareholder proposal requesting that the Company provide preferential fares to shareholders attending the annual shareholders meeting, 3,629,459 were voted for the proposal, 4,375,629 abstained, and there were 19,442,557 broker non- votes. 2. 109,831,029 shares of stock were voted for approval of the 1996 Incentive Stock Option Plan and 1996 Non-Qualified Stock Option Plan, 11,017,292 were voted against approval, and 928,555 abstained. 3. 102,347,475 shares of stock were voted for approval of an Officer's Stock Option Agreement, 18,404,059 were voted against approval, and 1,025,342 abstained. 4. 113,039,223 shares of stock were voted to approve an amendment to the Company's Articles of Incorporation to increase the authorized number of shares of common stock, 7,904,058 were voted against the amendment, and 833,595 abstained. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a) Exhibits (3.1) Restated Articles of Incorporation of Southwest (incorporated by reference to Exhibit 4.1 to Southwest's Registration Statement on Form S-3 (File No. 33-52155)); Articles of Amendment to the Articles of Incorporation of Southwest Airlines Co. filed May 31, 1996. (11.1) Computation of Earnings Per Share (27) Financial Data Schedule b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter. 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. August 13, 1996 /s/ Gary C. Kelly Date Gary C. Kelly Vice President - Finance and Chief Financial Officer (Principal Financial and Accounting Officer)
INDEX TO EXHIBITS Exhibit Number Exhibit (3.1) Restated Articles of Incorporation of Southwest (incorporated by reference to Exhibit 4.1 to Southwest's Registration Statement on Form S-3 (File No. 33-52155)); Articles of Amendment to the Articles of Incorporation of Southwest Airlines Co. filed May 31, 1996. (11.1) Computation of Earnings Per Share (27) Financial Data Schedule EX-27 2
5 1,000 6-MOS DEC-31-1996 JUN-30-1996 478,285 0 98,963 0 49,857 664,553 4,006,272 1,102,754 3,751,512 758,297 0 0 0 144,790 1,409,121 3,571,512 0 1,682,837 0 1,483,238 0 0 29,924 194,760 76,443 118,317 0 0 0 118,317 .77 .77
EX-3.1 3 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF SOUTHWEST AIRLINES CO. ARTICLE ONE Southwest Airlines Co. (the "Corporation"), pursuant to the provisions of Article 4.04 of the Texas Business Corporation Act, hereby adopts these Articles of Amendment to its Articles of Incorporation. ARTICLE TWO ARTICLE FOUR is amended by the deletion in its entirety of the first paragraph thereof, and by inserting in lieu thereof the following paragraph: The aggregate number of shares which the corporation shall have authority to issue is Six Hundred Eighty Million (680,000,000) shares of Common Stock of the par value of One Dollar ($1) each. ARTICLE THREE The amendment made by these Articles of Amendment was duly adopted by the shareholders of the Corporation on May 16, 1996. ARTICLE FOUR The number os shares outstanding on the record date for such shareholders meeting was 144,547,692 and the number of shares entitled to vote on such amendment as 144,547,692. 113,039,223 shares were voted for the amendment and 7,904,058 shares were voted against the amendment. IN WITNESS THEREOF, the Corporation has caused these Articles of Amendment to be executed this 16 day of May, 1996. SOUTHWEST AIRLINES CO. by: /s/ Gary C. Kelly Gary C. Kelly Vice President and Cheif Financial Officer EX-11.1 4 EXHIBIT (11.1) Page 1 of 4 Southwest Airlines Co. Computation of Earnings Per Share For the Three Months Ended June 30, 1996
Fully Primary Diluted Weighted average shares outstanding 144,705,676 144,705,676 Shares issuable upon exercise of outstanding stock options (treasury stock method) 8,969,735 8,969,761 Weighted average common and common equivalent shares 153,675,411 153,675,437 Earnings for per share computations 85,316,000 85,316,000 Earnings per common and common equivalent share $0.56 $0.56
EXHIBIT (11.1) Page 2 of 4 Southwest Airlines Co. Computation of Earnings Per Share For the Three Months Ended June 30, 1995
Fully Primary Diluted Weighted average shares outstanding 143,606,941 143,606,941 Shares issuable upon exercise of outstanding stock options (treasury stock method) 3,740,600 3,859,725 Weighted average common and common equivalent shares 147,347,541 147,466,666 Earnings for per share computations 59,724,000 59,724,000 Earnings per common and common equivalent share $0.41 $0.41
EXHIBIT (11.1) Page 3 of 4 Southwest Airlines Co. Computation of Earnings Per Share For the Six Months Ended June 30, 1996
Fully Primary Diluted Equivalent shares outstanding at March 31, 1996 152,402,780 153,449,020 Equivalent shares outstanding at June 30, 1996 153,675,411 153,675,437 306,078,191 307,124,427 Average number of equivalent shares outstanding 153,039,096 153,562,229 Earnings for per share computations $118,317,000 $118,317,000 Earnings per common and common equivalent share $0.77 $0.77
EXHIBIT (11.1) Page 4 of 4 Southwest Airlines Co. Computation of Earnings Per Share For the Six Months Ended June 30, 1995
Fully Primary Diluted Equivalent shares outstanding at March 31, 1995 146,532,231 146,532,231 Equivalent shares outstanding at June 30, 1995 147,347,541 147,466,666 293,879,772 293,998,897 Average number of equivalent shares outstanding 146,939,886 146,999,449 Earnings for per share computations $71,550,000 $71,550,000 Earnings per common and common equivalent share $0.49 $0.49
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