This summary is based on the first quarter fiscal 2007 earnings call conducted by Southwest Airlines Co. (LUV) on 19th April, 2007.
President and Corporate Secretary:Colleen Barrett
Chairman: Herbert D. Kelleher
Vice Chairman and Chief Executive Officer: Gary C. Kelly
Vice President, Ground Operations: Teresa Laraba
Senior Vice President Finance and Chief Financial Officer: James A. Ruppel
President and Corporate Secretary: Colleen C. Barrett
Vice President Flight Operations: Chuck Magill
Executive Vice President Strategy, Procurement and Technology: Robert E. Jordan
Key Investor Issues
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Revenues were $2.2 billion, up 8.9% from same period a year ago.
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Net income was $93 million, or 12 cents per share, up 52.5% from a year earlier.
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Economic net income was $33 million, or 4 cents per share, down 50%.
- The company repurchased 13.5 million shares of its common stock for $209 million.
First Quarter 2007 Highlights
The airline reported an increase in first quarter total operating revenues by 8.9% to $2.2 billion, compared to $2 billion a year ago.
- The total operating expenses were $2.1 billion, compared to $1.9 billion the previous year.
- Operating income for the quarter was $84 million compared to $98 million a year earlier.
- Economic operating income was $70 million compared to $115 million last year.
""Other income"" was $65 million in the quarter, compared to $2 million in ""other expenses"" for the first quarter 2006.
- The $67 million swing primarily resulted from unrealized ""other (gains) losses"" associated with amendment of Statement of Financial Accounting Standard (SFAS) 133, ""Accounting for Derivative Instruments and Hedging Activities"".
- The cost of the hedging program (which includes the premium costs of derivative contracts) of $14 million in first quarter 2007 and $11 million in first quarter 2006 is also included in ""other (gains) losses.""
- Net cash provided by operations for the quarter was $617 million, which included a $345 million increase in fuel derivative collateral deposits related to future periods.
Contributing to the company’s record revenue performance was a 21.7% year-over-year increase in other revenues.
- The increase was primarily driven by strong business partner income and the management expects similar year-over-year growth in other revenues in the second quarter.
- The company’s freight revenues decreased by 14.3% to $3 million primarily after the decision to discontinue carrying mail for the U.S. Postal Service at the end of the second quarter of 2006.
The company’s earnings for the quarter were $33 million, or 4 cents a share against previous year’s economic net income of $64 million or 8 cents a share.
- The company’s unit costs were up 4.3% led by an 11.6% increase in jet fuel prices per gallon.
- Capital expenditures were $325 million in the quarter.
The Company repurchased 13.5 million shares of its common stock for $209 million during the quarter.
Of this $209 million, $200 million completed the $400 million repurchase authorization by the Company''s Board of Directors in November 2006. The remaining $9 million related to the $300 million repurchase program authorized in March 2007.
The Company ended first quarter 2007 with $1.9 billion in cash and short-term investments, which included $885 million in fuel derivative collateral deposits.
In addition, the Company had a fully available unsecured revolving credit line of $600 million and plans to repay approximately $113 million in debt in the remainder of 2007.
The company’s GAAP first quarter net income was $92 million or 12 cents per diluted share against $61 million or 7 cents per diluted share a year earlier.
- The economic net income, which excluded unrealized FSA S133 items relating to contract settling and future periods, was $33 million, or 4 cents per share vs. $64 million, or 8 cents a year ago.
- The majority of the SFA S133 items not included from the company’s first quarter GAAP results reflect mark-to-market gains from fuel contracts that will be settled in future periods.
-The decline in earnings was primarily due to higher jet fuel costs and other cost pressures.
Fiscal Year 2007 Outlook
