<PAGE> 1
Pursuant to Rule 424(b)(2)
File No. 33-50930
PROSPECTUS SUPPLEMENT
(To Prospectus Dated August 25, 1992)
$100,000,000
[SOUTHWEST AIRLINES LOGO]
8% NOTES DUE 2005
The Notes will mature on March 1, 2005. Interest on the Notes is payable
semi-annually on March 1 and September 1, commencing September 1, 1995. The
Notes may not be redeemed prior to maturity and will not be subject to any
sinking fund. See "Description of Notes."
Settlement for the Notes will be made in same-day funds. All payments of
principal and interest will be made by the Company in immediately available
funds. See "Description of Notes."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(1)(2)
<S> <C> <C> <C>
Per Note................... 99.461% .650% 98.811%
Total...................... $99,461,000 $650,000 $98,811,000
- --------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from March 7, 1995 to the date of delivery.
(2) Before deducting expenses payable by the Company estimated to be $150,000.
The Notes are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that the Notes will be delivered in book-entry form only on or about March 7,
1995 through the facilities of The Depository Trust Company.
SALOMON BROTHERS INC
LEHMAN BROTHERS
MERRILL LYNCH & CO.
The date of this Prospectus Supplement is February 28, 1995.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The regional offices of the Securities and Exchange Commission referred to
under "Available Information" in the accompanying Prospectus have moved and are
now located at Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661
and Seven World Trade Center, New York, New York 10048.
INCORPORATION OF ADDITIONAL DOCUMENT BY REFERENCE
In addition to the documents referred to in the Prospectus under
"Incorporation of Certain Documents by Reference," the Company incorporates
herein by reference its Current Report on Form 8-K dated February 27, 1995,
including the Company's Consolidated Financial Statements and related
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
S-2
<PAGE> 3
THE COMPANY
Southwest Airlines Co. ("Southwest" or the "Company") is a major domestic
airline which provides single class air transportation characterized by
frequent, high-quality service at affordable prices. Southwest primarily serves
shorthaul city pairs, targeting the business commuter as well as leisure
travelers.
The Company was incorporated in Texas and commenced customer service on
June 18, 1971 with three Boeing 737 aircraft serving three Texas
cities -- Dallas, Houston and San Antonio. At December 31, 1994, Southwest
operated 199 Boeing 737 aircraft and provided service to 45 airports in 44
cities primarily in the midwestern, southwestern and western regions of the
United States.
S-3
<PAGE> 4
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Financial Data:
(in thousands except per share
amounts)
Operating revenues................... $ 2,591,933 $ 2,296,673 $ 1,802,979
Operating expenses................... 2,275,224 2,004,700 1,609,175
------------ ------------ ------------
Operating income..................... 316,709 291,973 193,804
Other expenses, net.................. 17,186 32,336 36,361
------------ ------------ ------------
Income before income taxes and
cumulative effect of accounting
changes........................... 299,523 259,637 157,443
Provision for income taxes........... 120,192 105,353 55,816
------------ ------------ ------------
Income before cumulative effect of
accounting changes................ 179,331 154,284 101,627
Cumulative effect of accounting
changes........................... -- 15,259(1) 12,538(2)
------------ ------------ ------------
Net income........................... $ 179,331 $ 169,543 $ 114,165
============ ============ ============
Income per common and common
equivalent share before cumulative
effect of accounting changes...... $ 1.22 $ 1.05 $ 0.71
Cash dividends per common share...... $ .04 $ .03867 $ .03533
Total assets at period-end........... $ 2,823,071 $ 2,576,037 $ 2,368,856
Long-term obligations at
period-end........................ $ 583,071 $ 639,136 $ 735,754
Stockholders' equity at period-end... $ 1,238,706 $ 1,054,019 $ 879,536
Operating Data:
Revenue passengers carried........... 42,742,602 36,955,221 27,839,284
Revenue passenger miles (RPMs)
(000s)............................ 21,611,266 18,827,288 13,787,005
Available seat miles (ASMs) (000s)... 32,123,974 27,511,000 21,366,642
Load factor.......................... 67.3% 68.4% 64.5%
Average length of passenger haul
(miles)........................... 506 509 495
Trips flown.......................... 624,476 546,297 438,184
Average passenger fare............... $ 58.44 $ 59.97 $ 58.33
Passenger revenue yield per RPM...... 11.56c. 11.77c. 11.78c.
