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10-K Annual Report for year ending December 31, 2015, filed February 2, 2016

Question 1

What 3 items of important information does the income statement reveal about the financial performance of the company over the last three years? Answer: The majority of revenues come from the sale of passenger tickets. That revenue has grown nicely: up 3.6% in 2015 and 5.6% in 2014. The costs for fuel and oil were down substantially (likely due to oil from fracking). These costs declined from $5.3 billion to $3.6 billion from 2014 to 2105. Salaries and wages were up over 17% from 2014 to 2015. Maintenance was up 2.7% and landing fees were up 4.9%. Both taxes and net income were up 91%. Cash dividends to shareowners were up 29%. Net Income divided by Total Revenues was 11.0% in 2015, up from 4.3% in 2013. All in all, it was a very successful year for the company. You will note that my answer included 10 interesting things that I learned. You need to find at least 3. A note on SEC Data My data came from the SEC web site. I used the Interactive Data to create an Excel spreadsheet, and used that sheet to calculate the percentages. I copied that sheet into this document below. Go to www.sec.gov and look for the box that says Search EDGAR, Free access to over 21 million filings. There is a place to enter the company name or stock market ticker symbol. Enter the name and click the search icon. When I typed in Southwest A, the search box filled in Southwest Airlines Co. (LUV). Under search results, enter 10-K in the box for filing type. Then you will have the choice between annual reports for the last 20 years or so. For Southwest, there is data available on an Excel spreadsheet for the last 7 years. Choose documents to see the 10-K as filed or Interactive Data to get the Excel spreadsheets. Most company web sites have their annual reports available on the investor relations page. One can obtain summary financial statements on Morningstar, Yahoo Finance, and MSN Money. Unfortunately, in cases where company data does not fit standard formats, some numbers may be omitted. The SEC web site does not have this problem. Most line items are self-explanatory. The Financial Statement Power Point may help with explanations. Also under Course Resources, Webliography, SEC guide to Financial Statements, may be helpful. The webliography contains other useful information. The Excel sheets will have several minor statements that you can ignore. Southwest Data for Question 1:

Southwest Airlines Company Consolidated Statement of Income - USD ($) $ in Millions	12 Months Ended
	12/31/15	12/31/2014	12/31/2013
OPERATING REVENUES:
Passenger	$ 18,299	$ 17,658	$ 16,721		103.6%	105.6%
Freight	179	175	164		102.3%
Special revenue adjustment	172	0	0
Other	1,170	772	814		151.6%
Total operating revenues	19,820	18,605	17,699		106.5%
OPERATING EXPENSES:
Salaries, wages, and benefits	6,383	5,434	5,035		117.5%
Fuel and oil	3,616	5,293	5,763		68.3%
Maintenance materials and repairs	1,005	978	1,080		102.8%
Aircraft rentals	238	295	361		80.7%
Landing fees and other rentals	1,166	1,111	1,103		105.0%
Depreciation and amortization	1,015	938	867		108.2%
Acquisition and integration	39	126	86		31.0%
Other operating expenses	2,242	2,205	2,126		101.7%
Total operating expenses	15,704	16,380	16,421		95.9%
OPERATING INCOME	4,116	2,225	1,278		185.0%
OTHER EXPENSES (INCOME):
Interest expense	121	130	131		93.1%
Interest Costs Capitalized Adjustment	(31)	(23)	(24)		134.8%
Interest income	(9)	(7)	(6)		128.6%
Other (gains) losses, net	556	309	(32)		179.9%
Total other expenses (income)	637	409	69		155.7%
INCOME BEFORE INCOME TAXES	3,479	1,816	1,209		191.6%
PROVISION FOR INCOME TAXES	1,298	680	455		190.9%
NET INCOME	$ 2,181	$ 1,136	$ 754		192.0%
NET INCOME PER SHARE, BASIC (in dollars per share)	$ 3.30	$ 1.65	$ 1.06		200.0%
NET INCOME PER SHARE, DILUTED (in dollars per share)	3.27	1.64	1.05		199.4%
Cash dividends declared per common share (in dollars per share)	$ 0.2850	$ 0.2200	$ 0.1300		129.5%
	11.0%	6.1%	4.3%