Southwest Airlines 2004 Annual Report Download - page 45

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value of the Company's Ñnancial instruments. A change ings or cash Öow associated with the Company's pub-
in market interest rates could, however, have a corre- licly traded Ñxed-rate debt.
sponding eÅect on the Company's earnings and cash The Company is also subject to various Ñnancial
Öows associated with its Öoating rate debt, invested covenants included in its credit card transaction process-
cash, and short-term investments because of the Öoat- ing agreement, the revolving credit facility, and out-
ing-rate nature of these items. Assuming Öoating mar- standing debt agreements. Covenants include the
ket rates in eÅect as of December 31, 2004, were held maintenance of minimum credit ratings. For the revolv-
constant throughout a 12-month period, a hypothetical ing credit facility, the Company shall also maintain, at
ten percent change in those rates would correspondingly all times, a Coverage Ratio, as deÑned in the agreement,
change the Company's net earnings and cash Öows of not less than 1.25 to 1.0. The Company met or
associated with these items by less than $2 million. exceeded the minimum standards set forth in these
Utilizing these assumptions and considering the Com- agreements as of December 31, 2004. However, if
pany's cash balance, short-term investments, and Öoat- conditions change and the Company fails to meet the
ing-rate debt outstanding at December 31, 2004, an minimum standards set forth in the agreements, it could
increase in rates would have a net positive eÅect on the reduce the availability of cash under the agreements or
Company's earnings and cash Öows, while a decrease in increase the costs to keep these agreements intact as
rates would have a net negative eÅect on the Company's written.
earnings and cash Öows. However, a ten percent change
in market rates would not impact the Company's earn-
27