Southwest Airlines 1998 Annual Report Download - page 51

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51
SOUTHWEST AIRLINES CO. ¤ SIX STORIES OF FREEDOM
value of these agreements at December 31, 1998, representing the amount the
Company would receive if the agreements were settled early, was not material.
Any outstanding call options or fixed swap agreements expose the Company to credit
loss in the event of nonperformance by the counterparties to the agreements, but the
Company does not expect any of the counterparties to fail to meet its obligations. The
credit exposure related to these financial instruments is represented by the fair value of
contracts with a positive fair value at the reporting date. To manage credit risks, the
Company selects counterparties based on credit ratings, limits its exposure to a single
counterparty, and monitors the market position of the program and its relative market
position with each counterparty. At December 31, 1998, the Company had no collateral
or other security interests supporting these agreements but was in the process of
negotiating such agreements with a majority of the counterparties.
The Company does not hold or issue any financial instruments for trading purposes.
The fair values of the Company’s long-term debt were based on quoted market
prices. The carrying amounts and estimated fair values of the Company’s long-term
debt at December 31, 1998, were as follows:
(In thousands) Carrying Value Fair Value
9.4% Notes due 2001 $100,000 $108,929
8 3/4% Notes due 2003 100,000 112,702
8% Notes due 2005 100,000 109,648
7 7/8% Notes due 2007 100,000 111,390
7 3/8% Debentures due 2027 100,000 106,657
The carrying values of all other financial instruments approximate their fair value.
7. COMMON STOCK
The Company has one class of common stock. Holders of shares of common stock
are entitled to receive dividends when and if declared by the Board of Directors and are
entitled to one vote per share on all matters submitted to a vote of the shareholders.