| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
| For the quarterly period ended June 30, 2004 |
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
| For the transition period from ___________________to____________________ |
| Commission file number 1-13934 |
MIDWEST AIR GROUP, INC.
(Exact name of registrant as specified in its charter)
| Wisconsin | 39-1828757 |
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) |
| incorporation or organization) |
6744 South Howell
Avenue
Oak Creek, Wisconsin 53154
(Address of principal executive offices) (Zip code)
414-570-4000
(Registrant’s
telephone number, including area code)
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes X No
As of July 31, 2004, there were 17,421,811 shares of Common Stock, $.01 par value, of the registrant outstanding.
| PART I - FINANCIAL INFORMATION | Page | |
Item 1. |
Financial Statements (Unaudited) | |
| Condensed Consolidated Statements of Operations | 2 | |
| Condensed Consolidated Balance Sheets | 3 | |
| Condensed Consolidated Statements of Cash Flows | 4 | |
| Notes to Condensed Consolidated Financial Statements | 5 | |
Item 2. |
Management's Discussion and Analysis of Results of Operations and Financial Condition | 11 |
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 25 |
Item 4. |
Controls and Procedures | 25 |
| PART II - OTHER INFORMATION | ||
Item 4. |
Submission of Matters to a Vote of Security Holders | 26 |
Item 6. |
Exhibits and Reports on Form 8-K | 27 |
SIGNATURES |
28 |
1
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2004 |
2003 |
2004 |
2003 | |||||||||||
Operating revenues: |
||||||||||||||
| Passenger service | $ | 92,313 | $ | 83,147 | $ | 176,244 | $ | 163,076 | ||||||
| Cargo | 1,233 | 1,252 | 2,296 | 2,536 | ||||||||||
| Other | 13,347 | 12,499 | 29,663 | 25,344 | ||||||||||
| Total operating revenues | 106,893 | 96,898 | 208,203 | 190,956 | ||||||||||
Operating expenses: | ||||||||||||||
| Salaries, wages and benefits | 35,061 | 34,742 | 70,119 | 73,725 | ||||||||||
| Aircraft fuel and oil | 24,547 | 18,270 | 49,094 | 42,990 | ||||||||||
| Commissions | 2,671 | 2,820 | 5,113 | 6,201 | ||||||||||
| Dining services | 1,847 | 1,451 | 3,809 | 4,713 | ||||||||||
| Station rental, landing and other fees | 9,567 | 8,354 | 20,569 | 19,535 | ||||||||||
| Aircraft maintenance materials and repairs | 10,101 | 7,297 | 18,736 | 15,234 | ||||||||||
| Depreciation and amortization | 4,346 | 5,487 | 8,867 | 10,844 | ||||||||||
| Aircraft rentals | 9,434 | 12,307 | 19,289 | 18,709 | ||||||||||
| Other | 12,220 | 11,725 | 25,722 | 22,482 | ||||||||||
| Total operating expenses | 109,794 | 102,453 | 221,318 | 214,433 | ||||||||||
| Operating loss | (2,901 | ) | (5,555 | ) | (13,115 | ) | (23,477 | ) | ||||||
Other (expense) income: | ||||||||||||||
| Interest income | 387 | 176 | 737 | 480 | ||||||||||
| Interest expense | (946 | ) | (499 | ) | (1,889 | ) | (987 | ) | ||||||
| Other, net | (4 | ) | 11,432 | (8 | ) | 11,431 | ||||||||
| Total other (expense) income | (563 | ) | 11,109 | (1,160 | ) | 10,924 | ||||||||
(Loss) income before income tax provision (credit) | (3,464 | ) | 5,554 | (14,275 | ) | (12,553 | ) | |||||||
| Income tax provision (credit) | 7 | 1,944 | (3,940 | ) | (4,393 | ) | ||||||||
| Net (loss) income | $ | (3,471 | ) | $ | 3,610 | $ | (10,335 | ) | $ | (8,160 | ) | |||
(Loss) income per common share – basic | $ | (0.20 | ) | $ | 0.23 | $ | (0.59 | ) | $ | (0.53 | ) | |||
| (Loss) income per common share – diluted | $ | (0.20 | ) | $ | 0.23 | $ | (0.59 | ) | $ | (0.53 | ) | |||
Weighted average shares – basic | 17,417,911 | 15,516,279 | 17,411,900 | 15,514,299 | ||||||||||
| Weighted average shares – diluted | 17,417,911 | 15,538,228 | 17,411,900 | 15,514,299 | ||||||||||
See notes to unaudited condensed consolidated financial statements.
