Southwest Airlines 2008 Annual Report Download - page 85

Download and view the complete annual report

Please find page 85 of the 2008 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 103

  • 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
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A rollforward of the amounts included in “Accumulated other comprehensive income (loss)”, net of taxes
for 2008, 2007, and 2006, is shown below:
Fuel hedge
derivatives Other
Accumulated other
comprehensive
income (loss)
(In millions)
Balance at December 31, 2006 ........................ $ 584 $ (2) $ 582
2007 changes in fair value ............................ 1,039 23 1,062
Reclassification to earnings ........................... (403) — (403)
Balance at December 31, 2007 ........................ 1,220 21 1,241
2008 changes in fair value ........................... (1,528) (59) (1,587)
Reclassification to earnings .......................... (638) — (638)
Balance at December 31, 2008 ....................... $ (946) $(38) $ (984)
13. Common Stock
The Company has one class of capital stock, its
common stock. Holders of shares of common stock
are entitled to receive dividends when and if declared
by the Board of Directors and are entitled to one vote
per share on all matters submitted to a vote of the
shareholders. At December 31, 2008, the Company
had 69 million shares of common stock reserved for
issuance pursuant to Employee stock benefit plans
(of which 28 million shares had not been granted.)
In 2006, the Company’s Board of Directors
authorized three separate programs for the repurchase
of up to a total of $1.0 billion of the Company’s
common stock—$300 million authorized in January
2006, $300 million authorized in May 2006, and $400
million authorized in November 2006. 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. These
programs, which were completed during first quarter
2007, resulted in the repurchase of a total of
approximately 63 million shares.
In 2007, the Company’s Board of Directors
authorized two separate programs for the repurchase of
up to a total of $800 million of the Company’s
common stock—$300 million authorized in March
2007, and $500 million authorized in May 2007.
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. These programs, which were completed
during third quarter 2007, resulted in the repurchase of
a total of approximately 53 million shares.
During January 2008, the Company’s Board of
Directors authorized an additional program for the
repurchase of up to $500 million of the Company’s
Common Stock. Repurchases have been or 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. The
Company had repurchased 4.4 million shares for a
total of $54 million as part of this program through
February 15, 2008; however, the Company has not
repurchased any additional shares from that date
through the date of this filing. The Company does not
believe it is prudent to repurchase shares at the
current time considering today’s unstable financial
markets and volatile fuel prices.
14. Stock Plans
Share-based Compensation
The Company has previously awarded share-
based compensation pursuant to plans covering the
majority of its Employee groups, including plans
adopted via collective bargaining, a plan covering the
Company’s Board of Directors, and plans related to
employment contracts with the Chairman Emeritus of
the Company. The Company accounts for share-
based compensation utilizing the fair value
recognition provisions of SFAS No. 123R, “Share-
Based Payment.”
The Consolidated Statement of Income for the
years ended December 31, 2008, 2007, and 2006
reflects share-based compensation cost of $18
million, $37 million, and $80 million, respectively.
The total tax benefit recognized in earnings from
66