Southwest Airlines 2012 Annual Report Download - page 70

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The following table aggregates the Company’s material expected contractual obligations and commitments
as of December 31, 2012:
Obligations by period (in millions)
Contractual obligations 2013
2014 -
2015
2016 -
2017
Beyond
2017 Total
Long-term debt (1) ....................... $ 251 $ 730 $ 1,062 $ 954 $ 2,997
Interest commitments - fixed (2) ............ 142 236 159 164 701
Interest commitments - floating (3) .......... 13 26 19 4 62
Operating lease commitments (4) ........... 688 1,121 761 1,823 4,393
Capital lease commitments (5) .............. 5 12 11 18 46
Aircraft purchase commitments (6) .......... 619 2,195 2,740 6,521 12,075
Other commitments ...................... 198 151 60 — 409
Total contractual obligations ............. $ 1,916 $ 4,471 $ 4,812 $ 9,484 $ 20,683
(1) Includes principal only and includes $68 million in 2013 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, 2012 and can be subject to significant fluctuation.
(4) Includes Love Field Modernization Program commitment amounts, and includes the impact of the Boeing 717 lease/
sublease transaction entered into in 2012. See Note 8 to the Consolidated Financial Statements
(5) Includes interest on capital leases.
(6) Firm orders from Boeing. The Company has flexibility as to the timing for certain of the firm orders in 2014 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 substantial
integration and closing costs associated with the acquisition of AirTran, a portion of which were incurred in
2010, 2011, and 2012 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 $3.0 billion
as of December 31, 2012, 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.
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, 2012, the book value of the Company’s unencumbered aircraft totaled approximately $6.8 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, of up to $500 million of the Company’s common
stock following such authorization. On May 16, 2012, the Company’s Board of Directors increased the previous
share repurchase authorization by an additional $500 million. During 2012, the Company purchased
approximately 45.5 million shares of its common stock for approximately $400 million, which brings its
cumulative purchases under this program since the August 2011 authorization to approximately 73.0 million
shares for approximately $625 million of the $1 billion in total authorized by the Board. Repurchases are made in
accordance with applicable securities laws in the open market or in private transactions from time to time,
depending on market conditions, and may be discontinued at any time.
During 2008, the City of Dallas approved the Love Field Modernization Program (LFMP), a project to
reconstruct Dallas Love Field (Airport) with modern, convenient air travel facilities. Pursuant to a Program
Development Agreement (PDA) with the City of Dallas and the Love Field Airport Modernization Corporation (or
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