Southwest Airlines 2012 Annual Report Download - page 101

Download and view the complete annual report

Please find page 101 of the 2012 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 140

  • 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
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140

were converted is considered in the Company’s net income per share calculations, unless such conversion would
be considered antidilutive. See Note 9.
Other Company Long-Term Debt
On July 1, 2009, the Company entered into a term loan agreement providing for loans to the Company
aggregating up to $124 million, to be secured by mortgages on five of the Company’s 737-700 aircraft. The
Company has borrowed the full $124 million and secured this loan with the requisite five aircraft mortgages. The
loan matures on July 1, 2019, and is repayable semi-annually in installments of principal that began January 1,
2010. The loan bears interest at a fixed rate of 6.84 percent, and interest is payable semi-annually, which payments
began on January 1, 2010. The Company used the proceeds from the term loan for general corporate purposes.
On April 29, 2009, the Company entered into a term loan agreement providing for loans to the Company
aggregating up to $332 million, to be secured by mortgages on 14 of the Company’s 737-700 aircraft. The
Company borrowed the full $332 million and secured the loan with the requisite 14 aircraft mortgages. The loan
matures on May 6, 2019, and is being repaid via quarterly installments of principal that began August 6, 2009.
The loan bears interest at the LIBO Rate (as defined in the term loan agreement) plus 3.30 percent, and interest is
payable quarterly, which payments began on August 6, 2009. Pursuant to the terms of the term loan agreement,
the Company entered into an interest rate swap agreement to convert the variable rate on the term loan to a fixed
6.315 percent until maturity. The Company used the proceeds from the term loan for general corporate purposes,
including the repayment of the Company’s revolving credit facility in 2009.
On May 6, 2008, the Company entered into a term loan agreement providing for loans to the Company
aggregating up to $600 million, to be secured by first-lien mortgages on 21 of the Company’s 737-700 aircraft.
On May 9, 2008, the Company borrowed the full $600 million and secured these loans with the requisite 21
aircraft mortgages. The loans mature on May 9, 2020, and are repayable quarterly in installments of principal,
with the first payment made on August 9, 2008. The loans bear interest at the LIBO Rate (as defined in the term
loan agreement) plus .95 percent, and interest is payable quarterly. Pursuant to the terms of the term loan
agreement, the Company entered into an interest rate swap agreement to convert the variable rate on the term
loan to a fixed 5.223 percent until maturity. The Company used the net proceeds from the term loan for general
corporate purposes.
On October 3, 2007, grantor trusts established by the Company issued $500 million Pass Through
Certificates consisting of $412 million 6.15% Series A certificates and $88 million 6.65% Series B certificates. A
separate trust was established for each class of certificates. The trusts used the proceeds from the sale of
certificates to acquire equipment notes in the same amounts, which were issued by the Company on a full
recourse basis. Payments on the equipment notes held in each trust will be passed through to the holders of
certificates of such trust. The equipment notes were issued for each of 16 Boeing 737-700 aircraft owned by the
Company and are secured by a mortgage on each aircraft. Interest on the equipment notes held for the certificates
is payable semi-annually, with the first payment made on February 1, 2008. Also beginning February 1, 2008,
principal payments on the equipment notes held for both series of certificates are due semi-annually until the
balance of the certificates mature on August 1, 2022. The Company utilized the proceeds from the issuance of the
Pass Through Certificates for general corporate purposes. Prior to their issuance, the Company also entered into
swap agreements to hedge the variability in interest rates on the Pass Through Certificates. The swap agreements
were accounted for as cash flow hedges, and resulted in a payment by the Company of $20 million upon issuance
of the Pass Through Certificates. The effective portion of the hedge is being amortized to interest expense
concurrent with the amortization of the debt and is reflected in the above table as a reduction in the debt balance.
The ineffectiveness of the hedge transaction was immaterial.
During December 2006, the Company issued $300 million senior unsecured notes due 2016. The notes
bear interest at 5.75 percent, payable semi-annually in arrears, with the first payment made on June 15, 2007. The
Company used the net proceeds from the issuance of the notes for general corporate purposes. During fourth
93