2
| ASSETS | June 30, 2004 |
December 31, 2003 | ||||||
|---|---|---|---|---|---|---|---|---|
Current assets: |
||||||||
| Cash and cash equivalents | $ | 103,229 | $ | 88,267 | ||||
| Accounts receivable, net | 5,221 | 4,273 | ||||||
| Inventories | 8,289 | 7,546 | ||||||
| Prepaid expenses | 9,504 | 9,076 | ||||||
| Restricted cash | 24,244 | 26,056 | ||||||
| Deferred income taxes | 8,671 | 8,662 | ||||||
| Total current assets | 159,158 | 143,880 | ||||||
Property and equipment, net | 185,218 | 192,805 | ||||||
| Aircraft purchase deposits and pre-delivery progress payments | 24,095 | 37,714 | ||||||
| Other assets, net | 14,613 | 21,840 | ||||||
| Total assets | $ | 383,084 | $ | 396,239 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
| Accounts payable | $ | 5,348 | $ | 4,882 | ||||
| Income taxes payable | 4,900 | 6,838 | ||||||
| Current maturities of long-term debt | 3,167 | 1,743 | ||||||
| Air traffic liability | 40,684 | 39,759 | ||||||
| Unearned revenue | 13,973 | 14,285 | ||||||
| Accrued liabilities | 36,953 | 37,108 | ||||||
| Total current liabilities | 105,025 | 104,615 | ||||||
Long-term debt | 52,277 | 53,642 | ||||||
| Long-term debt on pre-delivery progress payments | 15,934 | 27,244 | ||||||
| Deferred income taxes | 11,272 | 13,359 | ||||||
| Noncurrent scheduled maintenance expense | 2,051 | 2,176 | ||||||
| Accrued pension and other postretirement benefits | 17,897 | 15,473 | ||||||
| Deferred frequent flyer partner revenue | 6,853 | 7,047 | ||||||
| Deferred revenue | 46,676 | 39,834 | ||||||
| Other noncurrent liabilities | 10,743 | 8,532 | ||||||
| Total liabilities | 268,728 | 271,922 | ||||||
Shareholders' equity: | ||||||||
| Preferred stock, without par value; 5,000,000 shares authorized, | ||||||||
| no shares issued and outstanding | -- | -- | ||||||
| Common stock, $.01 par value; 50,000,000 shares authorized, | ||||||||
| 18,129,011 and 18,108,959 shares issued at June 30, 2004 | ||||||||
| and December 31, 2003, respectively | 181 | 181 | ||||||
| Additional paid-in capital | 45,469 | 45,171 | ||||||
| Treasury stock, at cost | (15,580 | ) | (15,578 | ) | ||||
| Retained earnings | 84,430 | 94,765 | ||||||
| Cumulative other comprehensive loss | (144 | ) | (222 | ) | ||||
| Total shareholders' equity | 114,356 | 124,317 | ||||||
| Total liabilities and shareholders' equity | $ | 383,084 | $ | 396,239 | ||||
See notes to unaudited condensed consolidated financial statements.
3
| Six Months Ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2004 |
2003 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (10,335 | ) | $ | (8,160 | ) | ||
| Items not involving the use of cash: | ||||||||
| Depreciation and amortization | 8,867 | 10,844 | ||||||
| Deferred income taxes | (2,096 | ) | (4,430 | ) | ||||
| Other, net | 6,354 | 6,939 | ||||||
Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (1,244 | ) | 6,266 | |||||
| Inventories | 20 | 747 | ||||||
| Prepaid expenses | (703 | ) | 182 | |||||
| Restricted cash | 1,812 | (10,491 | ) | |||||
| Other assets | 297 | 333 | ||||||
| Accounts payable | 466 | (178 | ) | |||||
| Deferred frequent flyer partner revenue | (756 | ) | (1,096 | ) | ||||
| Accrued liabilities | (1,523 | ) | 7,744 | |||||
| Unearned revenue | 250 | (8,274 | ) | |||||
| Accrued pension | 2,502 | 2,017 | ||||||
| Air traffic liability | 925 | 2,818 | ||||||
| Other non-current liabilities | 6,831 | (47 | ) | |||||
| Net cash provided by operating activities | 11,667 | 5,214 | ||||||
Investing activities: | ||||||||
| Capital expenditures | (1,631 | ) | (9,173 | ) | ||||
| Aircraft purchase deposits and pre-delivery progress payments | -- | (18,428 | ) | |||||
| Aircraft purchase deposits returned | 13,512 | 16,393 | ||||||
| Proceeds from sale of property and equipment | 766 | 535 | ||||||
| Other, net | 1,782 | (1,003 | ) | |||||
| Net cash provided by (used in) investing activities | 14,429 | (11,676 | ) | |||||
Financing activities: | ||||||||
| Funding of pre-delivery progress payments | -- | 16,962 | ||||||
| Return of pre-delivery progress payments | (11,223 | ) | (13,615 | ) | ||||
| Payment on note payable | -- | (3,531 | ) | |||||
| Other, net | 89 | 171 | ||||||
| Net cash used in financing activities | (11,134 | ) | (13 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 14,962 | (6,475 | ) | |||||
| Cash and cash equivalents, beginning of period | 88,267 | 41,498 | ||||||
| Cash and cash equivalents, end of period | $ | 103,229 | $ | 35,023 | ||||
Supplemental non-cash activities: | ||||||||
| Non-cash incentives | $ | 5,947 | $ | 19,813 | ||||
Supplemental cash flow information: | ||||||||
| Cash paid (received) for: | ||||||||
| Income taxes | $ | 13 | $ | (8,998 | ) | |||
| Interest | 631 | 226 | ||||||
See notes to unaudited condensed consolidated financial statements.
4
| 1. | Business and Basis of Presentation |
| The accompanying unaudited condensed consolidated financial statements for the three- and six-month periods ended June 30, 2004 and 2003 and as of June 30, 2004 reflect all adjustments (consisting only of normal recurring adjustments, except as noted herein) that are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and notes required for complete, audited financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in Midwest Air Group, Inc.‘s (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2003. The results of operations for the three- and six-month periods ended June 30, 2004 are not necessarily indicative of the results for the en |