Southwest Airlines 2005 Annual Report Download - page 68

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SOUTHWEST AIRLINES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The effective tax rate on income before income taxes differed from the federal income tax statutory rate for the
following reasons:
2005 2004 2003
(In millions)
Tax at statutory U.S. tax rates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $306 $171 $247
Nondeductible itemsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 877
State income taxes, net of federal benefitÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 415
Other, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4) (6) (3)
Total income tax provisionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $326 $176 $266
The Internal Revenue Service (IRS) regularly ex- ing of merit. The Company's management does not
amines the Company's federal income tax returns and, expect that the outcome of any proposed adjustments
in the course of which, may propose adjustments to the presented to date by the IRS, individually or collectively,
Company's federal income tax liability reported on such will have a material adverse effect on the Company's
returns. It is the Company's practice to vigorously financial condition, results of operations, or cash flows.
contest those proposed adjustments that it deems lack-
16. Net Income Per Share
The following table sets forth the computation of net income per share, basic and diluted:
2005 2004 2003
(In millions, except per
share amounts)
Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $548 $313 $442
Weighted-average shares outstanding, basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 789 783 783
Dilutive effect of Employee stock options ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 32 39
Adjusted weighted-average shares outstanding, diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 814 815 822
Net income per share, basicÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ .70 $ .40 $ .56
Net income per share, diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ .67 $ .38 $ .54
The Company has excluded 12 million, 31 million, $2.3 billion government grant for airlines. Southwest
and 10 million shares from its calculations of net received $271 million as its proportional share of the
income per share, diluted, in 2005, 2004, and 2003, grant during second quarter 2003. This amount is
respectively, as they represent antidilutive stock options included in ""Other (gains) losses'' in the accompanying
for the respective periods presented. Consolidated Income Statement for 2003. Also as part
of the Wartime Act, the Company received approxi-
mately $5 million as a reimbursement for the direct cost
17. Federal Grant of reinforcing cockpit doors on all of the Company's
aircraft. The Company accounted for this reimburse-
On April 16, 2003, as a result of the United States
ment as a reduction of capitalized property and
war with Iraq, the Emergency Wartime Supplemental
equipment.
Appropriations Act (Wartime Act) was signed into
law. Among other items, the legislation included a
49