Southwest Airlines 1999 Annual Report Download - page 26

Download and view the complete annual report

Please find page 26 of the 1999 Southwest Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 54

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54

Additionally, the Company does not have significant exposure to changing interest rates on
invested cash, which was $419 million and $379 million at December 31, 1999 and 1998, respectively.
The Company invests available cash in certificates of deposit and investment grade commercial paper
that have maturities of three months or less. As a result, the interest rate market risk implicit in these
investments at December 31, 1999, is low, as the investments mature within three months. The
Company has not undertaken any additional actions to cover interest rate market risk and is not a party
to any other interest rate market risk management activities.
A hypothetical ten percent change in market interest rates over the next year would not have a
material effect on the fair value of the Company’ s debt instruments or its short-term cash investments.
See Note 7 to the Consolidated Financial Statements for further information on the fair value of the
Company’ s financial instruments. Because of the floating rate nature of the Company’ s secured
borrowings, a ten percent change in market interest rates as of December 31, 1999, would
correspondingly change the Company’ s earnings and cash flows by approximately $1.4 million.
However, a ten percent change in market rates would not impact the Company’ s earnings or cash flow
associated with the Company’ s publicly traded fixed-rate debt or its cash investments.
IMPACT OF THE YEAR 2000
The Company has completed all significant aspects of its Year 2000 project. The Company’ s
Year 2000 project encompassed information technology systems as well as embedded technology
assets along with assessments of material third-party relationships and associated risks.
All of the Company’ s internal systems and software, including virtually all software and services
provided by third parties, appropriately handled the Year 2000 date changeover and the Company’ s
operations were also unaffected. While the Company has experienced no Year 2000 related disruptions
to date, there are remaining risks associated with the Year 2000 issue and the Company continues to
monitor possible future implications of Year 2000 issues. Based on currently available information,
management believes that Year 2000 related disruptions, if any, will not have a material adverse affect
on the Company’ s financial condition or results of operations.