Southwest Airlines 2000 Annual Report Download - page 34

collateral provisions whereby cash deposits are required if
market risk exposure exceeds a specified threshold amount.
Neither the Company nor the counterparties exceeded the
threshold amount at December 31, 2000. The Company is in
the process of negotiating similar agreements with other
counterparties.
The Company does not hold or issue any financial
instruments for trading purposes.
The carrying amounts and estimated fair values of the
Company’s long-term debt at December 31, 2000 were as
follows:
(In thousands)Carrying Value Fair Value
8 3/4% Notes due 2003 $ 100,000 $ 104,854
Aircraft Secured Notes due
2004 200,000 200,000
8% Notes due 2005 100,000 104,143
7 7/8% Notes due 2007 100,000 102,620
French Credit Agreements 54,243 54,243
7 3/8% Debentures due 2027 100,000 92,092
The estimated fair values of the Company’s long-term debt
were based on quoted market prices. The carrying values of all
other financial instruments approximate their fair value.
8. COMMON STOCK
The Company has one class of common stock. Holders of
shares of common stock are entitled to receive dividends when
and if declared by the Board of Directors and are entitled to
one vote per share on all matters submitted to a vote of the
shareholders.
At December 31, 2000, the Company had common stock
reserved for issuance pursuant to Employee stock benefit
plans (101.2 million shares) and upon exercise of rights (179.4
million shares) pursuant to the Common Share Purchase
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 is exercisable only in
the event of a proposed takeover, as defined by the
Agreement. The Company may redeem the Rights at $.0033
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 $4.94 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 July 22, 1998, the Company’s Board of Directors declared
a three-for-two stock split, distributing 111.9 million shares on
August 20, 1998. On May 20, 1999, the Company’s Board of
Directors declared a three-for-two stock split, distributing 168.0
million shares on July 19, 1999. Unless otherwise stated, all
share and per share data presented in the accompanying
consolidated financial statements and notes thereto have been
restated to give effect to these stock splits.
During third quarter 1998, the Company completed a $100
million common stock repurchase program, resulting in the
repurchase of 7.3 million shares at an average cost of $13.65
per share. All of the acquired shares were subsequently
reissued under Employee stock plans.
On September 23, 1999, the Company’s Board of Directors
authorized the Company to repurchase up to $250 million of its
outstanding common stock. As of December 31, 2000, this
program had resulted in the repurchase of 12.2 million shares
at an average cost of $16.28 per share. All of the acquired
shares are held as common stock in treasury, less shares
reissued under Employee stock 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.
On January 18, 2001, the Company’s Board of Directors
declared a three-for-two stock split, payable to shareholders of
record at the close of business on January 26, 2001, and also
increased the quarterly dividend. Shares will be distributed on
February 15, 2001. The dividend will be adjusted to $.0045 per
share quarterly on the increased number of shares
outstanding. The share and per share data presented in the
accompanying consolidated financial statements and notes
thereto have not been restated to give effect to this pending
2001 stock split.
9. STOCK PLANS
At December 31, 2000, the Company had 12 stock-based
compensation plans and other stock options outstanding,
which are described below. The Company applies APB 25 and
related Interpretations in accounting for its stock-based
compensation. Accordingly, no compensation expense is
recognized for its fixed option plans because the exercise
prices of the Company’s Employee stock options equal or
exceed the market prices of the underlying stock on the dates
of grant. Compensation expense for other stock options is not
material.
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