SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
MIDWEST EXPRESS HOLDINGS, INC.
----------------------------------
(Name of Registrant as Specified in its Charter)
---------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
MIDWEST EXPRESS HOLDINGS, INC.
6744 South Howell Avenue
Oak Creek, Wisconsin 53154
(414) 570-4000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 2000
To the Shareholders of
MIDWEST EXPRESS HOLDINGS, INC.:
Notice is hereby given that the Annual Meeting of the Shareholders (the
"Meeting") of Midwest Express Holdings, Inc. (the "Company") will be held at the
Midwest Express Center, 400 West Wisconsin Avenue, Milwaukee, Wisconsin, on
Wednesday, April 26, 2000, at 10:00 a.m. local time, for the following purposes:
1. To elect three directors to serve for a three-year term to expire at
the 2003 Annual Meeting; and
2. To transact such other business as may properly come before the
Meeting or any adjournments or postponements thereof.
Holders of record of Common Stock of the Company at the close of business
on March 9, 2000, will be entitled to notice of and to vote at the Meeting and
any adjournments or postponements thereof.
Complimentary parking for shareholders who will attend the meeting is
available at the Hyatt Hotel, Hilton Hotel or Grand Avenue parking structures,
or at a lot located at 841 North Seventh Street.
A proxy form is enclosed. Please complete it and return it as soon as
possible in the postage-paid return envelope provided, even if you plan to
attend the Meeting. You retain the right to revoke the proxy at any time before
it is actually voted by notice in writing to the Secretary of the Company.
By Order of the Board of Directors,
Carol N. Skornicka
Senior Vice President-Corporate Development,
Secretary and General Counsel
Milwaukee, Wisconsin
March 17, 2000
<PAGE>
MIDWEST EXPRESS HOLDINGS, INC.
6744 South Howell Avenue
Oak Creek, Wisconsin 53154
Proxy Statement for Annual Meeting of Shareholders
To Be Held on April 26, 2000
This Proxy Statement is furnished beginning on or about March 17, 2000, in
connection with the solicitation of proxies by the Board of Directors of Midwest
Express Holdings, Inc. (the "Company") to be used at the Annual Meeting of
Shareholders (the "Meeting") of the Company, which will be held at 10:00 a.m.
CDT, Wednesday, April 26, 2000, at the Midwest Express Center, 400 West
Wisconsin Avenue, Milwaukee, Wisconsin, and at any adjournments or postponements
thereof.
Any shareholder attending the Meeting may vote in person whether or not the
shareholder has previously filed a proxy. Presence at the Meeting by a
shareholder who has signed a proxy does not itself revoke the proxy. Any
shareholder giving a proxy may revoke it at any time before it is exercised by
delivering notice thereof to the Secretary of the Company in writing or in open
meeting. Unless revoked, the shares represented by such proxies will be voted as
directed by the shareholders at the Meeting and any adjournments or
postponements thereof.
The record date for shareholders entitled to notice of and to vote at the
Meeting is the close of business on March 9, 2000. As of the record date, there
were 14,017,662 shares of Common Stock of the Company ("Common Stock")
outstanding. Each share of Common Stock is entitled to one vote on each matter
to come before the Meeting.
ELECTION OF DIRECTORS
The Board of Directors currently consists of eleven members, but, due to
the retirement of one director, the Board of Directors will consist of only ten
members following the Meeting. The Company's Restated Articles of Incorporation
provide for an authorized number of directors of not less than six nor more than
fifteen and further provide that the Board of Directors shall determine the
specific number of directors. The Board of Directors has approved a reduction in
the size of the Board of Directors effective at the Meeting.
The Board of Directors is divided into three classes. One class is elected
each year to serve for a term of three years. At the Meeting, holders of Common
Stock will be entitled to elect three directors. Each of the directors in the
other classes will continue to serve in accordance with their previous
elections. Directors will be elected by a plurality of votes cast at the Meeting
(assuming a quorum is present). For this purpose, "plurality" means that the
individuals receiving the largest number of votes are elected as directors, up
to the maximum number of directors to be chosen at the election. Consequently,
any shares not voted at the Meeting, whether due to abstentions, broker nonvotes
or otherwise, will have no impact on the election of directors.
Proxies received representing Common Stock will, unless otherwise directed,
be voted in favor of the election of each of the three nominees named below to
serve as directors until the 2003 Annual Meeting of Shareholders or until their
respective successors have qualified and been elected. Pursuant to the Company's
By-laws, written notice of other qualifying nominations by shareholders for
election to the Board of Directors must have been received by the Secretary by
February 1, 2000. As no notice
<PAGE>
of any such other nominations was received, no other nominations for election to
the Board of Directors may be made by shareholders at the Meeting.
