Southwest Airlines 2011 Annual Report Download - page 50

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Reconciliation of Reported Amounts to non-GAAP Financial Measures (unaudited) (in millions, except per
share and per ASM amounts)
Year ended December 31, Percent
Change2011 2010
Fuel and oil expense, unhedged ..................................... $5,580 $3,296
Add: Fuel hedge losses included in Fuel and oil expense ............... 64 324
Fuel and oil expense, as reported .................................... $5,644 $3,620
Add (Deduct): Net impact from fuel contracts ....................... — (172)
Fuel and oil expense, non-GAAP .................................... $5,644 $3,448 63.7%
Operating income, as reported ...................................... $ 693 $ 988
Add (Deduct): Reclassification between Fuel and oil and Other (gains) losses,
net, associated with current period settled contracts ..................... (35) 1
Add: Contracts settling in the current period, but for which gains have been
recognized in a prior period* ....................................... 35 171
Add: Acquisition and integration costs, net (a) ........................... 132 7
Add: Charge for asset impairments, net of profitsharing ................... 14 —
Operating income, non-GAAP ...................................... $ 839 $1,167 (28.1)%
Net income, as reported ............................................ $ 178 $ 459
Add (Deduct): Mark-to-market impact from fuel contracts settling in future
periods ........................................................ 21 (21)
Add (Deduct): Ineffectiveness from fuel hedges settling in future periods ..... 33 (11)
Add: Other net impact of fuel contracts settling in the current or a prior period
(excluding reclassifications) ....................................... 35 171
Income tax impact of fuel contracts ................................... (31) (52)
Add: Acquisition and integration costs, net (b) ....................... 85 4
Add: Charge for asset impairments, net (b) .......................... 9 —
Net income, non-GAAP ............................................ $ 330 $ 550 (40.0)%
Net income per share, diluted, as reported ............................ $ 0.23 $ 0.61
Add: Net impact to net income above from fuel contracts divided by dilutive
shares ......................................................... 0.07 0.12
Add: Impact of special items, net (b) .................................. 0.13 0.01
Net income per share, diluted, non-GAAP ............................ $ 0.43 $ 0.74 (41.9)%
Operating expenses per ASM (cents) ................................. 12.41 11.29
Deduct: Fuel expense divided by ASMs ................................ (4.68) (3.68)
Deduct: Impact of special items, net (a) ................................ (0.12) —
Operating expenses per ASM, non-GAAP, excluding fuel and special items
(cents) ........................................................ 7.61 7.61 — %
* As a result of prior hedge ineffectiveness and/or contracts marked to market through earnings.
(a) Amounts net of profitsharing impact on charges incurred through March 31, 2011. The Company amended
its profitsharing plan during second quarter 2011 to defer the profitsharing impact of acquisition and
integration costs incurred from April 1, 2011, through December 31, 2013. The profitsharing impact of these
costs will be realized in 2014 and beyond.
(b) Amounts net of taxes and profitsharing. See footnote (a) above.
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