SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
June 30, 1996 OR
____TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
________ TO ________
Commission file No. 1-7259
SOUTHWEST AIRLINES CO.
(Exact name of registrant as specified in its charter)
TEXAS 74-1563240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 36611, Dallas, Texas 75235-1611
(Address of principal executive offices) (Zip Code)
(214) 792-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of Common Stock outstanding as of the close
of business on August 9, 1996:
144,915,798
SOUTHWEST AIRLINES CO.
FORM 10-Q
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Southwest Airlines Co.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $478,285 $317,363
Accounts receivable 98,963 79,781
Inventories of parts and supplies 49,857 41,032
Deferred income taxes 11,289 10,476
Prepaid expenses and other
current assets 26,159 24,484
Total current assets 664,553 473,136
Property and equipment:
Flight equipment 3,297,951 3,024,702
Ground property and equipment 478,998 435,822
Deposits on flight equipment
purchase contracts 229,323 323,864
4,006,272 3,784,388
Less allowance for depreciation 1,102,754 1,005,081
2,903,518 2,779,307
Other assets 3,441 3,679
$3,571,512 $3,256,122
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $107,545 $116,530
Accrued liabilities 423,024 349,419
Air traffic liability 216,110 131,156
Current maturities of long-term debt 11,618 13,516
Total current liabilities 758,297 610,621
Long-term debt less current maturities 655,726 661,010
Deferred income taxes 309,961 281,650
Deferred gains from sale and leaseback
of aircraft 257,425 245,154
Other deferred liabilities 36,192 30,369
Stockholders' equity:
Common Stock 144,790 144,033
Capital in excess of par value 173,402 162,704
Retained earnings 1,235,719 1,120,581
Total stockholders' equity 1,553,911 1,427,318
$3,571,512 $3,256,122
</TABLE>
See accompanying notes.
Southwest Airlines Co.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating revenues:
Passenger $876,322 $710,275 $1,617,422 $1,307,103
Freight 20,011 16,120 38,991 31,005
Other 13,975 11,810 26,424 21,096
Total operating
revenues 910,308 738,205 1,682,837 1,359,204
Operating expenses:
Salaries, wages, and
benefits 258,078 217,258 495,443 420,830
Fuel and oil 115,652 88,880 219,519 172,056
Maintenance materials
and repairs 66,834 52,580 129,033 104,253
Agency commissions 37,576 31,230 69,402 60,745
Aircraft rentals 45,922 42,065 90,919 80,480
Landing fees and other
rentals 45,401 39,443 90,844 79,976
Depreciation 46,111 38,209 90,125 75,556
Other operating expenses 152,528 125,115 297,953 238,474
Total operating
expenses 768,102 634,780 1,483,238 1,232,370
Operating income 142,206 103,425 199,599 126,834
Other expenses (income):
Interest expense 15,022 15,087 29,924 28,773
Capitalized interest (5,817) (8,415) (12,721) (16,900)
Interest income (5,345) (5,518) (9,398) (7,410)
Nonoperating losses
(gains), net (1,643) 1,470 (2,966) 1,536
Total other expenses 2,217 2,624 4,839 5,999
Income before income taxes 139,989 100,801 194,760 120,835
Provision for income taxes 54,673 41,077 76,443 49,285
Net income $85,316 $59,724 $118,317 $ 71,550
Weighted average common
and common equivalent
shares outstanding 153,675 147,348 153,039 146,940
Net income per common and
common equivalent share $ .56 $ .41 $ .77 $ .49
</TABLE>
See accompanying notes.
Southwest Airlines Co.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net cash provided by
operating activities $222,176 $193,792 $363,891 $298,203
Investing activities:
Net purchases of property
and equipment (201,393) (157,012) (333,747) (358,286)
Financing activities:
Issuance of long-term debt - - - 98,811
Payment of long-term debt
and capital lease
obligations (1,498) (1,615) (8,056) (5,027)
Payment of cash
dividends (1,592) (1,436) (4,621) (4,303)
Proceeds from aircraft sale
and leaseback
transactions 132,000 191,650 132,000 191,650
Proceeds from Employee
stock plans 3,912 2,770 11,455 5,312
Net cash provided by
financing activities 132,822 191,369 130,778 286,443
Net increase in cash
and cash equivalents 153,605 228,149 160,922 226,360
Cash and cash equivalents at
beginning of period 324,680 172,749 317,363 174,538
Cash and cash equivalents at
end of period $478,285 $400,898 $478,285 $400,898
Cash payments for:
Interest, net of amount
capitalized $510 - $17,944 $11,111
Income taxes $21,495 $5,996 $21,891 $7,827
</TABLE>
See accompanying notes.