Operating revenue yield per ASM...... 8.07c. 8.35c. 7.89c.
Operating expenses per ASM........... 7.08c. 7.25c.(3) 7.03c.
Fuel cost per gallon (average)....... 53.92c. 59.15c. 60.82c.
Number of employees at period-end.... 16,818 15,175 11,397
Size of fleet at period-end (includes
leased aircraft).................. 199 178 141
</TABLE>
- ---------------
(1) In 1993, the Company changed its method of accounting for income taxes and
postretirement benefits.
(2) In 1992, the Company changed its method of accounting for scheduled airframe
overhauls.
(3) Excludes merger expenses of $10.8 million.
S-4
<PAGE> 5
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1994 and as adjusted for the issuance and sale of the
Notes offered hereby.
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------------
AS
ACTUAL ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt............................... $ 9,553 $ 9,553
========== ==========
Long-term debt less current maturities:(1)
9 1/4% Notes due 1998............................................ $ 100,000 $ 100,000
9.40% Notes due 2001............................................. 100,000 100,000
8 3/4% Notes due 2003............................................ 100,000 100,000
7 7/8% Notes due 2007............................................ 100,000 100,000
8% Notes due 2005................................................ -- 100,000
Capital leases................................................... 186,214 186,214
Other............................................................ 424 424
----------- -----------
586,638 686,638
Debt discount...................................................... (3,567) (4,106)
----------- -----------
Total long-term debt less current maturities..................... 583,071 682,532
----------- -----------
Stockholders' Equity:
Common stock, $1.00 par value; authorized -- 500,000,000 shares,
issued and outstanding -- 143,255,795 shares(2)............... 143,256 143,256
Capital in excess of par value................................... 151,746 151,746
Retained earnings................................................ 943,704 943,704
----------- -----------
Total Stockholders' Equity.................................... 1,238,706 1,238,706
----------- -----------
Total Capitalization..................................... $ 1,821,777 $ 1,921,238
========== ==========
</TABLE>
- ---------------
(1) For additional information as to long-term debt and lease obligations, see
the Consolidated Financial Statements of the Company and the accompanying
notes incorporated by reference herein.
(2) Excludes 12,009,293 shares of Common Stock reserved for issuance pursuant
to Employee stock benefit plans and 155,265,088 shares reserved for
issuance pursuant to the Common Stock Rights Agreement.
S-5
<PAGE> 6
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods shown, as restated to reflect the
Company's acquisition of Morris as if it had occurred at the beginning of such
periods.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1994 1993 1992 1991 1990
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Ratios of Earnings to Fixed Charges....................... 3.28 3.12 2.41 1.51 2.32
</TABLE>
The ratios of earnings to fixed charges have been computed using earnings
which are the sum of net income, income taxes and fixed charges adjusted to
exclude interest capitalized during the period. Fixed charges are interest,
whether expensed or capitalized, amortization of debt discount and expense, and
that portion of rental charges estimated to be representative of an interest
factor.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes (referred to
in the Prospectus as the "Offered Debt Securities") supplements, and to the
extent inconsistent therewith replaces, the description of the general terms and
provisions of Debt Securities set forth in the Prospectus, to which description
reference is hereby made.
GENERAL
The Notes are to be issued as a series of Debt Securities under the
Indenture, which is more fully described in the Prospectus. The maximum
aggregate principal amount of Notes which may be issued is limited to
$100,000,000. Interest at the annual rate set forth on the cover page of this
Prospectus Supplement is to accrue from March 7, 1995 and is to be payable
semi-annually on March 1 and September 1, commencing September 1, 1995, to the
persons in whose names the Notes are registered at the close of business on the
preceding February 15 or August 15, respectively, and, unless otherwise
determined by the Company, will be paid by check mailed on or before the payment
date, by first class mail to such persons.
MATURITY AND REDEMPTION
The Notes will mature on March 1, 2005. The Notes will not be redeemable at
the option of the Company or repayable at the option of any holder prior to
maturity. There is no sinking fund applicable to the Notes.
