Southwest Airlines 2011 Annual Report Download - page 66

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The Company is a “well-known seasoned issuer” and has a universal shelf registration statement that allows
it to register an indeterminate amount of debt or equity securities for future sales. The Company intends to use
the proceeds from any future securities sales off this shelf registration statement for general corporate
purposes. The Company has not issued any securities under this shelf registration statement to date.
The following table aggregates the Company’s (including AirTran’s) material expected contractual
obligations and commitments as of December 31, 2011:
Obligations by period (in millions)
Contractual obligations 2012
2013 -
2014
2015 -
2016
Beyond
2016 Total
Long-term debt (1) ....................... $ 556 $ 719 $ 816 $ 1,481 $ 3,572
Interest commitments - fixed (2) ............ 129 226 167 144 666
Interest commitments - floating (3) .......... 19 35 41 60 155
Operating lease commitments (4) ........... 640 1,359 1,068 2,516 5,583
Capital lease commitments ................ 6 12 12 26 56
Aircraft purchase commitments (5) .......... 952 2,339 2,343 6,988 12,622
Other commitments ...................... 198 273 72 — 543
Total contractual obligations ............. $2,500 $4,963 $4,519 $11,215 $23,197
(1) Includes principal only and includes $68 million associated with the Company’s convertible senior notes
due 2016. See Note 7 to the Consolidated Financial Statements.
(2) Related to fixed-rate debt only.
(3) Interest obligations associated with floating-rate debt (either at issuance or through swaps) is estimated
utilizing forward interest rate curves as of December 31, 2011 and can be subject to significant fluctuation.
(4) Includes LFMP commitment amounts.
(5) Firm orders from Boeing. The Company has flexibility as to the timing for certain of the firm orders in 2013
through 2017, but has classified the amounts in the earliest year they could be considered a commitment.
As discussed in Note 2 to the Consolidated Financial Statements, the Company expects to incur
approximately $500 million in integration and closing costs associated with the acquisition of AirTran, a portion
of which were incurred in 2010 and 2011, and which have been, and are expected to continue to be, funded with
cash. The Company believes that its current liquidity position, including unrestricted cash and short-term
investments of $3.1 billion as of December 31, 2011, anticipated future internally generated funds from
operations, and its fully available, unsecured revolving credit facility of $800 million, will enable it to meet these
future integration expenditures. Additionally, as discussed in Note 7 to the Consolidated Financial Statements
and as set forth above in the contractual obligations table, the Company has long-term debt maturities of $385
million in March 2012, which are currently expected to be funded with cash and short-term investments on hand
or expected to be generated from operations during 2012. The Company will continue to consider various
borrowing or leasing options to maximize liquidity and supplement cash requirements as needed. The Company
believes it has access to financing arrangements because of its current investment grade credit ratings,
unencumbered assets, modest leverage, and consistent profitability, which should enable it to meet its ongoing
capital, operating, and other liquidity requirements. As of December 31, 2011, the book value of the Company’s
unencumbered aircraft totaled approximately $6.2 billion.
In January 2008, the Company’s Board of Directors authorized the repurchase of up to $500 million of the
Company’s common stock. Through February 15, 2008, the Company had repurchased 4.4 million shares for a
total of approximately $54 million, at which time repurchases under the program were suspended. On August 5,
2011, the Company’s Board of Directors authorized the Company to resume a share repurchase program and
approved the Company’s repurchase, on a discretionary basis, up to $500 million of the Company’s common
stock following such authorization. During 2011, the Company purchased approximately 27.5 million shares of
its common stock for approximately $225 million of the $500 million in total currently authorized by the Board.
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