SOUTHWEST AIRLINES CO.
Notes to Condensed Consolidated Financial Statements
1. Basis of presentation - The accompanying unaudited
condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. The condensed consolidated financial statements for
the interim periods ended June 30, 1996 and 1995 include all
adjustments (which include only normal recurring adjustments)
which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods. Operating
results for the three and six month periods ended June 30, 1996
are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Southwest Airlines Co. annual
report on Form 10-K for the year ended December 31, 1995.
2. Dividends - During the three month periods ended June
30, 1996, March 31, 1996, June 30, 1995, and March 31, 1995, $.01
per share in dividends were declared on the 144,715,343,
144,452,894, 143,648,993, and 143,411,223 shares of common stock
then outstanding, respectively.
3. Leases - During second quarter 1996, the Company
completed transactions for the sale and leaseback of four new
Boeing 737 aircraft. The lease terms, which require periodic
lease payments through 2019, increased the Company's commitments
for operating leases by $233.1 million.
4. Common stock - Effective July 18, 1996, the Company
amended and restated its Common Stock Rights Agreement dated July
14, 1986 (the Agreement). The principal purpose of the amendment
and restatement was to extend the Agreement by 10 years. For
further information regarding the Agreement, refer to footnote 8
to the consolidated financial statements included in the
Southwest Airlines Co. annual report on Form 10-K for the year
ended December 31, 1995.
5. Reclassifications - Certain prior year amounts have
been reclassified for comparison purposes.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Comparative Consolidated Operating Statistics
Relevant operating statistics for the three and six month
periods ended June 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue passengers
carried 12,574,740 11,513,556 23,979,977 21,617,113
Revenue passenger miles
(RPMs) (000s) 6,809,336 5,992,044 12,646,455 11,198,329
Available seat miles
(ASMs) (000s) 10,165,470 8,923,859 19,806,873 17,447,197
Load factor 67.0% 67.1% 63.8% 64.2%
Average length of
passenger haul 542 520 527 518
Trips flown 187,704 170,010 366,809 333,795
Average passenger fare $69.69 $61.69 $67.45 $60.47
Passenger revenue yield
per RPM $.1287 $.1185 $.1279 $.1167
Operating revenue yield
per ASM $.0895 $.0827 $.0850 $.0779
Operating expenses per ASM $.0756 $.0711 $.0749 $.0706
Fuel cost per gallon (average) $.6280 $.5437 $.6101 $.5374
Number of employees at
period-end 21,907 18,985 21,907 18,985
Size of fleet at period-end 237 210 237 210
</TABLE>
Material Changes in Results of Operations
Consolidated net income for the three months ended June 30,
1996 was $85.3 million ($.56 per share) compared with $59.7
million ($.41 per share) earned in second quarter 1995.
Consolidated operating revenues increased 23.3 percent for
the second quarter of 1996 and 23.8 percent for the six months
ended June 30, 1996 as compared to the corresponding periods of
the prior year, primarily as a result of a 23.4 percent and 23.7
percent increase, respectively, in consolidated passenger
revenues. The increase in passenger revenues resulted from 13.6
percent and 12.9 percent increases in revenue passenger miles
(RPMs) for the three and six month periods ended June 30, 1996,
respectively, coupled with 8.6 percent and 9.6 percent increases
in passenger revenue yield per RPM over these same periods.
Passenger revenue yield per RPM increased from $.1185 and $.1167
in the three and six month periods ended June 30, 1995,
respectively, to $.1287 and $.1279, respectively. This improved
performance is primarily due to increased fares and the December
31, 1995 expiration of the ten percent federal ticket tax.
In August 1996, Congress approved legislation which re-
enacts the ten percent federal ticket tax through December 31,
1996, effective seven days after enactment of the legislation.