DEFEASANCE
Subject to certain conditions described in the Prospectus, the Company
shall be deemed to have paid and discharged the entire indebtedness on all the
outstanding Notes by depositing with the Trustee (i) as trust funds in trust an
amount sufficient to pay and discharge the entire indebtedness on all
outstanding Notes for principal and interest, or (ii) as obligations in trust
such amount of direct obligations of, or obligations as the principal of and
interest on which are fully guaranteed, by, the United States of America as
will, together with the income to accrue thereon without consideration of any
reinvestment thereof, be sufficient to pay and discharge the entire indebtedness
on all outstanding Notes.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made in same-day funds. All payments of
principal and interest will be made by the Company in immediately available
funds. To the extent any Notes are held by The Depository Trust Company ("DTC"),
such Notes will trade in DTC's Same-Day Funds Settlement
S-6
<PAGE> 7
System until maturity, and therefore DTC will require secondary trading activity
in the Notes to be settled in immediately available funds. Secondary trading in
long-term notes and debentures of corporate issuers is generally settled in
clearing-house or next-day funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in the
Notes.
GLOBAL SECURITIES
The Notes initially will be represented by one or more global securities
(the "Global Securities") deposited with DTC and registered in the name of DTC
or any successor depositary (the "Depositary") or its nominee. The Depositary
will maintain the Notes in denominations of $1,000 and integral multiples
thereof through its book-entry facilities. Unless and until Notes are issued in
definitive certificated form under the limited circumstance described in the
Prospectus under "Description of Debt Securities -- Global Debt Securities," no
beneficial owner of a Note shall be entitled to receive a definitive certificate
representing a Note. See "Description of Debt Securities -- Global Debt
Securities" in the Prospectus for additional information concerning the Global
Securities and book-entry procedures.
DTC has advised the Company and the Underwriters as follows: DTC is a
limited-purpose trust company organized under the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered pursuant
to the provisions of Section 17A Securities Exchange Act of 1934, as amended.
DTC was created to hold securities of its participants and to facilitate the
clearance and settlement of securities transactions among its participants in
such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers
(including the Underwriters), banks, trust companies, clearing corporations and
certain other organizations, some of which (and/or their representatives) own
interests in DTC. Access to DTC's book-entry system is also available to others,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
UNDERWRITING
Subject to the terms and conditions set forth in the Terms Agreement (which
incorporates by reference the terms of the Underwriting Agreement, except to the
extent inconsistent therewith), the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters has severally agreed to
purchase from the Company, the principal amount of Notes set forth opposite its
name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
- ------------------------------------------------------------------------- --------------
<S> <C>
Salomon Brothers Inc .................................................... $ 33,400,000
Lehman Brothers Inc. .................................................... 33,300,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................. 33,300,000
--------------
Total.......................................................... $ 100,000,000
=============
</TABLE>
In the Underwriting Agreement, the Underwriters have severally agreed,
subject to the terms and conditions set forth therein, to purchase all the Notes
offered hereby if any of the Notes are purchased. In the event of a default by
any Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
The Underwriters propose initially to offer the Notes to the public at the
price to public set forth on the cover page of this Prospectus Supplement and to
certain dealers at such price less a concession of
S-7
<PAGE> 8
not in excess of .40% of the principal amount of the Notes. The Underwriters may
allow and such dealers may reallow concessions not in excess of .25% of such
principal amount of the Notes to certain other dealers. After the initial public
offering, the public offering price and such concessions may be changed.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that they
currently intend to make a market in the Notes, as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Notes and any such market making may be discontinued at any time at the
sole discretion of the Underwriters. Accordingly, no assurance can be given as
to the liquidity of, or trading markets for, the Notes.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
of such liabilities.
The Underwriters and their respective affiliates may engage in transactions
with and perform services for the Company in the ordinary course of business.
LEGAL OPINIONS
The validity of the Notes will be passed upon for the Company by Deborah
Ackerman, Associate General Counsel, who beneficially owns approximately 8,700
shares of the common stock of the Company and for the Underwriters by Vinson &
Elkins L.L.P., Houston, Texas. Vinson & Elkins L.L.P. also acts as counsel to
the Company in matters unrelated to the offering of the Notes. Members of the
firm of Vinson & Elkins L.L.P. having responsibility for the Company's legal
matters beneficially own approximately 5,500 shares of common stock of the
Company.
S-8
<PAGE> 9
PROSPECTUS
SOUTHWEST AIRLINES CO.