Listed below are the names of the nominees for election to the Board of
Directors at the Meeting for a three-year term and of each director of the
Company whose term will continue after the Meeting, together with certain
additional information concerning each such nominee and director as of March 9,
2000. As used below, the "Company" refers to Midwest Express Holdings, Inc. and,
for the period prior to the formation of Midwest Express Holdings, Inc. in July
1995, to Midwest Express Airlines, Inc. ("Midwest Express"), which is a wholly
owned subsidiary of Midwest Express Holdings, Inc. The three nominees are
currently directors of the Company. If any of the nominees should be unable or
unwilling to serve, then the proxies, pursuant to the authority granted to them
by the Board of Directors, will have discretionary authority to select and vote
for substitute nominees. The Board of Directors has no reason to believe that
any of the nominees will be unable or unwilling to serve.
NOMINEES FOR ELECTION AS DIRECTORS
Term Expiring at 2003 Annual Meeting
Director
Name Age Business Experience During Last Five Years Since
- ---- --- ------------------------------------------ -----
Brenda F. Skelton 44 Senior Vice President-Marketing of the 1995
Company since 1998; Senior Vice
President-Marketing and Customer Service
from 1995 to 1998; Vice
President-Marketing from 1993 to 1995.
Samuel K. Skinner 61 Co-Chairman of the law firm Hopkins & 1998
Sutter since 1998; President of Unicom
Corporation and Commonwealth Edison
Company (electric utility) from 1993 to
1999. Director of The LTV Corporation,
Union Pacific Resources Group Inc., Antec
Corporation, Navigant Consulting, Inc.
and USFreightways Corp.
Richard H. Sonnentag 59 Managing partner of Cobham Group LP 1997
(an investment partnership) since 1994.
Private investor since 1990. Served as a
director of Midwest Express from 1983 to
1990.
THE BOARD RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS DIRECTORS AND
URGES EACH SHAREHOLDER TO VOTE "FOR" ALL NOMINEES.
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<PAGE>
DIRECTORS CONTINUING IN OFFICE
Terms Expiring at 2001 Annual Meeting
Director
Name Age Business Experience During Last Five Years Since
- ---- --- ------------------------------------------ -----
John F. Bergstrom 53 Chairman and Chief Executive Officer 1993
of Bergstrom Corporation (owner and
operator of automobile sales and leasing
business) since 1974. Director of
Wisconsin Energy Corporation, Universal
Foods Corporation, The First National
Bank-Fox Valley, Kimberly-Clark
Corporation and Banta Corporation.
Frederick P. 60 Chairman and Chief Executive Officer of 1988
Stratton, Jr. Briggs & Stratton Corporation (engine
manufacturing) since 1986. Director of
Briggs & Stratton Corporation, Bank One
Corporation, Weyco Group, Inc. and
Wisconsin Energy Corporation.
John W. Weekly 68 Chairman and Chief Executive Officer of 1995
Mutual of Omaha Insurance Company and
United of Omaha Life Insurance Company
(insurance companies) since 1998; Vice
Chairman and Chief Executive Officer since
1997; Vice Chairman, President and Chief
Executive Officer since 1996; Vice
Chairman, President and Chief Operating
Officer since 1995; and President and
Chief Operating Officer since 1990.
Terms Expiring at 2002 Annual Meeting
Timothy E. Hoeksema 53 Chairman of the Board, President and 1983
Chief Executive Officer of the Company
since 1983. Director of The Marcus
Corporation and Marshall & Ilsley
Corporation.
James G. Grosklaus 64 Retired; Executive Vice President and 1988
Director of Kimberly-Clark Corporation
(consumer products) from 1986 to 1996.
Ulice Payne, Jr. 44 Partner with the law firm of Foley & 1998
Lardner since February 1998; partner with
the law firm of Reinhart, Boerner, Van
Deuren, Norris & Rieselbach, S.C. from
1990 to 1998. Director of State Financial
Services Corporation and Badger Meter,
Inc.
-3-
<PAGE>
Director
Name Age Business Experience During Last Five Years Since
- ---- --- ------------------------------------------ -----
David H. Treitel 45 Chairman and Chief Executive Officer 1984
of SH&E, Inc. (aviation consulting) since
1996; President of SH&E, Inc. from 1993 to
September 1999. Independent Trustee of
Aircraft Finance Trust since May 1999.
Committees, Meetings and Attendance
The Board of Directors of the Company has four standing committees: an
Audit Committee, a Compensation Committee, a Board Affairs and Nominating
Committee, and an Executive Committee.