The enactment date (the date the legislation is signed by the
President of the United States) has not been determined, but most
likely will occur before August 31, 1996. Extension of the tax
past December 31, 1996 is uncertain at this time and requires
additional legislation. If the federal ticket tax is reimposed
as planned, it will affect revenues for the period from late
August until December 31, 1996 for tickets sold and flown during
that period. While we believe the ten percent tax can be "passed
on" to Customers in some markets, effectively as a price
increase, Southwest cannot predict future fares with any
certainty, which are set competitively and dependent upon the
underlying demand for air travel.
Available seat miles (ASMs) increased 13.9 percent and 13.5
percent in second quarter 1996 and the six month period ended
June 30, 1996, respectively, resulting in load factors of 67.0
percent and 63.8 percent for these same periods. The increase in
ASMs resulted primarily from the addition of 27 aircraft since
second quarter 1995.
In celebration of the Company's 25th Anniversary, Southwest
launched a fare sale on July 12, 1996 continuing through July 23,
1996 for travel between August 19 and October 31, 1996. The sale
was extremely popular and resulted in record advance bookings,
with more than four and a half million seats sold. While the
Company anticipates strong third quarter 1996 traffic, July's
load factor of 68.1 percent fell below last year's performance of
71.8 percent, primarily due to telephone line congestion during
our sale. Based on traffic results thus far, the Company also
expects August's load factor to fall below year-ago levels due to
the impact of telephone line congestion experienced during the
sale. However, given current booking levels and booking trends,
we anticipate positive load factor comparisons in September and
October. (The immediately preceding three sentences are forward-
looking statements which involve uncertainties that could result
in actual results differing materially from expected results.
Some significant factors include, but may not be limited to,
competitive pressure such as fare sales and capacity changes by
other carriers, general economic conditions, and variations in
advanced booking trends.) As a result of the fare sale combined
with the likely reinstatement of the ten percent federal ticket
tax, the Company cannot accurately predict third quarter 1996
revenue yields at this time.
Consolidated freight revenues increased 24.1 percent in the
second quarter of 1996 and 25.8 percent for the six months ended
June 30, 1996 as compared to the same periods of the prior year,
primarily due to increased capacity and an increase in U.S. mail
revenue. Other revenues increased 18.3 percent in the second
quarter 1996 and 25.3 percent for the six months ended June 30,
1996, primarily due to increased charter activity.
Operating expenses per ASM increased 6.3 percent for the
three months and 6.1 percent for the six months ended June 30,
1996, primarily due to significantly higher jet fuel prices; the
4.3 cent per gallon federal jet fuel tax implemented September 30,
1995; increased Profitsharing and Employee savings plan
contributions; and higher aircraft engine overhaul costs.
Excluding jet fuel costs and related taxes, operating expenses
per ASM for the three and six month periods ended June 30, 1996,
were up 3.6 percent.
Southwest Airlines Co.
Consolidated Operating Expenses per ASM
(in cents except percent change)
<TABLE>
<CAPTION>
Three months ended
June 30,
Increase Percent
1996 1995 (decrease) change
<S> <C> <C> <C> <C>
Salaries, wages, and benefits 2.21 2.15 .06 2.8
Profitsharing and Employee
savings plans .33 .28 .05 17.9
Fuel and oil 1.14 1.00 .14 14.0
Maintenance materials
and repairs .66 .59 .07 11.9
Agency commissions .37 .35 .02 5.7
Aircraft rentals .45 .47 <.02> <4.3>
Landing fees and other rentals .45 .44 .01 2.3
Depreciation .45 .43 .02 4.7
Other operating expenses 1.50 1.40 .10 7.1
Total 7.56 7.11 .45 6.3
</TABLE>
<TABLE>
<CAPTION>
Six Months ended
June 30,
Increase Percent
1996 1995 (decrease) change
<S> <C> <C> <C> <C>
Salaries, wages and benefits 2.24 2.21 .03 1.4
Profitsharing and Employee
savings plans .26 .20 .06 30.0
Fuel and oil 1.11 .99 .12 12.1
Maintenance materials
and repairs .65 .60 .05 8.3
Agency commissions .35 .35 - -
Aircraft rentals .46 .46 - -
Landing fees and other rentals .46 .46 - -
Depreciation .46 .43 .03 7.0
Other operating expenses 1.50 1.36 .14 10.3
Total 7.49 7.06 .43 6.1
</TABLE>
Salaries, wages, and benefits per ASM increased 2.8 percent
and 1.4 percent for the three and six month periods ended June
30, 1996, respectively, as compared to the same periods of the
prior year, primarily due to an increase in Reservation Sales
Agent wages and higher health costs.