DEBT SECURITIES
---------------------
Southwest Airlines Co. (the "Company") intends to issue from time to time
unsecured debt securities (the "Debt Securities") from which the Company will
receive up to an aggregate of $200,000,000 in proceeds and which will be offered
on terms determined by market conditions at the time of sale. The Debt
Securities may be issued in one or more series with the same or various
maturities, at par or with an original issue discount. The specific designation,
aggregate principal amount, authorized denominations, offering or purchase
price, maturity, rate and time of payment of any interest, any redemption terms
or other specific terms and any listing on a securities exchange of the Debt
Securities in respect of which this Prospectus is being delivered (the "Offered
Debt Securities") are set forth in the accompanying Prospectus Supplement (the
"Prospectus Supplement"), together with any other terms of offering of the
Offered Debt Securities.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
This Prospectus may not be used to consummate sales of the Debt Securities
unless accompanied by a Prospectus Supplement.
---------------------
THE DATE OF THIS PROSPECTUS IS AUGUST 25, 1992.
<PAGE> 10
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports, proxy or
information statements and other information with the Securities and Exchange
Commission (the "Commission") relating to its business, financial position,
results of operations and other matters. Such reports, proxy or information
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. and at certain of its Regional Offices,
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois; and 75 Park Place, Room 1400, New York, New York. Copies of
such material can also be obtained from the Public Reference Section of the
Commission in Washington, D.C. 20549 at prescribed rates. Such material can also
be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York, on which the Company's common stock is listed.
The Company has filed with the Commission a Registration Statement under
the Securities Act of 1933 with respect to the Debt Securities offered hereby.
This Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Debt Securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1991, and its Quarterly Reports on Form 10-Q for the quarters ended March
31, 1992 and June 30, 1992, heretofore filed with the Commission, are
incorporated by reference herein and made a part hereof.
In addition, all documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 subsequent to the date
of this Prospectus and prior to the termination of the offering of the Debt
Securities offered hereby shall be deemed incorporated herein by reference and
such documents shall be deemed to be a part hereof from the date of filing such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein or in the accompanying Prospectus
Supplement modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY REFERENCE
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO THE DOCUMENTS THAT THIS PROSPECTUS INCORPORATES).
WRITTEN OR TELEPHONE REQUEST SHOULD BE DIRECTED TO: SOUTHWEST AIRLINES CO., P.O.
BOX 36611, DALLAS, TEXAS 75235, ATTENTION: JOHN D. OWEN, TREASURER (TELEPHONE
214/904-4334).
2
<PAGE> 11
THE COMPANY
Southwest Airlines Co. ("Southwest" or the "Company") provides single class
air transportation characterized by frequent, high quality service at affordable
prices. Southwest primarily serves short-haul city pairs, targeting the business
commuter as well as leisure travelers.
At June 30, 1992, Southwest provided service to 36 airports in 34 cities in
the southwestern, western and midwestern regions of the United States. Southwest
employed a fleet comprised exclusively of 138 Boeing 737 aircraft.
The Company was incorporated in Texas in 1967. The Company's principal
executive offices are located at 2702 Love Field Drive, Dallas, Texas 75235. The
Company's mailing address is P.O. Box 36611, Love Field, Dallas, Texas 75235,
where its telephone number is 214/904-4000.
RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------- ----------------------------------------
1992 1991 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratios of Earnings to Fixed Charges.... 2.12 * 1.38 2.21 3.03 2.74 1.47
</TABLE>
- ---------------
* Earnings for the six months ended June 30, 1991 were inadequate to cover fixed
charges. The earnings deficiency for such six month period was $3.8 million.
The ratios of earnings to fixed charges have been computed using earnings
which are the sum of net income, income taxes and fixed charges adjusted to
exclude interest capitalized during the period. Fixed charges are interest,
whether expensed or capitalized, amortization of debt discount and expense and
that portion of rental charges estimated to be representative of an interest
factor.
A statement setting forth the calculation of the ratios of earnings to
fixed charges is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities offered hereby will
be added to working capital of the Company and will be available for general
corporate purposes, including the acquisition of aircraft and related equipment,
unless otherwise indicated in the Prospectus Supplement relative to the Offered
Debt Securities.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Offered Debt Securities. The
particular terms of the Offered Debt Securities and the extent, if any, to which
such general provisions may not apply to the Offered Debt Securities are
described in the Prospectus Supplement.
The Debt Securities are to be issued under an Indenture (the "Indenture")
dated as of June 20, 1991 between the Company and NationsBank of Texas, N.A.