The Audit Committee, which met four times in 1999, currently consists of
Messrs. Boldt (Chairman), Skinner and Sonnentag. The Audit Committee recommends
to the Board of Directors independent auditors for selection by the Company,
discusses with the independent auditors and internal auditors the scope and
results of audits, approves and reviews any nonaudit services performed by the
Company's independent auditing firm, and responds to Securities and Exchange
Commission requirements on audit committee reports.
The Compensation Committee, which met once in 1999, currently consists of
Messrs. Bergstrom (Chairman), Stratton and Weekly. The Compensation Committee
establishes all forms of compensation for the officers of the Company,
administers the Company's benefit plans, reviews and recommends officer
selection, responds to Securities and Exchange Commission requirements on
compensation committee reports, and performs other functions relating to officer
compensation.
The Board Affairs and Nominating Committee, which met once in 1999,
currently consists of Messrs. Treitel (Chairman), Grosklaus and Payne. The Board
Affairs and Nominating Committee recommends nominees for the Company's Board of
Directors and reviews qualifications, compensation and benefits for the Board of
Directors and other matters relating to the Board. This committee will consider
nominees for director recommended by the shareholders, but has no established
procedures that must be followed. The Company's By-laws require that
shareholders give advance notice and furnish certain information to the Company
in order to nominate a person for election as a director.
The Executive Committee, which met once in 1999, currently consists of
Messrs. Hoeksema (Chairman), Bergstrom and Stratton. The Executive Committee
exercises the full authority of the Board of Directors in the management of the
business affairs of the Company to the extent permitted by law or not otherwise
limited by the Board of Directors.
The Board of Directors of the Company held five meetings in 1999. Each
director who was a director in 1999 attended at least 75% of the meetings of the
Board of Directors and committees on which he or she serves.
Director Compensation
All directors who are not employees of the Company, any of the Company's
subsidiaries or any 10% or greater shareholder of the Company ("Non-employee
Directors") are paid an annual retainer and receive a fee of $1,500 and $500 for
each Board meeting and committee meeting,
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<PAGE>
respectively, that they attend. Pursuant to the Midwest Express Holdings, Inc.
1995 Stock Plan for Outside Directors (the "Director Plan"), the annual retainer
is payable in 675 shares of Common Stock, and at the election of a director, a
portion or all of the meeting and committee fees is also payable in shares of
Common Stock. The Director Plan also allows each Non-employee Director to defer
the receipt of fees for purposes of deferring recognition for income tax
purposes. Such deferral may be made to a share account for Common Stock granted
under the Director Plan or to a cash account for those fees payable, at the
Director's election, in cash. Such deferred fees (i) will be treated as invested
in Common Stock, and ultimately will be paid in Common Stock, to the extent such
fees would have been paid in Common Stock, or (ii) will otherwise earn a return
at market rates. The Directors are reimbursed for expenses incurred in
connection with attendance at Board and committee meetings. To encourage
directors to stay well informed about the Company's operations and service
levels, the Board adopted a Director Travel Policy. Pursuant to the Director
Travel Policy, each outside director and his or her spouse and dependent
children are (i) eligible to purchase airline tickets at a price equal to the
lowest fare structure for a specified flight and (ii) entitled to one free
roundtrip ticket per six-month period, in each case, subject to seat
availability at the time of reservation.
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth, as of March 9, 2000, the number of shares
of Common Stock beneficially owned by (i) each director of the Company
(including the nominees), (ii) each of the executive officers named in the
Summary Compensation Table set forth below, (iii) all directors and executive
officers of the Company as a group, and (iv) each person known to the Company to
be the beneficial owner of more than 5% of the Common Stock. Except as otherwise
indicated, persons listed have sole voting and investment power over shares
beneficially owned.
