Using the cash flow statement for Southwest Airlines for 2019 and 2020 and Skywest Airlines for 2019 and 2020.
1. Compute Free Cash Flow for 2019 and 2020 for both companies.
2. In a sentence or two, what conclusions can be drawn from this data?
3. Review the cash flow statements for 2019 and 2020 for Southwest Airlines. What are the main sources of cash financing for 2019? 2020?
4. Did you see a change in dividend policy for either company based on your review of the cash flow statements for 2020 and 2019?
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SKYWEST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2020 2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (8,515) $ 340,099 $ 280,372
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474,959 368,098 334,589
Stock based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,802 10,274 13,105
Write-off of maintenance assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,255 — —
Increase in credit loss reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,087 — —
Loss on disposal of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445 — —
Net increase in deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,100 109,654 99,139
Gain on sale of ExpressJet subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (46,525) —
Special items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 21,869 —
Changes in operating assets and liabilities:
Decrease (increase) in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,831 (40,700) (21,464)
Decrease (increase) in income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,225 14,795 (20,620)
Decrease (increase) in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,307 (4,303) (7,935)
Decrease in other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,233 2,707 77,484
Decrease in operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,647 — —
Increase in operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65,557) (895) —
Increase in deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,728 — —
Decrease in deferred aircraft credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (14,243)
Increase (decrease) in accounts payable and other current liabilities . . . . . . . . . . . . (26,984) (54,043) 62,107
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . 633,563 721,030 802,534
CASH FLOWS
Southwest Airlines Co.
Consolidated Statement of Cash Flows
(in millions)
Year ended December 31,
2020 2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (3,074) $ 2,300 $ 2,465
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization 1,255 1,219 1,201
Impairment of long-lived assets 32 — —
Unrealized/realized (gain) loss on fuel derivative instruments 15 — (14)
Deferred income taxes (716) (55) 301
Gain on sale-leaseback transactions (222) — —
Changes in certain assets and liabilities:
Accounts and other receivables (294) (94) 117
Other assets 415 239 (227)
Accounts payable and accrued liabilities 231 298 545
Air traffic liability 1,623 440 506
Other liabilities (306) (277) —
Cash collateral received from (provided to) derivative counterparties 9 25 (15)
Other, net (95) (108) 14
Net cash provided by (used in) operating activities (1,127) 3,987 4,893
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (515) (1,027) (1,922)
Supplier proceeds 428 400 —
Proceeds from sale-leaseback transactions 815 — —
Assets constructed for others — — (54)
Purchases of short-term investments (5,080) (2,122) (2,409)
Proceeds from sales of short-term and other investments 4,336 2,446 2,342
Other, net — — 5
Net cash used in investing activities (16) (303) (2,038)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 2,294 — —
Proceeds from issuance of long-term debt 5,622 — —
Proceeds from term loan credit facility 3,683 — —
Proceeds from revolving credit facility 1,000 — —
Proceeds from convertible notes 2,300 — —
Proceeds from Payroll Support Program loan and warrants 1,016 — —
Proceeds from Employee stock plans 48 40 35
Repurchase of common stock (451) (2,000) (2,000)
Reimbursement for assets constructed for others — — 170
Payments of long-term debt and finance lease obligations (839) (615) (342)
Payments of term loan credit facility (3,683) — —
Payments of revolving credit facility (1,000) — —
Payments of cash dividends (188) (372) (332)
Payments of terminated interest rate derivative instruments (59) — —
Repayment of construction obligation — — (30)
Capitalized financing items (134) — —
Other, net 49 (43) 3
Net cash provided by (used in) financing activities 9,658 (2,990) (2,496)
NET CHANGE IN CASH AND CASH EQUIVALENTS 8,515 694 359
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,548 1,854 1,495
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,063 $ 2,548 $ 1,854
CASH PAYMENTS FOR:
Interest, net of amount capitalized $ 212 $ 88 $ 107
Income taxes $ 19 $ 779 $ 327
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Assets constructed for others $ 145 $ 65 $ 171
Supplier receivables $ — $ 428 $ —
See accompanying notes.
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