(formerly NCNB Texas National Bank) (the "Trustee"), as Trustee. The following
statements are subject to the detailed provisions of the Indenture, a copy of
which is filed as an exhibit to the Registration Statement. Wherever any
particular provision of the Indenture or terms defined therein are referred to,
such provisions and terms are incorporated by reference as a part of the
statements made herein and such statements are qualified in their entirety by
such references. Parenthetical references in italic type are to the Indenture.
3
<PAGE> 12
GENERAL
The Indenture does not limit the amount of Debt Securities that can be
issued thereunder. Debt Securities will be issued from time to time and offered
on terms determined by market conditions at the time of sale.
The Debt Securities may be issued in one or more series with the same or
various maturities at par or at a discount. (Section 2.03) Any Debt Securities
bearing no interest or interest at a rate which at the time of issuance is below
market rates ("Original Issue Discount Securities") will be sold at a discount
(which may be substantial) below their stated principal amount. Federal income
tax consequences and other special considerations applicable to any such
substantially discounted Debt Securities will be described in the Prospectus
Supplement relating thereto.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities: (i) the designation, aggregate principal amount and
authorized denominations of the Offered Debt Securities, (ii) the percentage of
their principal amount at which such Offered Debt Securities will be issued;
(iii) the date or dates on which the Offered Debt Securities will mature; (iv)
the rate per annum, if any, at which the Offered Debt Securities will bear
interest, or the method of determining such rate or rates; (v) the times at
which any such interest will be payable; (vi) whether such Debt Securities are
to be issued in whole or in part in the form of one or more temporary or
permanent global securities and, if so, the identity of the depositary for such
global security or securities; and (vii) any redemption terms or other specific
terms. Principal, premium, if any, and interest, if any, will be payable and the
Offered Debt Securities will be transferable at the Corporate Trust Office of
the Trustee in Dallas, Texas, provided that payment of interest, if any, may be
made at the option of the Company by check mailed on or before the payment date,
first class mail, to the address of the person entitled thereto as it appears on
the registry books of the Company. (Sections 2.03, 3.01)
The Debt Securities will be unsecured and will rank equally and ratably
with other unsecured and unsubordinated debt of the Company.
Neither the Indenture nor any of the outstanding senior indebtedness of the
Company contains any provisions which would afford holders protection in the
event of a highly leveraged or other transaction involving the Company that may
adversely affect holders.
The Offered Debt Securities will be issued only in fully registered form
without coupons and in denominations of $1,000 and any multiple thereof, unless
otherwise specified in the Prospectus Supplement. No service charge will be made
for any transfer or exchange of any Debt Securities but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. (Sections 2.03, 2.06)
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (a "Registered Global
Security") that will be deposited with a depositary (the "Depositary") or with a
nominee for the Depositary identified in the applicable Prospectus Supplement.
In such a case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Debt Securities of the series to be represented
by such Registered Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in definitive certificated
form, a Registered Global Security may not be registered for transfer or
exchange except as a whole by the Depositary for such Registered Global Security
to a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by such Depositary or any
such nominee to a successor Depositary for such series or a nominee of such
successor Depositary and except in the circumstances described in the applicable
Prospectus Supplement. (Section 2.10)
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered Global
Security will be described in the applicable Prospectus Supplement. The Company
expects that the following provisions will apply to depositary arrangements.