Name of Beneficial Owner Shares Percent of Class
- ------------------------ ------ ----------------
Timothy E. Hoeksema 321,149(1)(2)(3) 2.3%
Brenda F. Skelton 77,205(1)(2) *
Robert S. Bahlman 44,970(1)(2) *
Carol N. Skornicka 64,813(1)(2) *
David C. Reeve 42,522 *
John F. Bergstrom 29,295(4)(5) *
Oscar C. Boldt 15,421(5) *
James G. Grosklaus 6,174(6) *
Ulice Payne, Jr. 1,247 *
Samuel K. Skinner 2,227 *
Richard H. Sonnentag 16,904(5)(7) *
Frederick P. Stratton, Jr. 41,671(5) *
David H. Treitel 4,984(5) *
John W. Weekly 4,704 *
-5-
<PAGE>
Name of Beneficial Owner Shares Percent of Class
- ------------------------ ------ ----------------
All directors and executive
officers as a group (15 persons) 688,603(1)(2)(5) 4.9%
PRIMECAP Management Company
225 South Lake Avenue #400
Pasadena, CA 91101 1,614,000(8) 11.5%
FMR Corp. and related persons
82 Devonshire Street
Boston, MA 02109 1,332,925(8) 9.5%
Waddell & Reed Investment
Management Company
6300 Lamar Avenue
Shawnee Mission, KS 66201 1,110,300(8) 7.9%
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202 1,028,525(8) 7.3%
Vanguard Horizon Funds and Vanguard
Capital Opportunity Fund
P.O. Box 2600
Valley Forge, PA 19482 975,000(8) 6.9%
- ---------------
* Less than one percent.
(1) Includes shares of Common Stock in which the person or persons noted had an
interest under the Midwest Express Airlines Savings and Investment Plan as
of December 31, 1999. Such plan's Common Stock fund is a unitized account
that is invested in Common Stock and in liquid funds. As of a given date,
each participant with an investment in the stock fund has a number of share
units, and the participant's interest in Common Stock depends upon the
aggregate number of shares of Common Stock held in the stock fund as of
that date. Thus, each participant has voting rights with respect to share
units based upon the aggregate number of shares held in the stock fund as
of the record date for a shareholders' meeting. Each participant has the
ability to divest share units through intraplan transfers.
(2) Includes shares of Common Stock that may be purchased under currently
exercisable stock options, as follows: Mr. Hoeksema, 261,300 shares; Ms.
Skelton, 75,990 shares; Mr. Bahlman, 42,240 shares; Ms. Skornicka, 64,740
shares; Mr. Reeve, 42,240; and all directors and executive officers as a
group, 514,095 shares.
(3) Mr. Hoeksema holds 225 shares jointly with his wife.
(4) Mr. Bergstrom shares voting and investment control over 4,095 shares that
are held in trust for the benefit of Mr. Bergstrom's children.
(5) Includes shares of Common Stock the receipt of which has been deferred by
certain Non-employee Directors pursuant to the Director Plan, as follows:
Mr. Bergstrom, 2,700 shares; Mr. Boldt, 4,171 shares; Mr. Skinner, 1,075
shares; Mr. Stratton, 4,171 shares; and Mr. Treitel, 3,859 shares.
(6) Includes 1,959 shares held by Mr. Grosklaus' wife.
(7) Includes 2,475 shares of Common Stock held by the Cobham Group LP, a
limited partnership for which Mr. Sonnentag serves as the general partner
and a limited partner.
(8) As reported to the Securities and Exchange Commission.
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<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid by the Company during each of the Company's last three years to the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers during 1999 (collectively, the "named
executive officers") for services rendered in all capacities to the Company at
any time during such periods.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
---------------------------------------- ---------------------
Name and Principal Fiscal Other Annual Securities Underlying All Other
Position Year Salary($) Bonus($) Compensation($) Options (#)(1)(2) Compensation($)(3)
------------------ ----- --------- -------- --------------- --------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Timothy E. Hoeksema, 1999 $333,000 $173,016 $0 76,000 $5,000
Chairman of the Board, 1998 309,000 288,276 0 78,750 5,000
President and Chief Executive 1997 300,000 224,353 0 78,750 4,750
Officer
Brenda F. Skelton, Senior 1999 166,392 49,173 0 20,800 4,992
Vice President-Marketing 1998 165,859 81,931 0 22,500 4,976
1997 160,000 63,763 0 22,500 4,750
Robert S. Bahlman, Senior 1999 155,820 49,173 0 20,800 4,675
Vice President, Chief 1998 145,824 81,931 0 22,500 4,375
Financial Officer and 1997 122,820 45,940 0 22,500 3,684
Controller
Carol N. Skornicka, 1999 155,004 49,173 0 20,800 4,650
Senior Vice President- 1998 152,776 81,931 0 22,500 4,574
Corporate Development, 1997 142,000 45,940 3,007 22,500 4,260
Secretary and General Counsel
David C. Reeve, Senior Vice 1999 144,804 43,249 0 20,800 4,344
President-Operations 1998 133,077 37,812 0 22,500 5,000
1997 96,924 19,898 24,023 22,500 3,462
- ---------------
(1) Represents options granted under the Midwest Express Holdings, Inc. 1995 Stock Option Plan.
(2) The number of options in 1998 and 1997 reflects adjustments for the 3-for-2 splits of Common Stock effected on
May 27, 1998 and May 28, 1997.
