Question

Please analyze this company financial and briefly tell me how they are performing and areas of concern

Southwest Airlines Co.
Condensed Consolidated Statement of Income
(in millions, except per share amounts)
(unaudited)
	Three months ended
	March 31,
				2017
	2018			As Recast			Percent Change
OPERATING REVENUES:
Passenger	$	4,585		$	4,546		0.9
Freight	42			42			—
Other	317			266			19.2
Total operating revenues	4,944			4,854			1.9
OPERATING EXPENSES:
Salaries, wages, and benefits	1,821			1,730			5.3
Fuel and oil	1,018			956			6.5
Maintenance materials and repairs	257			243			5.8
Landing fees and airport rentals	330			313			5.4
Depreciation and amortization	277			318			(12.9)
Other operating expenses	625			688			(9.2)
Total operating expenses	4,328			4,248			1.9
OPERATING INCOME	616			606			1.7
OTHER EXPENSES (INCOME):
Interest expense	32			29			10.3
Capitalized interest	(10)			(11)			(9.1)
Interest income	(12)			(7)			71.4
Other (gains) losses, net	4			63			(93.7)
Total other expenses (income)	14			74			(81.1)
INCOME BEFORE INCOME TAXES	602			532			13.2
PROVISION FOR INCOME TAXES	139			193			(28.0)
NET INCOME	$	463		$	339		36.6
NET INCOME PER SHARE:
Basic	$	0.79		$	0.55		43.6
Diluted	$	0.79		$	0.55		43.6
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic	587			613			(4.2)
Diluted	588			614			(4.2)

Southwest Airlines Co.
Reconciliation of Reported Amounts to Non-GAAP Items (excluding special items)
(See Note Regarding Use of Non-GAAP Financial Measures)
(in millions, except per share amounts)(unaudited)
	Three months ended
	March 31,
				2017
	2018			As Recast			Percent Change
Fuel and oil expense, unhedged	$	1,014		$	816
Add: Premium cost of fuel contracts	34			34
Add (Deduct): Fuel hedge (gains) losses included in Fuel and oil expense, net	(30)			106
Fuel and oil expense, as reported	$	1,018		$	956
Add: Net impact from fuel contracts (a)	7			37
Fuel and oil expense, excluding special items (economic)	$	1,025		$	993		3.2
Total operating expenses, as reported	$	4,328		$	4,248
Add: Net impact from fuel contracts (a)	7			37
Deduct: Lease termination expense	—			(5)
Add: Gain on sale of grounded aircraft	25			—
Total operating expenses, excluding special items	$	4,360		$	4,280		1.9
Deduct: Fuel and oil expense, excluding special items (economic)	(1,025)			(993)
Operating expenses, excluding Fuel and oil expense and special items	$	3,335		$	3,287		1.5
Deduct: Profitsharing expense	(102)			(99)
Operating expenses, excluding profitsharing, Fuel and oil expense, and special items	$	3,233		$	3,188		1.4
Operating income, as reported	$	616		$	606
Deduct: Net impact from fuel contracts (a)	(7)			(37)
Add: Lease termination expense	—			5
Deduct: Gain on sale of grounded aircraft	(25)			—
Operating income, excluding special items	$	584		$	574		1.7
Other (gains) losses, net, as reported	$	4		$	63
Deduct: Net impact from fuel contracts (a)	—			(65)
Other (gains) losses, net, excluding special items	$	4		$	(2)		n.m.
Net income, as reported	$	463		$	339
Add (Deduct): Net impact from fuel contracts (a)	(7)			28
Add: Lease termination expense	—			5
Deduct: Gain on sale of grounded aircraft	(25)			—
Add (Deduct): Net income tax impact of fuel and special items (b)	7			(13)
Net income, excluding special items	$	438		$	359		22.0
Net income per share, diluted, as reported	$	0.79		$	0.55
Add (Deduct): Impact from fuel contracts	(0.01)			0.04
Add (Deduct): Impact of special items	(0.04)			0.01
Add (Deduct): Net income tax impact of fuel and special items (b)	0.01			(0.02)
Net income per share, diluted, excluding special items	$	0.75		$	0.58		29.3

(a) See Reconciliation of Impact from Fuel Contracts.

(b) Tax amounts for each individual special item are calculated at the Company's effective rate for the applicable period and totaled in this line item.

	Twelve months ended			Twelve months ended
	March 31, 2018			March 31, 2017
Operating income, as reported	$	3,417		$	3,269
Contract ratification bonuses	—			356
Net impact from fuel contracts	(125)			(247)
Asset impairment	—			21
Lease termination expense	28			27
Aircraft grounding charge	63			—
Gain on sale of grounded aircraft	(25)			—
Operating income, non-GAAP	$	3,358		$	3,426
Net adjustment for aircraft leases (a)	107			109
Adjusted operating income, non-GAAP (A)	$	3,465		$	3,535
Non-GAAP tax rate (B)	23.1%		(d)	36.6%		(e)
Net operating profit after-tax, NOPAT (A* (1-B) = C)	2,665			2,241
Debt, including capital leases (b)	$	3,300		$	3,282
Equity (b)	8,561			7,350
Net present value of aircraft operating leases (b)	732			957
Average invested capital	$	12,593		$	11,589
Equity adjustment for hedge accounting (c)	196			698
Adjusted average invested capital (D)	$	12,789		$	12,287
Non-GAAP ROIC, pre-tax (A/D)	27.1%			28.8%
Non-GAAP ROIC, after-tax (C/D)	20.8%			18.2%