Southwest Airlines 1996 Annual Report Download - page 46

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46
The effects of applying SFAS 123 for providing pro forma disclosures during the initial
phase-in period may not be representative of the effects on reported net income for future years.
The weighted-average fair value of options granted under the five fixed option plans
during 1996 and 1995 was $10.17 and $8.42, respectively, for the incentive plans, $9.24 and
$7.97, respectively, for the SWAPA Plan, and $10.17 and $8.42, respectively, for other non-
qualified plans. The weighted-average fair value of options granted in 1996 to the Company’s
president and chief executive officer (no options were granted in 1995) was $13.98. The
weighted-average fair value of each purchase right under the ESPP granted in 1996 and 1995,
which is equal to the ten percent discount from the market value of the common stock at the end
of each purchase period, was $2.56 and $2.15, respectively.
8. EMPLOYEE PROFITSHARING AND SAVINGS PLANS
Substantially all of Southwest’s Employees are members of the Southwest Airlines Co.
Profitsharing Plan. Total profitsharing expense charged to operations in 1996, 1995, and 1994
was $59,927,000, $54,033,000, and $52,782,000, 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 1996,
1995, and 1994 were $35,125,000, $28,954,000, and $19,817,000, respectively.
9. INCOME TAXES
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,
1996 and 1995 are as follows (in thousands):