Southwest Airlines 1994 Annual Report Download - page 34

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Notes to Consolidated Financial Statements
Southwest Airlines – 1994 Annual Report Page 34
10. Employee Profitsharing And Savings Plans
Substantially all of Southwest's Employees are members of the Southwest Airlines Co. Profitsharing Plan
(the Plan). Total profitsharing expense charged to operations in 1994, 1993, and 1992 was $52,782,000,
$44,959,000, and $26,363,000, respectively. The Company also elected to contribute $3,605,000 in 1992
as a result of an accounting change (see Note 3).
The Company sponsors Employee savings plans under Section 401(k) of the Internal Revenue Code. The
plans cover substantially all full-time Employees. The amount of matching contributions varies by
Employee group. Company contributions generally vest over five years with credit for prior years' service
granted. Company matching contributions expensed in 1994, 1993, and 1992 were $19,817,000,
$13,986,000, and $11,611,000, respectively.
11. Income Taxes
Effective January 1, 1993, the Company changed its method of accounting for income taxes from the
deferred method to the liability method as required by SFAS 109 (see Note 3).
Under SFAS 109, deferred income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. The components of deferred tax assets and liabilities at December 31, 1994 and
1993 are as follows (in thousands):
1994 1993
Deferred tax liabilities:
Accelerated depreciation $343,585 $299,195
Scheduled airframe overhauls 23,966 21,512
Other 55,953 45,734
Total deferred tax liabilities 423,504 366,441
Deferred tax assets:
Deferred gains from sale and leaseback of
aircraft 95,602 87,358
Capital and operating leases 38,240 33,637
Alternative minimum tax credit carry
forward 22,778 32,122
Other 43,856 40,183
Total deferred tax assets 200,476 193,300
Net deferred tax liability $223,028 $173,141
In August 1993, the Revenue Reconciliation Act of 1993 (the “ 1993 Act”) was enacted, which contains
numerous provision changes including an increase in the federal corporate income tax rate from 34
percent to 35 percent effective January 1, 1993. As a result, the Company recognized approximately $4.0
million of additional expense related to deferred tax liabilities existing on January 1, 1993.