2018 Q1 Form 10-Q Financial Statement

#000009238018000073 Filed on May 01, 2018

View on sec.gov

Income Statement

Concept 2018 Q1 2017 Q1
Revenue $4.944B $4.854B
YoY Change 1.85% 0.58%
Cost Of Revenue $1.388B $1.323B
YoY Change 4.91% 9.07%
Gross Profit $3.556B $3.531B
YoY Change 0.71% -2.27%
Gross Profit Margin 71.93% 72.74%
Selling, General & Admin $2.078B $1.973B
YoY Change 5.32% 9.55%
% of Gross Profit 58.44% 55.88%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $277.0M $318.0M
YoY Change -12.89% 9.66%
% of Gross Profit 7.79% 9.01%
Operating Expenses $4.328B $4.248B
YoY Change 1.88% 9.43%
Operating Profit $616.0M $606.0M
YoY Change 1.65% -35.81%
Interest Expense $32.00M $29.00M
YoY Change 10.34% -3.33%
% of Operating Profit 5.19% 4.79%
Other Income/Expense, Net -$14.00M -$74.00M
YoY Change -81.08% -42.19%
Pretax Income $602.0M $532.0M
YoY Change 13.16% -34.8%
Income Tax $139.0M $193.0M
% Of Pretax Income 23.09% 36.28%
Net Earnings $463.0M $339.0M
YoY Change 36.58% -33.92%
Net Earnings / Revenue 9.36% 6.98%
Basic Earnings Per Share $0.79 $0.55
Diluted Earnings Per Share $0.79 $0.55
COMMON SHARES
Basic Shares Outstanding 587.0M shares 613.0M shares
Diluted Shares Outstanding 588.0M shares 614.0M shares

Balance Sheet

Concept 2018 Q1 2017 Q1
SHORT-TERM ASSETS
Cash & Short-Term Investments $3.243B $3.482B
YoY Change -6.86% -2.79%
Cash & Equivalents $1.822B $1.851B
Short-Term Investments $1.421B $1.631B
Other Short-Term Assets $448.0M $235.0M
YoY Change 90.64% 22.4%
Inventory $430.0M $356.0M
Prepaid Expenses
Receivables $680.0M $585.0M
Other Receivables $0.00 $0.00
Total Short-Term Assets $4.801B $4.658B
YoY Change 3.07% 1.84%
LONG-TERM ASSETS
Property, Plant & Equipment $18.77B $17.29B
YoY Change 8.6% 8.28%
Goodwill $970.0M $970.0M
YoY Change 0.0% 0.0%
Intangibles $410.0M $423.0M
YoY Change -3.07% -8.04%
Long-Term Investments
YoY Change
Other Assets $959.0M $849.0M
YoY Change 12.96% 15.83%
Total Long-Term Assets $20.70B $19.11B
YoY Change 8.36% 8.14%
TOTAL ASSETS
Total Short-Term Assets $4.801B $4.658B
Total Long-Term Assets $20.70B $19.11B
Total Assets $25.50B $23.76B
YoY Change 7.32% 6.84%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $1.243B $1.214B
YoY Change 2.39% 5.29%
Accrued Expenses $1.134B $1.947B
YoY Change -41.76% -21.24%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00
YoY Change
Long-Term Debt Due $365.0M $285.0M
YoY Change 28.07% -70.09%
Total Short-Term Liabilities $7.162B $7.458B
YoY Change -3.97% -9.63%
LONG-TERM LIABILITIES
Long-Term Debt $3.302B $2.896B
YoY Change 14.02% 15.38%
Other Long-Term Liabilities $706.0M $703.0M
YoY Change 0.43% 0.0%
Total Long-Term Liabilities $706.0M $703.0M
YoY Change 0.43% 0.0%
TOTAL LIABILITIES
Total Short-Term Liabilities $7.162B $7.458B
Total Long-Term Liabilities $706.0M $703.0M
Total Liabilities $7.868B $8.161B
YoY Change -3.59% -8.88%
SHAREHOLDERS EQUITY
Retained Earnings $14.24B $11.71B
YoY Change 21.61% 18.6%
Common Stock $2.260B $2.227B
YoY Change 1.48% 1.46%
Preferred Stock
YoY Change
Treasury Stock (at cost) $6.957B $5.419B
YoY Change 28.38% 47.38%
Treasury Stock Shares
Shareholders Equity $9.619B $8.204B
YoY Change
Total Liabilities & Shareholders Equity $25.50B $23.76B
YoY Change 7.32% 6.84%

Cashflow Statement

Concept 2018 Q1 2017 Q1
OPERATING ACTIVITIES
Net Income $463.0M $339.0M
YoY Change 36.58% -33.92%
Depreciation, Depletion And Amortization $277.0M $318.0M
YoY Change -12.89% 9.66%
Cash From Operating Activities $1.002B $1.625B
YoY Change -38.34% 0.56%
INVESTING ACTIVITIES
Capital Expenditures -$433.0M -$463.0M
YoY Change -6.48% 3.12%
Acquisitions
YoY Change
Other Investing Activities $360.0M -$7.000M
YoY Change -5242.86% -102.55%
Cash From Investing Activities -$73.00M -$470.0M
YoY Change -84.47% 168.57%
FINANCING ACTIVITIES
Cash Dividend Paid $148.0M $123.0M
YoY Change 20.33% 28.13%
Common Stock Issuance & Retirement, Net $500.0M $550.0M
YoY Change -9.09% 10.0%
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -$602.0M -$984.0M
YoY Change -38.82% 54.72%
NET CHANGE
Cash From Operating Activities $1.002B $1.625B
Cash From Investing Activities -$73.00M -$470.0M
Cash From Financing Activities -$602.0M -$984.0M
Net Change In Cash $327.0M $171.0M
YoY Change 91.23% -78.76%
FREE CASH FLOW
Cash From Operating Activities $1.002B $1.625B
Capital Expenditures -$433.0M -$463.0M
Free Cash Flow $1.435B $2.088B
YoY Change -31.27% 1.11%