The Company's flight attendants are subject to an agreement
with the Transport Workers Union of America, AFL-CIO (TWU), which
became amendable May 31, 1996. Southwest is currently in
negotiations with TWU for a new contract.
Profitsharing and Employee savings plans expense per ASM
increased 17.9 percent and 30.0 percent for the three and six
month periods ended June 30, 1996, respectively, as compared to
the corresponding periods of the prior year primarily due to
higher earnings subject to profitsharing in 1996.
Fuel and oil expense per ASM increased 14.0 percent and 12.1
percent in second quarter 1996 and the six month period then
ended due to higher jet fuel prices. The average price paid for
jet fuel in the three month and six month periods ended June 30,
1996 was $.6280 and $.6101 per gallon, respectively, compared to
$.5437 and $.5374 for the corresponding periods in 1995. Since
the end of the second quarter 1996, fuel prices have averaged
approximately $.6156 per gallon.
Maintenance materials and repairs per ASM increased 11.9
percent and 8.3 percent for the three and six month periods ended
June 30, 1996, respectively, as compared to the corresponding
periods of 1995, primarily as a result of higher engine overhaul
costs and increased scheduled airframe inspections during second
quarter 1996.
Agency commissions per ASM increased by 5.7 percent for
second quarter 1996 and remained unchanged for the six months
ended June 30, 1996. The second quarter increase is primarily
due to an increase in passenger revenues per ASM and a consistent
mix of travel agency sales.
Aircraft rentals per ASM decreased 4.3 percent for second
quarter 1996 and remained unchanged for the six months ended June
30, 1996. The decrease in the second quarter was primarily due
to a lower percentage of the aircraft fleet being leased.
Depreciation expense per ASM increased 4.7 percent for
second quarter 1996 and 7.0 percent for the six months ended June
30, 1996 as compared to the same periods of 1995 due to leased
aircraft representing a lower percentage of the total fleet as
discussed above.
Other operating expenses per ASM increased 7.1 percent and
10.3 percent for the three and six month periods ended June 30,
1996, respectively. These increases were primarily due to the
recently implemented jet fuel tax, which resulted in
approximately $8.4 million and $15.9 million of additional
expense for the three and six month periods ended June 30, 1996.
Other expenses (income) for the three and six month periods
ended June 30, 1996, included interest expense, interest income,
and nonoperating gains and losses. Interest expense increased in
the first half of 1996 as compared to the first half of 1995 due
to the March 1995 issuance of $100 million of 8 percent senior
unsecured Notes due March 2005. Capitalized interest decreased
for the three month and six month periods ended June 30, 1996, as
a result of certain amendments to aircraft purchase contracts
during third quarter 1995 that affected the timing of payments.
Interest income increased for the six months ended June 30, 1996
due to higher invested cash balances.
Material Changes in Financial Condition
Net cash provided by operating activities was $222.2 million
for the three months ended June 30, 1996. During June 1996, the
Company generated $132.0 million from the sale/leaseback of four
Boeing 737 aircraft. During the twelve months ended June 30,
1996, cash of $522.1 million was provided from operations. This
cash was primarily used to finance aircraft-related capital
expenditures and provide working capital.
For the twelve months ended June 30, 1996, net capital
expenditures were $704.1 million, which were primarily for the
purchase of 27 new 737-300 aircraft and progress payments for
future aircraft deliveries.
The Company opened service to Orlando, Florida in April
1996, and recently announced expansion to Providence, Rhode
Island beginning October 1996.
As of June 30, 1996 and since 1990, the Company had
authority from its Board of Directors to purchase 3,750,000
shares of its common stock from time-to-time on the open market.
No shares have been purchased since 1990.
