Southwest increases its quarterly dividend

Victoria
By Victoria May 16, 2013 12:51

Southwest increases its quarterly dividend

 

Southwest Airlines has significantly increased its quarterly dividend to $.04 per share from $.01 per share.  Annualized, this amounts to over $100 million.  The increase in the quarterly dividend will begin with the 147th consecutive quarterly dividend declared today to Shareholders of record at the close of business on June 5, 2013 on all shares then issued and outstanding.  The dividend will be paid on June 26, 2013.  The Board also increased the Company’s existing $1 billion share repurchase authorization to $1.5 billion.  Of the remaining share repurchase authorization, an initial $250 million of Southwest common stock will be repurchased under an accelerated stock repurchase program.

Gary C. Kelly, Chairman of the Board, President, and CEO, stated: “Over the past 24 months, we have returned over 20 percent of our operating cash flows, or approximately $770 million, to Shareholders through share repurchases and dividends. I am pleased to announce several actions taken today by our Board that follow through with our commitment to deploy free cash flow1 to our Shareholders. The Board authorized an increase in our quarterly dividend payment to $.04 per share from $.01 per share.  Based on yesterday’s closing stock price of $13.98, this would provide an approximate one percent annual dividend yield to our Shareholders.  The Board also increased our existing $1 billion share repurchase authorization to $1.5 billion.  To date, $725 million in share repurchases of the $1.5 billion authorization have been completed since August 2011.  This means we have the authority to repurchase an additional $775 million of our common stock.  We intend to execute an agreement today to repurchase $250 million of our shares under an accelerated stock repurchase program, which, upon implementation, will immediately bring shares back into the Company.

“As the only investment-grade rated U.S. airline, our balance sheet and liquidity remain strong.  Our cash and short-term investments are approximately $3.5 billion2, and we have a fully available unsecured revolving credit line of $1 billion. With modest debt levels, and an additional $150 million of debt payments planned for the remainder of this year, our debt-to-capital leverage is estimated to fall below 40 percent by yearend, including off balance sheet aircraft leases.  The Board’s actions today are in recognition of our strong financial position and performance, strong cash flow outlook, and commitment to create value for our Shareholders.”

Southwest also announced that it has revised its aircraft delivery schedule.  For 2014, five Boeing 737-700 firm orders have been converted to 737-800s, five options were exercised for -800 deliveries from Boeing, and five options to purchase Boeing Next Generation (NG) aircraft were relinquished.  Five options in 2015 were also relinquished.  Separately, the airline has agreed to purchase ten pre-owned 737-700s for delivery in 2014 and 2015. Twelve 737NG options held by the Company in 2014 and 2015, as well as 29 options in 2017 and 2018, were converted to 737 MAX options and deferred beyond 2024.  The airline also converted 30 Boeing 737NG firm orders in 2017 and 2018 to MAX firm orders and deferred them to 2019 through 2021.

Gary said: “Our objectives with respect to today’s fleet announcement are to efficiently and aggressively manage our invested capital, shift the mix of new aircraft to the MAX, and replace more than 100 Boeing 717s and Boeing 737s being retired over the next three years with more economical aircraft.  To accomplish that and still maintain a relatively flat fleet, we will augment our Boeing deliveries with pre-owned aircraft.  For 2014 and 2015, combined, we have relinquished ten 737 Boeing delivery options, and we have agreed to purchase ten pre-owned 737-700 aircraft.  Consistent with our fleet modernization efforts, we converted and deferred 30 firm orders and 41 options for Boeing’s NG aircraft over the next five years to firm orders and options for the 737 MAX aircraft.  Further, following the expected delivery of Boeing’s 737 MAX 8 in 2017, we are thrilled to announce that Southwest Airlines and Boeing have entered into an agreement for Southwest to be the launch customer for the Boeing 737 MAX 7 series, with deliveries beginning in 2019. Building on the strengths of today’s Next-Generation 737-700, the 737 MAX 7 incorporates the latest CFM International LEAP-1B engines and is expected to reduce fuel burn and CO2 emissions by an additional 12 percent over today’s most fuel-efficient single-aisle airplane.

“Our restructured aircraft delivery schedule will reduce our capital spending for firm orders through 2018 by more than $500 million.  Further, it defers nearly $2 billion in potential capital spend on option aircraft deliveries beyond 2018.  This reduction follows last year’s deferral of approximately $1 billion in capital spend in 2012 through 2014.

Victoria
By Victoria May 16, 2013 12:51
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