Southwest Airlines 2006 Annual Report Download - page 72

Download and view the complete annual report

Please find page 72 of the 2006 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 83

  • 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
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83

15. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax
assets and liabilities at December 31, 2006 and 2005, are as follows:
2006 2005
(In millions)
DEFERRED TAX LIABILITIES:
Accelerated depreciation .......................................... $2,405 $2,251
Fuel hedges ................................................... 363 563
Other ....................................................... 14
Total deferred tax liabilities .................................... 2,769 2,818
DEFERRED TAX ASSETS:
Deferred gains from sale and leaseback of aircraft ........................ 70 76
Capital and operating leases ....................................... 65 70
Accrued employee benefits ........................................ 160 132
Stock-based compensation ......................................... 122 128
State taxes .................................................... 55 57
Net operating loss carry forward .................................... 22 164
Other ....................................................... 93 21
Total deferred tax assets ........................................ 587 648
Net deferred tax liability ........................................ $2,182 $2,170
The provision for income taxes is composed of the following:
2006 2005 2004
(In millions)
CURRENT:
Federal .................................................. $64 $ 43 $(20)
State .................................................... 15 7—
Total current ............................................ 79 50 (20)
DEFERRED:
Federal .................................................. 220 231 140
State .................................................... (8) 14 4
Total deferred ............................................ 212 245 144
$291 $295 $124
For the year 2004, Southwest Airlines Co. had a tax
net operating loss of $616 million for federal income tax
purposes. The Company carried a portion of this net
operating loss back to prior periods, resulting in a
$35 million refund of federal taxes previously paid. This
refund was received during 2005. The Company applied a
portion of this 2004 net operating loss to the 2005 and
2006 tax years, resulting in the payment of no regular
federal income taxes for these years. The remaining
portion of the Company’s federal net operating loss that
can be carried forward to future years is estimated at
$59 million, and expires in 2024.
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)