Southwest Airlines by Ryan Cohen on Prezi, pro forma income statement.#Pro #forma #income #statement

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Southwest Airlines

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Transcript of Southwest Airlines

Pro Forma Balance Sheet

Net Operating Cash Flow

General Footnote Findings

One subsidiary, Air Tran Holdings LLC.

Cash and cash equivalents beyond necessary operating requirements are invested

Investments with original maturities of three months or less are considered cash equivalents

Allowance for doubtful accounts was considered immaterial

Short-term securities are held available-for-sale at fair market value. Valued at $3.757 billion.

Inventory carried at average cost

Property and equipment stated at cost.

NOCF carry forward of $34 million, for deferred tax asset of $12 million

Southwest carries an allowance for obsolescence of Inventory

This reserve is an off balance sheet, off income statement item.

The reserve was $36 million in 2013, and $34 million in 2012

Southwest Airlines: A Financial Analysis

Team 1 – Summer 2014

Southwest went through two big accounting changes that heavily impacted the financial outcomes of recent years

First the company changed several retirement dates on aircrafts in their fleet in the first quarter of 2012.

This resulted in an increase of $12 million in depreciation expense in 2012 that would otherwise not be there.

The company also changes the residual value of multiple aircrafts in the third quarter of 2013.

This decreased the residual value of these aircrafts by 10% down to 2%.

This increased depreciation expense by $34 million in 2012, and $26 million in 2013

Four aircrafts that were capital leases in 2013, compared to 2 in 2012. Totaling out to $57 million and $37 million

Total rental expenses, which does include operating leases, totaled out to $997 million in 2013

Most of the companies terminal operating space is leases, as well as 160 planes in their fleet

Under note 8, the company has estimated their total lease payments for 2014-18, which amounts to $3.89 billion.

$8 million each of those years will be capital leases.

They also leased all 88 Boeing 717-200 aircrafts to Delta Airlines.

They moved 13 to Delta in 2013, and expect to move three every month after.

The transaction of these aircrafts cost the company $137 million

Two of these aircraft are capital leases

Founded 47 years ago by Rollin King and Herb Kelleher

If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline

Acquired AirTran May 2, 2011

Rapid Rewards Program

Reported Profits for 41 consecutive years

Limited Freight/cargo/business seating

Turnover of Executives

Expanded Travel Destinations

Invest in Bio Fuel before it becomes normal

Financial Instability of other airlines

Acquisition of AirTran

Large Unionized Labor Force

Acts of Terror/Weather conditions

Contingencies and Commitments Footnote

Zero material effect of any future legal proceedings

Southwest has huge financial commitments in Dallas, Houston, Miami, and Broward County, Florida.

The estimated costs of these projects will be $519, $400, $156, and $295 million respectively.

Cost of Capital

Valuation: NPV Method

Accounting Changes Footnote

Future NPV Including Terminal Value:

Should we aquire Southwest?

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