Southwest Airlines 2007 Annual Report Download - page 46

are an off-balance sheet item, the majority of obligations
to which they relate are reflected as liabilities in the
Consolidated Balance Sheet. Outstanding letters of credit
totaled $211 million at December 31, 2007.
The following table aggregates the Company’s material expected contractual obligations and commitments as of
December 31, 2007:
Contractual Obligations 2008
2009
- 2010
2011
- 2012
Beyond
2012 Total
Obligations by Period
(In millions)
Long-term debt(1) ........................ $ 27 $ 65 $ 451 $1,499 $2,042
Interest commitments(2) .................... 115 229 208 556 1,108
Capital lease commitments(3) ................ 16 32 12 — 60
Operating lease commitments ................. 400 633 430 876 2,339
Aircraft purchase commitments(4) . . . .......... 747 839 902 684 3,172
Other purchase commitments ................. 60 64 14 — 138
Total contractual obligations ................ $1,365 $1,862 $2,017 $3,615 $8,859
(1) Includes current maturities, but excludes amounts associated with interest rate swap agreements
(2) Related to fixed-rate debt
(3) Includes amounts classified as interest
(4) Firm orders from Boeing
There were no outstanding borrowings under the
revolving credit facility at December 31, 2007. See Note 6
to the Consolidated Financial Statements for more infor-
mation on the Company’s revolving credit facility.
In January 2004, the Company’s Board of Directors
authorized the repurchase of up to $300 million of the
Company’s common stock, utilizing present and antic-
ipated proceeds from the exercise of Employee stock
options. Repurchases were made in accordance with
applicable securities laws in the open market or in private
transactions from time to time, depending on market
conditions. This program was completed during first
quarter 2005, resulting in the total repurchase of approx-
imately 21 million of the Company’s common shares.
In 2006 and 2007, the Company’s Board of Direc-
tors authorized five separate programs for the repurchase
of up to a total of $1.8 billion of the Company’s Common
Stock — $300 million authorized in January 2006,
$300 million authorized in May 2006, $400 million
authorized in November 2006, $300 million authorized
in March 2007, and $500 million authorized in May
2007. Repurchases were made in accordance with appli-
cable securities laws in the open market or in private
transactions from time to time, depending on market
conditions. These programs, the last of which was com-
pleted during third quarter 2007, resulted in the repur-
chase of a total of approximately 116 million shares.
During January 2008, the Company’s Board of
Directors authorized an additional program for the repur-
chase of up to $500 million of the Company’s Common
Stock. Repurchases will be made in accordance with
applicable securities laws in the open market or in private
transactions from time to time, depending on market
conditions.
Critical Accounting Policies and Estimates
The Company’s Consolidated Financial Statements
have been prepared in accordance with U.S. Generally
Accepted Accounting Principles (GAAP). The Com-
pany’s significant accounting policies are described in
Note 1 to the Consolidated Financial Statements. The
preparation of financial statements in accordance with
GAAP requires the Company’s management to make
estimates and assumptions that affect the amounts
reported in the Consolidated Financial Statements and
accompanying footnotes. The Company’s estimates and
assumptions are based on historical experience and
changes in the business environment. However, actual
results may differ from estimates under different condi-
tions, sometimes materially. Critical accounting policies
and estimates are defined as those that are both most
important to the portrayal of the Company’s financial
condition and results and require management’s most
subjective judgments. The Company’s most critical
accounting policies and estimates are described below.
27