Southwest Airlines 1998 Annual Report Download - page 52

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52
SOUTHWEST AIRLINES CO. ¤ SIX STORIES OF FREEDOM
At December 31, 1998, the Company had common stock reserved for issuance
pursuant to Employee stock benefit plans (69,453,206 shares) and upon exercise of
rights (405,357,512 shares) pursuant to the Common Stock Rights Agreement, as
amended (Agreement).
Pursuant to the Agreement, each outstanding share of the Company’s common stock
is accompanied by one common share purchase right (Right). Each Right entitles its
holder to purchase one share of common stock at an exercise price of $7.41 and is
exercisable only in the event of a proposed takeover, as defined by the Agreement.
The Company may redeem the Rights at $.0049 per Right prior to the time that 15
percent of the common stock has been acquired by a person or group. If the Company
is acquired, as defined in the Agreement, each Right will entitle its holder to purchase
for $7.41 that number of the acquiring company’s or the Company’s common shares, as
provided in the Agreement, having a market value of two times the exercise price of the
Right. The Rights will expire no later than July 30, 2006.
On September 25, 1997, the Company’s Board of Directors declared a three-for-two
stock split, distributing 73,577,983 shares on November 26, 1997. On July 22, 1998,
the Company’s Board of Directors declared a three-for-two stock split, distributing
111,894,315 shares on August 20, 1998. Unless otherwise stated, all per share data
presented in the accompanying consolidated financial statements and notes thereto
have been restated to give effect to the stock splits.
As of July 22, 1998, the Company’s Board of Directors increased the Company’s
authorization to repurchase shares of its outstanding common stock to $100 million.
The Company completed this repurchase program during third quarter 1998, resulting
in the repurchase of 4,885,763 shares at an average cost of $20.47 per share. All of
the acquired shares are held as common stock in treasury, less shares reissued under
the Employee stock option and purchase plans. When treasury shares are reissued,
the Company uses a first-in, first-out method and the excess of repurchase cost over
reissuance price, if any, is treated as a reduction of retained earnings.