(3) All amounts shown for 1999 consist of Midwest Express' contributions under the Midwest Express Airlines
Savings & Investment Plan.
</TABLE>
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<PAGE>
Option Grants in 1999
The following table presents certain information as to grants of options to
purchase Common Stock made to each of the named executive officers during 1999
pursuant to the Midwest Express Holdings, Inc. 1995 Stock Option Plan (the
"Option Plan").
<TABLE>
Option Grants in 1999
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for Option
Individual Grants Grant Term(1)
------------------------------------------------------------ ----------------------------
Percentage
of Total
Number of Options
Securities Granted to Exercise At 5% At 10%
Underlying Employees or Base Annual Annual
Options in Fiscal Price Expiration Growth Growth
Name Granted Year ($/share) Date Rate Rate
---- ------- ---- --------- ---- ------ ------
Common Stock(2)
---------------
<S> <C> <C> <C> <C> <C> <C>
Timothy E. Hoeksema.... 76,000 39.6% $29.2188 02/17/09 $1,396,556 $3,539,147
Brenda F. Skelton...... 20,800 10.8% $29.2188 02/17/09 382,211 968,597
Robert S. Bahlman...... 20,800 10.8% $29.2188 02/17/09 382,211 968,597
Carol N. Skornicka..... 20,800 10.8% $29.2188 02/17/09 382,211 968,597
David C. Reeve......... 20,800 10.8% $29.2188 02/17/09 382,211 968,597
- --------------------
(1) This presentation is intended to disclose the potential value that would accrue to the optionee if the option
were exercised the day before it would expire and if the per share value had appreciated at the compounded
annual rate indicated in each column. The assumed rates of appreciation of 5% and 10% are prescribed by the
rules of the Securities and Exchange Commission regarding disclosure of executive compensation. The assumed
annual rates of appreciation are not intended to forecast possible future appreciation, if any, with respect to
the price of the Common Stock.
(2) The options to purchase Common Stock reflected in the table (which are nonstatutory stock options for purposes
of the Internal Revenue Code of 1986, as amended (the "Code")) were granted effective February 17, 1999, and
vest 30% on the first anniversary of the date of grant, another 30% on the second anniversary of the date of
grant and the final 40% on the third anniversary of the date of grant. The options are subject to early vesting
in the case of the optionee's death, disability or retirement, or a change of control (as defined in the Option
Plan) of the Company.
</TABLE>
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<PAGE>
Aggregated Option Exercises in 1999 and Year-End Option Values
None of the named executive officers exercised options to acquire Common
Stock during 1999. The following table sets forth information regarding the
year-end value of unexercised options held by such officers under the Option
Plan.
Option Values as of December 31, 1999
Number of Securities
Underlying Value of Unexercised
Unexercised Options in-the-Money Options
at December 31, at December 31,
1999(#)(1) 1999($)(2)
-------------------- --------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
---- ------------- -------------
Timothy E. Hoeksema.............. 183,375/162,625 $3,462,775/$773,084
Brenda F. Skelton................ 54,000/45,550 1,027,735/218,453
Robert S. Bahlman................ 20,250/45,550 221,954/218,453
Carol N. Skornicka............... 42,750/45,550 624,141/218,453
David C. Reeve................... 20,250/45,550 235,078/227,203
- -------------------
(1) Reflects adjustments for the 3-for-2 splits of Common Stock effected on May
27, 1998 and May 28, 1997.
(2) The dollar values are calculated by determining the difference between the
fair market value of the underlying stock as of December 31, 1999, which
was $31.875, and the exercise price of the options.
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<PAGE>
Pension Plan Table
Midwest Express will provide retirement benefits to certain of its U.S.
employees, including the named executive officers, through the Midwest Express
Airlines, Inc. Salaried Employees' Retirement Plan (the "Midwest Express Pension
Plan"). The following table illustrates the estimated annual benefits payable
upon retirement at age 65 under the Midwest Express Pension Plan for the
specified highest five-year average remuneration and years of service
classifications.