The Company's contractual commitments at June 30, 1996,
consist primarily of scheduled aircraft acquisitions. Seven 737-
300s are scheduled for delivery in the remainder of 1996, and
seventeen in 1997. Four 737-700s are scheduled for delivery in
1997, 16 in 1998, 16 in 1999, 15 in 2000, and 12 in 2001. In
addition, the Company has options to purchase up to sixty-seven
737-700s during 1998-2004. The Company has the option, which
must be exercised two years prior to the contractual delivery
date, to substitute 737-600s or 737-800s for the 737-700s
delivered subsequent to 1999. Aggregate funding needed for these
commitments was approximately $2,331.6 million at June 30, 1996
due as follows: $180.6 million in 1996; $575.4 million in 1997;
$446.9 million in 1998; $551.2 million in 1999; $351.0 million in
2000; and $226.5 million in 2001. The Company believes Boeing
will deliver two 737-300 aircraft in late December 1996 that were
previously scheduled to be delivered in early January 1997. This
change in the delivery schedule is not reflected in the
commitment and funding amounts above.
The Company has various options available to meet its
capital and operating commitments, including cash on hand at June
30, 1996 of $478.3 million, internally generated funds, and a
revolving credit line with a group of banks of up to $460 million
(none of which had been drawn at June 30, 1996). In addition,
the Company will also consider various borrowing or leasing
options to maximize earnings and supplement cash requirements.
The Company currently has outstanding shelf registrations
for the issuance of $260.6 million public debt securities which
it currently intends to substantially utilize for aircraft
financings during the remainder of 1996.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company has received examination reports from the
Internal Revenue Service proposing certain adjustments
to Southwest's income tax returns for 1987 through
1991. The adjustments relate to certain types of
aircraft financings consummated by Southwest, as well
as other members of the aviation industry, during that
time period. Southwest intends to vigorously protest
the adjustments made with which it does not agree.
The industry's difference with the IRS involves complex
issues of law and fact which are likely to take a
substantial period of time to resolve. Management
believes that final resolution of such protest will not
have a materially adverse effect upon the results of
operations of Southwest. This forward-looking
statement is based on management's current
understanding of the relevant law and facts; it is
subject to various contingencies including the views of
legal counsel, changes in the IRS' position, the
potential cost and risk associated with litigation and
the actions of the IRS, judges and juries.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held
on May 16, 1996. At the meeting the following matters
were voted on by security holders:
1. 94,329,231 shares of stock were voted against a
shareholder proposal requesting that the Company
provide preferential fares to shareholders
attending the annual shareholders meeting,
3,629,459 were voted for the proposal, 4,375,629
abstained, and there were 19,442,557 broker non-
votes.
2. 109,831,029 shares of stock were voted for
approval of the 1996 Incentive Stock Option Plan
and 1996 Non-Qualified Stock Option Plan,
11,017,292 were voted against approval, and
928,555 abstained.
3. 102,347,475 shares of stock were voted for
approval of an Officer's Stock Option Agreement,
18,404,059 were voted against approval, and
1,025,342 abstained.
4. 113,039,223 shares of stock were voted to approve
an amendment to the Company's Articles of
Incorporation to increase the authorized number
of shares of common stock, 7,904,058 were voted
against the amendment, and 833,595 abstained.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(3.1) Restated Articles of Incorporation of
Southwest (incorporated by reference
to Exhibit 4.1 to Southwest's Registration
Statement on Form S-3 (File No. 33-52155));
Articles of Amendment to the Articles of
Incorporation of Southwest Airlines Co.
filed May 31, 1996.
(11.1) Computation of Earnings Per Share
(27) Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K were filed
during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
SOUTHWEST AIRLINES CO.
<TABLE>
<S> <C>
August 13, 1996 /s/ Gary C. Kelly
Date Gary C. Kelly
Vice President - Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
</TABLE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
(3.1) Restated Articles of Incorporation of Southwest
(incorporated by reference to Exhibit 4.1 to Southwest's
Registration Statement on Form S-3 (File No. 33-52155));
Articles of Amendment to the Articles of Incorporation of
Southwest Airlines Co. filed May 31, 1996.
