Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
As previously reported, on April 20, 2020, Southwest Airlines Co. (the
"Company") entered into definitive documentation with the United States
Department of Treasury ("Treasury") with respect to the receipt of funding
support pursuant to the Payroll Support Program ("Payroll Support") under the
Coronavirus Aid, Relief and Economic Security Act. On April 20, 2020, the
Company entered into a payroll support program agreement (the "PSP Agreement")
with Treasury, and as consideration for the Payroll Support, the Company issued
a promissory note (the "Note") in favor of Treasury and entered into a warrant
agreement with Treasury (the "Warrant Agreement" and, together with the PSP
Agreement and the Note, the "Payroll Support Documents"), pursuant to which the
Company agreed to issue warrants (each, a "Warrant") to purchase common stock of
the Company to Treasury in connection with each disbursement of Payroll Support.
The Company received the first of four expected disbursements of Payroll Support
on April 21, 2020.
On May 29, 2020, the Company received the second disbursement of Payroll Support
in the amount of $651,836,344, for which the Company provided Treasury
consideration in the form of an increase of the Note in an amount of
$195,550,903 and a Warrant to purchase up to 536,197 shares of the Company's
common stock. After taking into account this second installment of Payroll
Support, the Company has received a total of $2,281,427,204, or 70 percent of
the total expected Payroll Support, for which the Company has provided Treasury
with a Note in the aggregate amount of $654,428,161 and Warrants to purchase up
to 1,794,429 shares of the Company's common stock. The remainder of the Payroll
Support is expected to be disbursed to the Company, and the additional Warrants
are expected to be issued, in two installments in June and July 2020.
A description of the Payroll Support Documents can be found in Note 13 to the
Company's unaudited Condensed Consolidated Financial Statements included in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020,
and a copy of each Payroll Support Document was filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
Cautionary Statement Regarding Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Specific forward-looking statements include,
without limitation, statements related to the Company's expectations about
future disbursements pursuant to the Payroll Support Documents. These
forward-looking statements are based on the Company's current intent and
expectations and are not guarantees of future events. Forward-looking statements
involve risks, uncertainties, assumptions, and other factors that are difficult
to predict and that could cause actual results to vary materially from those
expressed in or indicated by them. Factors include, among others, (i) the
Treasury's right pursuant to the Payroll Support Documents to amend the
documents or require new or additional conditions of the Payroll Support in ways
that may be materially adverse to the Company and (ii) the enactment or adoption
of future laws, statutes, and regulations and interpretation or enforcement of
current and future laws, statutes, and regulations that affect the terms or
application of the Payroll Support Documents and that may have a material
adverse effect on the Company. These factors are not necessarily all of the
important factors that could cause actual results to differ materially from
those expressed in any of the forward-looking statements contained herein. Other
unknown or unpredictable factors could also have material adverse effects on the
Company's expectations described herein.
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses