Southwest Airlines 2014 Annual Report Download - page 56

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Reconciliation of Reported Amounts to non-GAAP Financial Measures (unaudited) (in millions,
except per share and per ASM amounts)
Year ended December 31, Percent
2014 2013 Change
Fuel and oil expense, unhedged $ 5,321 $ 5,645
Add (Deduct): Fuel hedge losses (gains) included in Fuel and oil expense (28) 118
Fuel and oil expense, as reported $ 5,293 $ 5,763
Deduct: Net impact from fuel contracts (28) (84)
Fuel and oil expense, non-GAAP $ 5,265 $ 5,679 (7.3)%
Total operating expenses, as reported $ 16,380 $ 16,421
Add (Deduct): Reclassification between Fuel and oil and Other (gains)
losses, net, associated with current period settled contracts (4) 3
Deduct: Contracts settling in the current period, but for which gains have
been recognized in a prior period* (24) (87)
Deduct: Acquisition and integration costs (126) (86)
Deduct: Labor ratification bonus (9) —
Total operating expenses, non-GAAP $ 16,217 $ 16,251 (0.2)%
Operating income, as reported $ 2,225 $ 1,278
Add (Deduct): Reclassification between Fuel and oil and Other (gains)
losses, net, associated with current period settled contracts 4 (3)
Add: Contracts settling in the current period, but for which gains have been
recognized in a prior period* 24 87
Add: Acquisition and integration costs 126 86
Add: Labor ratification bonus 9 —
Operating income, non-GAAP $ 2,388 $ 1,448 64.9%
Net income, as reported $ 1,136 $ 754
Add (Deduct): Mark-to-market impact from fuel contracts settling in future
periods 251 (103)
Add: Ineffectiveness from fuel hedges settling in future periods 5 11
Add: Other net impact of fuel contracts settling in the current or a prior
period (excluding reclassifications) 24 87
Income tax impact of fuel contracts (104) 2
Add: Acquisition and integration costs (a) 79 54
Add: Labor ratification bonus (a) 6 —
Net income, non-GAAP $ 1,397 $ 805 73.5%
Net income per share, diluted, as reported $ 1.64 $ 1.05
Add: Net impact to net income above from fuel contracts divided by dilutive
shares (a) 0.25 —
Add: Impact of special items, net (a) 0.12 0.07
Net income per share, diluted, non-GAAP $ 2.01 $ 1.12 79.5%
Operating expenses per ASM (Cents) 12.50¢ 12.60¢
Deduct: Fuel expense divided by ASMs (4.04) (4.42)
Deduct: Impact of special items (0.10) (0.07)
Operating expenses per ASM, non-GAAP, excluding fuel and special
items (cents) 8.36¢ 8.11¢ 3.1%
* As a result of prior hedge ineffectiveness and/or contracts marked to market through earnings.
(a) Amounts net of tax
48