Southwest Airlines 1995 Annual Report Download - page 37

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37
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 1995, 1994,
and 1993, was $54,033,000, $52,782,000, and $44,959,000, respectively.
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 1995,
1994, and 1993 were $28,954,000, $19,817,000, and $13,986,000, 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, 1995 and 1994 are as follows (in thousands):
1995 1994
Deferred tax liabilities:
Accelerated depreciation $400,321 $343,585
Scheduled airframe overhauls 27,129 23,966
Other 68,458 55,953
Total deferred tax liabilities 495,908 423,504
Deferred tax assets:
Deferred gains from sale and
leaseback of aircraft 106,119 95,602
Capital and operating leases 54,472 38,240
Alternative minimum tax credit
carryforward 11,333 22,778
Other 52,810 43,856
Total deferred tax assets 224,734 200,476
Net deferred tax liability $271,174 $223,028
In August 1993, the Revenue Reconciliation Act of 1993 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 in 1993 related to deferred tax liabilities existing on January 1,
1993.