Southwest Airlines 2013 Annual Report Download - page 99

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are helping to fund portions of the LFMP project, including the Federal Aviation Administration (“FAA”), the
Transportation Security Administration, and the City of Dallas’ Aviation Fund, the majority of the funds used are
from the issuance of bonds. During fourth quarter 2010, $310 million of such bonds were issued by the LFAMC,
and the Company has guaranteed principal and interest payments on the bonds. An additional tranche of such
bonds totaling $146 million was issued during second quarter 2012, and the Company has guaranteed the
principal and interest payments on these bonds as well. The Company currently expects that as a result of the
funding commitments from the above mentioned sources and the bonds that have been issued thus far, no further
bond issuances and related guarantees from the Company will be required to complete the LFMP project.
In conjunction with the Company’s significant presence at Dallas Love Field, its rights to occupy 16 of the
available gates upon completion of the facility, and other factors, the Company agreed to manage the majority of the
LFMP project. Based on these facts, the Company has evaluated its ongoing accounting requirements in consideration
of accounting guidance provided for lessees involved in asset construction. The Company has recorded and will
continue to record an asset and corresponding obligation for the cost of the LFMP project as the construction of the
facility occurs. As of December 31, 2013, the Company had recorded LFMP construction costs of $430 million (of
which $350 million has been placed into service and was classified as Assets constructed for others and $80 million
was in progress and is classified within Ground property and equipment) and had a liability of $437 million classified
as Airport construction obligations in its Consolidated Balance Sheet. Upon completion of different phases of the
LFMP project, the Company has placed the associated assets in service and has begun depreciating the assets over their
estimated useful lives. The amount of depreciation recorded for the year ended December 31, 2013, associated with the
LFMP assets in service was $9 million. The corresponding LFMP liabilities will be reduced primarily through the
Company’s airport rental payments to the City of Dallas as the construction costs of the project are passed through to
the Company via recurring airport rates and charges. Such 2013 payments are reflected as Repayments of airport
construction obligations in the Consolidated Statement of Cash Flows. Further, future contractual airport rental
payments to the City of Dallas are included in the schedule of future minimum lease payments in Note 8. The
Company records interest expense on the Construction obligation at an imputed rate based on the outstanding bonds.
Contingencies
The Company is from time to time subject to various legal proceedings and claims arising in the ordinary
course of business, including, but not limited to, examinations by the IRS. The Company’s management does not
expect that the outcome in any of its currently ongoing legal proceedings or the outcome of any adjustments
presented by the IRS, individually or collectively, will have a material adverse effect on the Company’s financial
condition, results of operations, or cash flow.
5. SUPPLEMENTAL FINANCIAL INFORMATION
(in millions)
December 31,
2013
December 31,
2012
Derivative contracts ................................ $ 145 $ 306
Intangible assets ................................... 166 138
Non-current investments ............................ 44 41
Other ........................................... 175 148
Other assets ..................................... $ 530 $ 633
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