<TABLE>
<CAPTION>
Years of Benefit Service
----------------------------------------------------------------------------------
Five-Year Average
Remuneration 15 20 25 30 35 40
- ----------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000...... $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500 $ 60,000
200,000...... 45,000 60,000 75,000 90,000 105,000 120,000
300,000...... 67,500 90,000 112,500 135,000 157,500 180,000
400,000...... 90,000 120,000 150,000 180,000 210,000 240,000
500,000...... 112,500 150,000 187,500 225,000 262,500 300,000
600,000...... 135,000 180,000 225,000 270,000 315,000 360,000
700,000...... 157,500 210,000 262,500 315,000 367,500 420,000
800,000...... 180,000 240,000 300,000 360,000 420,000 480,000
</TABLE>
The estimated benefits in the table above are computed on a single-life
annuity basis. Benefits will be adjusted if the employee receives one of the
optional forms of payment. Benefits in the table above do not reflect the offset
under the Midwest Express Pension Plan of 1.25% per year of service (up to a
maximum of 50%) of the Social Security Benefit. Benefits under the Midwest
Express Pension Plan are limited to the extent required by tax provisions. To
the extent benefits under the Midwest Express Pension Plan are limited under tax
law, any excess will be paid pursuant to supplemental retirement arrangements.
The compensation covered by the Midwest Express Pension Plan, as supplemented
for the named executive officers, includes all compensation reported for each
individual as salary and bonus set forth in the Summary Compensation Table.
Service recognized under Kimberly-Clark Corporation's pension plan is
counted under the Midwest Express Pension Plan for eligibility and vesting
purposes and, for certain transferring employees, benefit accrual purposes.
As of December 31, 1999, years of benefit service for those named executive
officers currently eligible to participate in the Midwest Express Pension Plan
are as follows: Mr. Hoeksema, 29 years; Mr. Bahlman, 18 years; Ms. Skelton, 12
years; Ms. Skornicka, 3 years; and Mr. Reeve, 1 year.
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<PAGE>
Agreements with Named Executive Officers
The Company has agreements with each of the named executive officers that
provide that each officer is entitled to benefits if, after a change in control
(as defined in the agreements) of the Company, such officer's employment is
ended through (i) termination by the Company, other than by reason of death or
disability or for cause (as defined in the agreements), or (ii) termination by
the officer following the first anniversary of the change in control or due to a
breach of the agreement by the Company or a significant adverse change in the
officer's responsibilities. In general, the benefits provided are: (a) a cash
termination payment one to three times the sum of the executive officer's annual
salary and highest annual bonus during the three years before the termination,
(b) continuation of equivalent hospital, medical, dental, accident, disability
and life insurance coverage as in effect at the time of termination, (c)
supplemental pension benefits and (d) outplacement services. Each agreement
provides that, if any portion of the benefits under the agreement or under any
other agreement would constitute an "excess parachute payment" for purposes of
the Code, then benefits are reduced so that the executive officer is entitled to
receive $1 less than the maximum amount that such officer can receive without
becoming subject to the 20% excise tax imposed by the Code, or which the Company
may pay without loss of deduction under the Code.
Board Compensation Committee Report on Executive Compensation
Background
The Compensation Committee of the Board of Directors (the "Committee") has
responsibility to establish the compensation and benefits for officers of the
Company, among others.
A key objective of employee compensation is to ensure that a company
delivers compensation that is sufficient to attract and retain qualified
employees. Thus, as part of its compensation strategy, every company needs to
identify its competitors for executive and other employee talent and where it
should position itself relative to the compensation those competitors provide.
Generally, the Company's competitors for personnel are others in the airline
industry. However, in determining where the Company should position itself with
respect to compensation relative to competitors in the industry, the Company is
unusual in that there are no airlines of the same size, sales volume and
strategy.
Given this background, the Committee believes it is not necessary,
appropriate or, based upon available information, practical to state precisely
how the Company's compensation should compare to that of other airlines. While
the Committee believes it is appropriate to continue to survey the industry, it
believes the Company should base Companywide compensation decisions on Company
performance and economic conditions using the following framework:
1. As the Company has in the past, the Company should continue to work at
improving the total compensation of its employees while maintaining a
cost structure that will allow the Company to compete, survive and be
successful over the long term.
2. The Company must maintain compensation structures that continue to
allow the Company to attract and retain a high quality work force.
3. The Company's total compensation package must recognize and reward the
Company's employees for their contributions to the Company's success.
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<PAGE>
4. As a publicly traded company, compensation must align the interests of
employees with those of the Company's shareholders.
The Company is a regular participant in two airline industry surveys. An
Air Conference survey reflects information concerning salary, benefits and work
rules relating to 22 member carriers. This survey is primarily directed at line
employee groups (pilots, flight attendants, customer service and reservations
representatives, mechanics, inspectors, dispatchers, aircraft cleaners, etc.).
The Company also participates in the Salary Information Retrieval System survey
conducted by Organization Resources Counselors, Inc. ("ORC"). This survey, which
is updated semi-annually, includes major and national airlines. It focuses on
management, office and some line positions. However, neither survey reports on
executive officer and other senior management compensation. The Company also
relies on available market information regarding competitive compensation
practices for positions that are not specific to the airline industry.
