Southwest Airlines 2012 Annual Report Download - page 95

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financial benefits that the Company expects to achieve from the AirTran acquisition and could continue to result
in the Company taking significant charges against earnings during the integration process. The Company
incurred consolidated acquisition and integration-related costs for the years ended December 31, 2012, 2011, and
2010, of $183 million, $134 million, and $8 million, respectively, primarily consisting of consulting, financial
advisory fees, severance, flight crew training, seniority integration, technology, aircraft-related, and facility
integration expenses. In the Consolidated Statement of Income, these costs are classified as Acquisition and
integration expenses.
Recording of assets acquired and liabilities assumed
The transaction has been accounted for using the acquisition method of accounting (“purchase
accounting”), which requires, among other things, that most assets acquired and liabilities assumed be recognized
at their fair values as of the acquisition date. There were no significant fair value adjustments made since the
purchase accounting was finalized in the second quarter of 2012. The following table summarizes the assets
acquired and liabilities assumed as of the acquisition date at fair value:
(in millions) May 2, 2011
Assets
Cash and cash equivalents ............................... $ 477
Restricted cash ........................................ 6
Other current assets .................................... 234
Operating property and equipment ........................ 1,154
Goodwill ............................................ 970
Other identified intangibles .............................. 123
Deferred income taxes .................................. 162
Other noncurrent assets ................................. 45
Liabilities
Long-term debt and capital leases, including current portion .... (1,119)
Air traffic liability ..................................... (354)
Other liabilities assumed ................................ (657)
Net assets acquired ...................................... $ 1,041
Pro forma impact of the acquisition
The unaudited pro forma results presented below include the effects of the AirTran acquisition as if it had
been consummated as of January 1, 2010. The pro forma results include the amortization associated with
estimates for the acquired intangible assets, fair value adjustments for deferred revenue, favorable/unfavorable
leasehold interests, property and equipment, and long-term debt. In addition, the pro forma results do not include
any anticipated synergies, or the assumption of hedge accounting for AirTran’s derivative instruments, or other
expected benefits of the acquisition. Accordingly, the unaudited pro forma financial information below is not
necessarily indicative of either future results of operations or results that might have been achieved had the
acquisition been consummated as of January 1, 2010.
Year ended
December 31,
(in millions, except per share data) 2011 2010
Total operating revenues ..................... $ 16,601 $ 14,721
Net income ............................... 160 499
Net income per share, basic ................... .21 .63
Net income per share, diluted ................. .21 .63
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