4
<PAGE> 13
Upon the issuance of any Registered Global Security, and the deposit of
such Registered Global Security with or on behalf of the Depositary for such
Registered Global Security, the Depositary will credit, on its book-entry
registration and transfer system, the respective principal amounts of the Debt
Securities represented by such Registered Global Security to the accounts of
institutions ("participants") that have accounts with the Depositary or its
nominee. The Accounts to be credited will be designated by the underwriters or
agents engaging in the distribution of such Debt Securities or by the Company,
if such Debt Securities are offered and sold directly by the Company. Ownership
of beneficial interests in a Registered Global Security will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests by participants in such Registered Global Security will
be shown on, and the transfer of that ownership interest will be effected only
through, records maintained by the Depositary for such Registered Global
Security or by its nominee. Ownership of beneficial interests in such Registered
Global Security by persons that hold through participants will be shown on, and
the transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. The foregoing limitations and
such laws may impair the ability to transfer beneficial interests in such
Registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented by such Registered Global Security for all
purposes under the Indenture. Unless otherwise specified in the applicable
Prospectus Supplement and except as specified below, owners of beneficial
interests in such Registered Global Security will not be entitled to have Debt
Securities of the series represented by such Registered Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities of such series in certificated form and will not be
considered the holders thereof for any purposes under the Indenture. (Section
2.10) Accordingly, each person owning a beneficial interest in such Registered
Global Security must rely on the procedures of the Depositary and, if such
person is not a participant, on the procedures of the participant through which
such person owns its interest, to exercise any rights of a holder under the
Indenture. The Depositary may grant proxies and otherwise authorize participants
to give or take any request, demand, authorization, direction, notice, consent,
waiver or other action which a holder is entitled to give or take under the
Indenture. The Company understands that, under existing industry practices, if
the Company requests any action of holders or an owner of a beneficial interest
in such Registered Global Security desires to give any notice or take any action
a holder is entitled to give or take under the Indenture, the Depositary would
authorize the participants to give such notice or to take such action, and
participants would authorize beneficial owners owning through such participants
to give such notice or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Unless otherwise specified in the applicable Prospectus Supplement,
payments with respect to principal, premium, if any, and interest, if any, on
Debt Securities represented by a Registered Global Security registered in the
name of a Depositary or its nominee will be made to such Depositary or its
nominee, as the case may be, as the registered owner of such Registered Global
Security.
The Company expects that the Depositary for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium or interest, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Registered Global Security as shown on the records
of such Depositary. The Company also expects that payments by participants to
owners of beneficial interests in such Registered Global Security held through
such participants will be governed by standing instructions and customary
practices, as is now the case with the securities held for the accounts of
customers registered in "street names," and will be the responsibility of such
participants. None of the Company, the Trustee or any agent of the Company shall
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests of a Registered
Global Security, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests. (Section 2.10)
5
<PAGE> 14
If the Depositary for any Debt Securities represented by a Registered
Global Security is at any time unwilling or unable to continue as Depositary and
a successor Depositary is not appointed by the Company within 90 days, or an
Event of Default (or an event which, with the giving of notice or lapse of time
would constitute an Event of Default) with respect to the Debt Securities has
occurred and is continuing, then the Company will issue such Debt Securities in
definitive certificated form in exchange for such Registered Global Security. In
addition, the Company may at any time and in its sole discretion determine not
to have any of the Debt Securities of a series represented by one or more
Registered Global Securities and, in such event, will issue Debt Securities of
such series in definitive certificated form in exchange for all of the
Registered Global Security or Securities representing such Debt Securities.
(Section 2.10)
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that the Company may, without the consent of the
holders of the Debt Securities, consolidate with, or sell or convey all or
substantially all of its properties and assets to, or merge into or with another
corporation, provided that in any such case (i) if the Company is not the
continuing corporation, the successor corporation shall assume by a supplemental
indenture the Company's obligations under the Indenture and (ii) immediately
after giving effect to such transaction no Event of Default, and no event which
after notice or lapse of time would become an Event of Default, shall have
occurred and be continuing. (Section 10.01) In case of any such consolidation,
merger, sale or conveyance and upon any such assumption by the successor
corporation, such successor corporation shall succeed to and be substituted for
the Company as obligor on the Debt Securities, with the same effect as if it had
been named in the Indenture as the Company. (Section 10.02)
EVENTS OF DEFAULT
The following events are "Events of Default" under the Indenture with
respect to Debt Securities of each series: (a) failure with respect to such
series to pay principal (including any sinking fund installment) or premium, if
any, when due; (b) failure with respect to such series for a period of 30 days
to pay interest; (c) failure for a period of 90 days after notice to perform in
any material respect any other covenants in respect of such series; (d) default
under any instrument under which there may be issued or by which they may be
secured or evidenced any indebtedness for money borrowed by the Company
(including the Indenture) resulting in the acceleration of such indebtedness in
excess of $50 million, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled, within 10 days after notice; or
(e) certain events in bankruptcy, insolvency, or reorganization of the Company.