Facts In Submission

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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:11pt;"><font style="font-family:inherit;font-size:11pt;">BASIS OF PRESENTATION</font></div><div style="line-height:120%;font-size:11pt;"><font style="font-family:inherit;font-size:11pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;font-size:11pt;"><font style="font-family:inherit;font-size:11pt;">Southwest Airlines Co. (the "Company" or "Southwest") operates Southwest Airlines, a major passenger airline that provides scheduled air transportation in the United States and near-international markets. The unaudited Condensed Consolidated Financial Statements include accounts of the Company and its wholly owned subsidiaries.</font></div><div style="line-height:120%;text-align:justify;font-size:11pt;"><font style="font-family:inherit;font-size:11pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;font-size:11pt;"><font style="font-family:inherit;font-size:11pt;">The accompanying unaudited Condensed Consolidated Financial Statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States 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 in the United States ("GAAP") for complete financial statements. The unaudited Condensed Consolidated Financial Statements for the interim periods ended </font><font style="font-family:Times New Roman;font-size:11pt;color:#000000;font-style:normal;font-weight:normal;text-decoration:none;">March&#160;31, 2018</font><font style="font-family:inherit;font-size:11pt;"> and </font><font style="font-family:Times New Roman;font-size:11pt;color:#000000;font-style:normal;font-weight:normal;text-decoration:none;">2017</font><font style="font-family:inherit;font-size:11pt;"> include all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. This includes all normal and recurring adjustments and elimination of significant intercompany transactions. Financial results for the Company and airlines in general can be seasonal in nature. In many years, the Company's revenues, as well as its Operating income and Net income, have been better in its second and third fiscal quarters than in its first and fourth fiscal quarters. Air travel is also significantly impacted by general economic conditions, the amount of disposable income available to consumers, unemployment levels, corporate travel budgets, natural disasters, and other factors beyond the Company's control. These and other factors, such as the price of jet fuel in some periods, the nature of the Company's fuel hedging program, and the periodic volatility of commodities used by the Company for hedging jet fuel, have created, and may continue to create, significant volatility in the Company's financial results. See</font><font style="font-family:inherit;font-size:10pt;"> </font><font style="font-family:inherit;font-size:11pt;color:#000000;text-decoration:none;">Note 3</font><font style="font-family:inherit;font-size:11pt;"> for further information on fuel and the Company's hedging program. Operating results for the </font><font style="font-family:inherit;font-size:11pt;">three months ended</font><font style="font-family:inherit;font-size:10pt;"> </font><font style="font-family:inherit;font-size:11pt;color:#000000;text-decoration:none;">March&#160;31, 2018</font><font style="font-family:inherit;font-size:11pt;">, are not necessarily indicative of the results that may be expected for future quarters or for the year ended </font><font style="font-family:inherit;font-size:11pt;color:#000000;text-decoration:none;">December&#160;31, 2018</font><font style="font-family:inherit;font-size:11pt;">. 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 </font><font style="font-family:inherit;font-size:11pt;">December&#160;31, 2017</font><font style="font-family:inherit;font-size:11pt;">.</font></div><div style="line-height:120%;text-align:justify;font-size:11pt;"><font style="font-family:inherit;font-size:11pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;font-size:11pt;"><font style="font-family:inherit;font-size:11pt;">Effective as of January 1, 2018, the Company adopted&#160;Accounting Standards Update ("ASU") No. 2014-09: Revenue from Contracts with Customers, ASU No. 2017-07: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, and ASU No. 2017-12: Targeted Improvements to Accounting for Hedging Activities. All amounts and disclosures set forth in this Form 10-Q reflect the adoption of these ASUs. See Note </font><font style="font-family:inherit;font-size:11pt;">2</font><font style="font-family:inherit;font-size:11pt;"> for further information. </font></div><div style="line-height:120%;text-align:justify;font-size:11pt;"><font style="font-family:inherit;font-size:11pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;font-size:11pt;"><font style="font-family:inherit;font-size:11pt;">The Company reclassified </font><font style="font-family:inherit;font-size:11pt;">$54 million</font><font style="font-family:inherit;font-size:11pt;"> from Aircraft rentals to Other operating expenses in the unaudited Condensed Consolidated Statement of Comprehensive Income for the </font><font style="font-family:inherit;font-size:11pt;">three months ended March 31, 2017</font><font style="font-family:inherit;font-size:11pt;">, to be comparative with the current period's presentation. Aircraft rentals expense included in Other operating expenses for the </font><font style="font-family:inherit;font-size:11pt;">three months ended March 31, 2018</font><font style="font-family:inherit;font-size:11pt;">, was </font><font style="font-family:inherit;font-size:11pt;">$40 million</font><font style="font-family:inherit;font-size:11pt;">. This reclassification had no impact on Operating income, Net income, the unaudited Condensed Consolidated Balance Sheet, or the unaudited Condensed Consolidated Statement of Cash Flows.</font></div></div>

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