In 1996, the Company sponsored an Airline Industry Executive Compensation
Survey conducted by ORC (the "1996 ORC Compensation Survey"). Eleven airlines of
various sizes participated in the 1996 ORC Compensation Survey and provided
information regarding base pay, annual bonuses and long-term incentive
compensation for 26 key executive positions in the airline industry. The results
were made more useful to the participants through the use of linear regression
analysis to take into account the varying sizes of the participating companies.
The results of the 1996 ORC Compensation Survey indicated generally that
compensation for the Company's officers in 1996 was in line with the airline
industry given the size of the Company. The Company did not sponsor an executive
compensation study in 1997 or 1998 to provide guidance in determining 1999
compensation. The Company did, however, extrapolate from the 1996 ORC
Compensation Survey using more recent generally available information on
executive compensation trends in the airline industry.
1999 Compensation
Base Salary. The approach the Committee used to establish 1999 compensation
for the Company's executive officers generally involved evaluating each position
on a subjective basis and establishing a base salary range for each position
based upon that evaluation. The evaluation was intended to reflect the relative
worth to the Company of each position as it compared to all other senior
management positions. The three basic criteria used for the evaluation were
know-how, problem solving and accountability. The Company determined market
value for positions by attempting to take into account the amount that other
employers pay for experienced employees in comparable positions, using benchmark
positions for which information was available regarding other employers'
practices and determining market values for other positions based upon the
internal evaluations for each position. In considering information concerning
other employers' pay practices, the Company did not factor in the performance of
individual employers. The resulting market value (or "midpoint") for each
position represented the dollar value of base compensation that the Company was
willing to pay an experienced employee for competently performing in his or her
job. Using the midpoint for each position, the Committee approved a salary range
for each executive officer position, where the minimum salary was 20% below the
midpoint, and the maximum salary was 20% above the midpoint. For each individual
executive officer, the Committee established a base salary within the
established range based upon an individual's experience, length of service in
the position and, most importantly, performance.
For 1999, base salary midpoints were generally set at a level 3% higher
than the 1998 base salary midpoint for each executive officer position.
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<PAGE>
Incentive Payments. Incentive payments are an integral part of the
Company's compensation approach for several reasons. First, such payments are
intended to provide employees with appropriate incentives to reach higher levels
of performance. Second, these payments are necessary in light of competitive
practice to attract and retain high quality employees. Third, the payments
provide the Company with a means to deliver additional compensation to employees
as performance justifies such compensation without resulting in increases in the
Company's salary structure that become "fixed" costs.
The Company delivers incentive compensation to executive officers and
senior management through the Company's Annual Incentive Plan, which the
Committee administers. The plan provides incentives to create additional
shareholder value, or "Shareholder Value Added." Shareholder Value Added is a
dollar amount equal to the excess of net operating profit after tax over a
calculated cost of the capital employed in the Company. The plan provides that
Target Awards under the plan may focus on corporate Shareholder Value Added,
subsidiary Shareholder Value Added and/or individual performance measures that
drive shareholder value as determined by the Committee.
Under the Annual Incentive Plan, for 1999 the Committee approved for each
eligible employee an annual incentive Target Award that represented a percentage
of the base salary midpoint for the employee's position. The Target Awards for
executive officers ranged from 15% of an officer's midpoint to 75% of an
officer's midpoint. The 1996 ORC Compensation Survey and more recent generally
available information on executive compensation indicate that these Target Award
percentages are competitive with respect to airline industry practice. The
Annual Incentive Plan does not provide for a maximum award; however, to provide
an incentive for executives to remain with the Company, the plan specifies that
any awards earned in excess of an employee's Target Award are credited to an
account for the participant in an "award bank." A participant's balance in the
award bank is subject to forfeiture, and one-third of the balance is payable
each year, assuming continued employment.
For the Company's executive officers for 1999, the Committee chose a
corporate level Shareholder Value Added objective as the sole performance
criterion used for determining the amount that could be paid to each officer in
relation to the officer's Target Award. Awards were subject to control measures
that reduced awards by at least 50% in the event cost per available seat mile
did not meet Company goals. Awards were also subject to control measures that
gave the Committee the discretion to take into account unusual Company or
industry conditions or events. The Company achieved results equal to 58% of its
Shareholder Value Added target in 1999. After taking into account unusual events
and the failure to meet cost per available seat mile goals, the Committee
exercised its discretion to set potential awards at 56% of Target Awards. In
addition, executive officers received a payout of one-third of their award bank
balance.
