Southwest Airlines 2014 Annual Report Download - page 59

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Year ended
(in millions, except per share amounts) December 31,
GAAP 2014 2013
Percent
Change
Operating income $ 2,225 $ 1,278 74.1
Net income $ 1,136 $ 754 50.7
Net income per share, diluted $ 1.64 $ 1.05 56.2
Non-GAAP
Operating income $ 2,388 $ 1,448 64.9
Net income $ 1,397 $ 805 73.5
Net income per share, diluted $ 2.01 $ 1.12 79.5
See the previous Note Regarding Use of Non-GAAP Financial Measures and the Reconciliation of Reported
Amounts to Non-GAAP Financial Measures for additional detail regarding non-GAAP financial measures.
Year ended December 31, 2014 net income was a Company record $1.1 billion, or $1.64 per
diluted share, a 50.7 percent increase year-over-year. This increase primarily was due to a 5.1 percent
increase in Operating revenues, driven by strong demand for air travel and successful execution of the
Company’s strategic initiatives. Operating expenses remained relatively flat, also as a result of benefits
from the Company’s strategic initiatives and from lower fuel prices, which offset an increase in
Salaries, Wages, and Benefits expense driven by the Company’s record Employee Profitsharing
expense of $355 million. Excluding special items in both years, which consisted primarily of
Acquisition and integration costs associated with the AirTran acquisition and unrealized non-cash
adjustments and reclassifications associated with hedge accounting, non-GAAP Net income was a
record $1.4 billion, or $2.01 per diluted share, a 73.5 percent increase year-over-year. Year ended
December 31, 2014 Operating income was $2.2 billion and non-GAAP Operating income was
$2.4 billion. Both GAAP and non-GAAP annual Operating income results for 2014 were Company
records and significantly surpassed the prior year performance.
During 2014, the Company continued to return significant value to its Shareholders through
four separate accelerated share repurchase programs, the buyback of its common shares on the open
market, and $139 million in dividend payments. See Part II, Item 5 for further information on the
Company’s share repurchase authorization.
For the twelve months ended December 31, 2014, the Company’s exceptional earnings
performance, combined with its actions to prudently manage invested capital, produced a 21.2 percent
pre-tax Return on invested capital, excluding special items (“ROIC”). This represented a significant
increase compared with the Company’s ROIC of 13.1 percent for the twelve months ended
December 31, 2013. The increase in ROIC was achieved primarily through successful execution of the
Company’s strategic initiatives and declining fuel prices, especially during the second half of 2014.
The integration of AirTran
The Company’s over three year long integration of Southwest’s and AirTran’s networks,
fleets, systems, and People, was effectively completed in December 2014. AirTran’s final passenger
service occurred on December 28, 2014. The acquisition of AirTran in 2011 served to increase the
Company’s fleet size and expand its network into key U.S. markets, such as Atlanta and Washington,
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