(Section 5.01)
The Indenture provides that if an Event of Default described above occurs
and is continuing with respect to any series, either the Trustee or the holders
of not less than 25% in aggregate principal amount of the Debt Securities of
such series then outstanding may declare the principal (or, in the case of
Original Issue Discount Securities, the portion thereof specified in the terms
thereof) of all outstanding Debt Securities of such series and the interest
accrued thereon, if any, to be due and payable immediately, but under certain
conditions such declarations may be annulled and past defaults (except for a
default in the payment of principal of or interest or premium, if any, on such
Debt Securities) may be waived by the holders of a majority in aggregate
principal amount of the then outstanding Debt Securities of each such series.
(Sections 5.01 and 5.06)
Under the Indenture the Trustee must give to the holders of each series of
Debt Securities notice of all uncured defaults known to it with respect to such
series within 90 days after the occurrence of such a default (the term default
to include the events specified above without grace periods); provided that,
except in the case of default in the payment of principal of, or interest on,
any of the Debt Securities, the Trustee shall be protected in withholding such
notice if it in good faith determines that the withholding of such notice is in
the interests of the Debt Securityholders of such series. (Section 5.07)
The Company must furnish to the Trustee annually an officer's certificate
as to his or her knowledge of the Company's compliance with all of the
conditions and covenants under the Indenture. (Section 4.03)
No holder of any Debt Securities of any series may institute any legal
action unless he shall have given the Trustee written notice of default and
unless (i) the holders of not less than 25% in aggregate principal
6
<PAGE> 15
amount of the Debt Securities of such series then outstanding shall have
requested the Trustee to act, (ii) such holders shall have offered the Trustee
such reasonable indemnity as the Trustee may require, (iii) the Trustee shall
have failed to institute an action for 60 days thereafter and (iv) no
inconsistent direction shall have been given to the Trustee by the holders of a
majority in aggregate principal amount of Debt Securities of all series affected
(voting as one class). (Section 5.04)
The holders of a majority in aggregate principal amount of the Debt
Securities of any or all series affected and then outstanding (voting as one
class) will have the right, subject to certain limitations, to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee. (Section
5.06) The Indenture provides that in case an Event of Default shall occur (which
shall not have been cured or waived), the Trustee in exercising its rights and
powers under the Indenture, will be required to use the degree of care of a
prudent man in the conduct of his own affairs. (Section 6.01) Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the Debt
Securityholders unless they shall have offered to the Trustee reasonable
security or indemnity. (Section 6.02)
MODIFICATION OF THE INDENTURE
The Company and the Trustee, with the consent of the holders of not less
than 66 2/3% in aggregate principal amount of the Debt Securities of all series
then outstanding and affected (voting as one class), may add any provisions to,
or change in any manner or eliminate any of the provisions of, the Indenture or
modify in any manner the rights of the holders of the Debt Securities of each
such series; but no such modification may be made which would (a) extend the
fixed maturity of the Debt Securities or reduce the principal amount thereof or
reduce the rate or extend the time of payment of interest, if any, thereon, or
reduce any amount payable on redemption thereof or reduce the amount of the
principal of an Original Issue Discount Security that would be due and payable
upon an acceleration of the maturity thereof pursuant to Section 5.01, or impair
or affect the right of any Debt Securityholder to institute suit for the payment
thereof or the right of repayment, if any, at the option of the Debt
Securityholder, without the consent of the holder of each Debt Security so
affected; or (b) reduce the percentage of aggregate principal amount of Debt
Securities of any series, or of all series (voting as one class), as the case
may be, the consent of the holders of which is required for any such
modification, in any case without the consent of the holders of all Debt
Securities of each such series so affected. (Section 9.02)
DEFEASANCE
If the terms of any series of Debt Securities so provide, the Company shall
be deemed to have paid and discharged the entire indebtedness on all outstanding
Debt Securities of such series by depositing with the Trustee (i) as trust funds
in trust an amount sufficient to pay and discharge the entire indebtedness on
all Debt Securities of such series for principal and interest, or (ii) as
obligations in trust such amount of direct obligations of, or obligations the
principal of and interest on which are fully guaranteed by, the United States of
America as will, together with the income to accrue thereon without
consideration of any reinvestment thereof, be sufficient to pay and discharge
the entire indebtedness on all such Debt Securities for principal and interest.
Such a trust may be established only if, among other things, the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling to the effect that holders of such Debt Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amounts and in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred. (Section
11.05) In the event of any such defeasance, the holders of such Debt Securities
would thereafter be able to look only to such trust fund for payment of
principal, premium, if any, and interest.
