Southwest Airlines 2004 Annual Report Download - page 38

Net cash provided by Ñnancing activities was aircraft, payment of debt, and lease arrangements.
$133 million in 2004, primarily from the issuance of Along with the receipt of 47 new 737-700 aircraft in
$520 million in long-term debt. The majority of the 2004 (one of which is leased), the Company exercised
debt issuance was the $350 million senior unsecured its remaining options for aircraft to be delivered in
notes issued in September 2004, and the fourth quarter 2005, and several more options for aircraft to be
2004 issuance of $112 million in Öoating-rate Ñnanc- delivered in 2006. The following table details the
ing. The largest cash outÖows in Ñnancing activities Company's current Ñrm orders, options, and purchase
were from the Company's repurchase of $246 million of rights for 737-700 aircraft:
its common stock during 2004, and the redemption of Current Schedule
long-term debt, primarily the $175 million Aircraft Firm Options*
Secured Notes that came due in November 2004. For 2005ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34 Ì
2003, net cash used in Ñnancing activities was $48 mil- 2006ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 8
lion. Cash used primarily was for the redemption of its
2007ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 29
$100 million senior unsecured 8
3
/ 4 % Notes originally
issued in 1991. This was mostly oÅset by proceeds of 2008ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 45
$93 million from the exercise of Employee stock op- 2009-2012 ÏÏÏÏÏÏÏÏÏÏÏÏ Ì 177
tions. See Note 7 to the Consolidated Financial State- TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 91 259
ments for more information on the issuance and
redemption of long-term debt.
* Includes purchase rights
The Company has various options available to
meet its 2005 capital and operating commitments, The Company has the option to substitute
including cash on hand at December 31, 2004, of 737-600s or -800s for the -700s. This option is applica-
$1.3 billion, internally generated funds, and a $575 mil- ble to aircraft ordered from the manufacturer and must
lion bank revolving line of credit. In addition, the be exercised two years prior to the contractual delivery
Company will also consider various borrowing or leasing date.
options to maximize earnings and supplement cash
requirements. The Company believes it has access to a The Company has engaged in oÅ-balance sheet
wide variety of Ñnancing arrangements because of its arrangements in the leasing of aircraft. The leasing of
excellent credit ratings, unencumbered assets, modest aircraft provides Öexibility to the Company eÅectively as
leverage, and consistent proÑtability. a source of Ñnancing. Although the Company is respon-
sible for all maintenance, insurance, and expense associ-
The Company currently has outstanding shelf re- ated with operating the aircraft, and retains the risk of
gistrations for the issuance of up to $650 million in loss for leased aircraft, it has not made any guarantees to
public debt securities and pass through certiÑcates, the lessors regarding the residual value (or market
which it may utilize for aircraft Ñnancings or other value) of the aircraft at the end of the lease terms.
purposes in the future. The Company currently expects
that a portion of these securities will be issued in 2005, As shown above and as disclosed in Note 8 to the
primarily to replace debt that is coming due and to fund Consolidated Financial Statements, the Company oper-
current Öeet growth plans. ates 95 aircraft that it has leased from third parties, of
which 88 are operating leases. As prescribed by GAAP,
OÅ-Balance Sheet Arrangements, Contractual assets and obligations under operating lease are not
Obligations, and Contingent Liabilities and included in the Company's Consolidated Balance Sheet.
Commitments Disclosure of the contractual obligations associated with
Southwest has contractual obligations and commit- the Company's leased aircraft are shown below as well as
ments primarily with regard to future purchases of in Note 8 to the Consolidated Financial Statements.
20