(11.1) Computation of Earnings Per Share
(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 478,285
<SECURITIES> 0
<RECEIVABLES> 98,963
<ALLOWANCES> 0
<INVENTORY> 49,857
<CURRENT-ASSETS> 664,553
<PP&E> 4,006,272
<DEPRECIATION> 1,102,754
<TOTAL-ASSETS> 3,751,512
<CURRENT-LIABILITIES> 758,297
<BONDS> 0
0
0
<COMMON> 144,790
<OTHER-SE> 1,409,121
<TOTAL-LIABILITY-AND-EQUITY> 3,571,512
<SALES> 0
<TOTAL-REVENUES> 1,682,837
<CGS> 0
<TOTAL-COSTS> 1,483,238
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,924
<INCOME-PRETAX> 194,760
<INCOME-TAX> 76,443
<INCOME-CONTINUING> 118,317
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 118,317
<EPS-PRIMARY> .77
<EPS-DILUTED> .77
</TABLE>
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
SOUTHWEST AIRLINES CO.
ARTICLE ONE
Southwest Airlines Co. (the "Corporation"), pursuant to the provisions of
Article 4.04 of the Texas Business Corporation Act, hereby adopts these
Articles of Amendment to its Articles of Incorporation.
ARTICLE TWO
ARTICLE FOUR is amended by the deletion in its entirety of the first
paragraph thereof, and by inserting in lieu thereof the following paragraph:
The aggregate number of shares which the corporation
shall have authority to issue is Six Hundred Eighty
Million (680,000,000) shares of Common Stock of the
par value of One Dollar ($1) each.
ARTICLE THREE
The amendment made by these Articles of Amendment was duly adopted by
the shareholders of the Corporation on May 16, 1996.
ARTICLE FOUR
The number os shares outstanding on the record date for such shareholders
meeting was 144,547,692 and the number of shares entitled to vote on such
amendment as 144,547,692. 113,039,223 shares were voted for the amendment
and 7,904,058 shares were voted against the amendment.
IN WITNESS THEREOF, the Corporation has caused these Articles of
Amendment to be executed this 16 day of May, 1996.
SOUTHWEST AIRLINES CO.
by: /s/ Gary C. Kelly
Gary C. Kelly
Vice President and
Cheif Financial Officer
EXHIBIT (11.1)
Page 1 of 4
Southwest Airlines Co.
Computation of Earnings Per Share
For the Three Months Ended June 30, 1996
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Weighted average shares outstanding 144,705,676 144,705,676
Shares issuable upon exercise of outstanding
stock options (treasury stock method) 8,969,735 8,969,761
Weighted average common and common
equivalent shares 153,675,411 153,675,437
Earnings for per share computations 85,316,000 85,316,000
Earnings per common and common equivalent share $0.56 $0.56
</TABLE>
EXHIBIT (11.1)
Page 2 of 4
Southwest Airlines Co.
Computation of Earnings Per Share
For the Three Months Ended June 30, 1995
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Weighted average shares outstanding 143,606,941 143,606,941
Shares issuable upon exercise of outstanding
stock options (treasury stock method) 3,740,600 3,859,725
Weighted average common and common
equivalent shares 147,347,541 147,466,666
Earnings for per share computations 59,724,000 59,724,000
Earnings per common and common equivalent share $0.41 $0.41
</TABLE>
EXHIBIT (11.1)
Page 3 of 4
Southwest Airlines Co.
Computation of Earnings Per Share
For the Six Months Ended June 30, 1996
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Equivalent shares outstanding at March 31, 1996 152,402,780 153,449,020
Equivalent shares outstanding at June 30, 1996 153,675,411 153,675,437
306,078,191 307,124,427
Average number of equivalent shares outstanding 153,039,096 153,562,229
Earnings for per share computations $118,317,000 $118,317,000
Earnings per common and common equivalent share $0.77 $0.77
</TABLE>
EXHIBIT (11.1)
Page 4 of 4
Southwest Airlines Co.
Computation of Earnings Per Share
For the Six Months Ended June 30, 1995
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Equivalent shares outstanding at March 31, 1995 146,532,231 146,532,231
Equivalent shares outstanding at June 30, 1995 147,347,541 147,466,666
293,879,772 293,998,897
Average number of equivalent shares outstanding 146,939,886 146,999,449
Earnings for per share computations $71,550,000 $71,550,000
Earnings per common and common equivalent share $0.49 $0.49
</TABLE>