CONCERNING THE TRUSTEE
NationsBank of Texas, N.A., a national banking association with its
principal offices in Dallas, Texas, is the Trustee under the Indenture. The
Trustee maintains a commercial banking relationship with the Company, including
participating in loans to the Company in the ordinary course of business.
7
<PAGE> 16
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. (Section 6.13) The Trustee
will be permitted to engage in certain other transactions; however, if it
acquires any conflicting interest (as described in the Indenture) it must
eliminate such conflict or resign. (Section 6.08)
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in any of three ways: (i) through
underwriters or dealers; (ii) directly to a limited number of institutional
purchasers or to a single purchaser; or (iii) through agents. Any such
underwriter, dealer or agent may be deemed to be an underwriter within the
meaning of the Securities Act of 1933. The Prospectus Supplement relative to the
Offered Debt Securities sets forth the terms of the offering of the Offered Debt
Securities, including the name or names of any underwriters, the purchase price
of the Offered Debt Securities and the proceeds to the Company from such sale,
any underwriting discounts, commissions, and other items constituting
underwriters' compensation, any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers and any securities
exchanges on which the Offered Debt Securities may be listed.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, or at prices related to such
prevailing market price, or at negotiated prices. The Debt Securities may be
offered to the public either through underwriting syndicates represented by
managing underwriters which may include Merrill Lynch & Co., Lehman Brothers or
Goldman, Sachs & Co. or directly by any of such firms. Unless otherwise set
forth in the Prospectus Supplement, the obligations of the underwriters to
purchase the Offered Debt Securities will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all the Offered
Debt Securities if any are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
Offered Debt Securities may be sold directly by the Company or through
agents designated by the Company from time to time, which may include Merrill
Lynch & Co., Lehman Brothers or Goldman, Sachs & Co. Any agent involved in the
offer or sale of the Offered Debt Securities in respect of which this Prospectus
is delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
dealers acting as the Company's agents to solicit offers by certain institutions
to purchase Offered Debt Securities from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for a payment and delivery on the date stated
in the Prospectus Supplement. Each Contract will be for an amount not less than,
and the aggregate principal amount of Offered Debt Securities sold pursuant to
Contract shall be not more than, the respective amounts stated in the Prospectus
Supplement. Institutions with whom Contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions but shall in all cases be subject to the approval of the Company.
Contracts will not be subject to any conditions except (i) the purchase by an
institution of the Offered Debt Securities covered by its Contract shall not at
the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject, and (ii) if the Offered Debt
Securities are being sold to underwriters, the Company shall have sold to such
underwriters the total principal amount of the Offered Debt Securities less the
principal amount thereof covered by Contracts.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act of 1933, or to contribution by
the Company to payments they may be required to make in respect thereof. Agents
and underwriters may be customers of, engage in transactions with, or perform
services for, the Company in the ordinary course of business.
8
<PAGE> 17
LEGAL OPINIONS
The validity of the Debt Securities will be passed upon for the Company by
Deborah Ackerman, Associate General Counsel of the Company, and for any agents,
dealers or underwriters by Jenkens & Gilchrist, P.C., Dallas, Texas.
EXPERTS
The consolidated financial statements of Southwest Airlines Co. for the
year ended December 31, 1991 incorporated herein by reference to the Company's
Annual Report (Form 10-K) have been examined by Ernst & Young, independent
auditors, as set forth in their report incorporated herein by reference. Such
consolidated financial statements are incorporated by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
9
<PAGE> 18
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
Available Information................. S-2
Incorporation of Additional Document
by Reference........................ S-2
The Company........................... S-3
Selected Consolidated Financial and
Operating Data...................... S-4
Capitalization........................ S-5
Ratios of Earnings to Fixed Charges... S-6
Description of Notes.................. S-6
Underwriting.......................... S-7
Legal Opinions........................ S-8
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Ratios of Earnings to Fixed Charges... 3
Use of Proceeds....................... 3
Description of Debt Securities........ 3
Plan of Distribution.................. 8
Legal Opinions........................ 9
Experts............................... 9
</TABLE>
$100,000,000
[SOUTHWEST AIRLINES LOGO]
8% NOTES DUE 2005
SALOMON BROTHERS INC
LEHMAN BROTHERS
MERRILL LYNCH & CO.
PROSPECTUS SUPPLEMENT
DATED FEBRUARY 28, 1995