Long-Term Compensation. The Committee intends to rely on awards under its
Option Plan to provide long-term incentives to executive officers and senior
management, and to align their interests with those of shareholders. Although
this is a common form of compensation, it is difficult to compare stock option
compensation from one employer to another due to the difficulty in valuing
options at the time they are awarded and thereafter. For 1999, the Committee
approved awards of options to executive officers and certain members of senior
management, with the sizes of the awards determined relative to the size of the
position and market data without taking into account options previously granted
or an officer's shareholdings. All options were granted at fair market value
pursuant to the terms of the Option Plan approved by shareholders.
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<PAGE>
Other Compensation. The Company has established other elements of a
compensation package for executive officers that include a 401(k) savings plan
that has a 50% Company match feature (up to a maximum of $5,000), a defined
benefit retirement plan and a supplemental benefit plan. The Committee believes
these elements and their terms are consistent with competitive practice.
Chief Executive Officer Compensation
The Committee determined that Mr. Hoeksema's performance in his position
has been outstanding. At management's request, however, the Committee consented
to set Mr. Hoeksema's 1999 base salary at $333,000, an amount only slightly
higher than the base salary midpoint that the Committee established for his
position. Mr. Hoeksema's annual incentive Target Award under the Annual
Incentive Plan for 1999 represented 75% of his base salary midpoint. As noted
above, the actual award was dependent upon the level of Shareholder Value Added
created by the Company. Of the total incentive compensation potentially payable
to Mr. Hoeksema in respect of 1999 performance, $173,016 has been paid to Mr.
Hoeksema to date, consisting of 56% of his Target Award and one-third of Mr.
Hoeksema's award bank balance (described above). In 1999, Mr. Hoeksema received
options to purchase 76,000 shares on the basis described above.
Section 162(m) Limitations
Under Section 162(m) of the Code, the tax deduction by corporate taxpayers,
such as the Company, is limited with respect to the compensation of certain
executive officers unless such compensation is based upon performance objectives
meeting certain acceptable criteria or is otherwise excluded from the
limitation. The Committee currently intends to qualify a sufficient amount of
compensation to its executive officers so that Section 162(m) of the Code will
not adversely impact the Company.
The foregoing report has been approved by all members of the Committee.
The Compensation Committee
--------------------------
John F. Bergstrom, Chairman
Frederick P. Stratton, Jr.
John W. Weekly
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Common Stock for the period beginning September 22, 1995, when the Company
became a reporting company pursuant to Section 12(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and ending December 31, 1999, with
the cumulative total return of the Standard & Poor's 500 Stock Index ("S&P 500")
and the Standard & Poor's Airlines Index ("S&P Airlines Index") beginning with
the closing value of each index as of September 21, 1995, and ending December
31, 1999. The graph assumes investments of $100 on September 22, 1995, in Common
Stock at its initial public offering price of $8.00 per share (as adjusted for
the 3-for-2 splits of Common Stock effected on May 28, 1997 and May 27, 1998),
and in the S&P 500 and the S&P Airlines Indices at their September 21, 1995,
closing prices. Any dividends are assumed to be reinvested.
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<PAGE>
MIDWEST EXPRESS HOLDINGS, INC.
Relative Market Performance
September 22, 1995, to December 31, 1999
[GRAPHIC OMITTED]
Legend
- --------------------------------------------------------------------------------
9/22/95 12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
- --------------------------------------------------------------------------------
Midwest Express Holdings $100.00 $155.56 $200.00 $323.44 $328.91 $398.44
- --------------------------------------------------------------------------------
S&P Airlines Index(1) 100.00 102.76 112.82 189.90 184.08 181.69
- --------------------------------------------------------------------------------
S&P 500 Index 100.00 105.88 127.33 166.82 211.31 252.57
- --------------------------------------------------------------------------------
(1) The S&P Airlines Index consists of AMR Corporation, Delta Air Lines,
Inc., Southwest Airlines Co. and US Airways Group, Inc.
INDEPENDENT AUDITORS
Deloitte & Touche LLP served as the Company's independent auditors in 1999.
Representatives of Deloitte & Touche LLP will be present at the Meeting to
respond to appropriate questions and to make a statement if they desire to do
so. The Company's independent auditors for 2000 will be formally approved in
June 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors to file reports concerning the ownership of Company equity securities
with the Securities and Exchange Commission and the Company. The Company has
assumed the responsibility of filing required reports on behalf of its officers
and directors. The Company believes that, during the year ended December 31,
1999, all of its officers and directors complied with Section 16(a) filing
requirements.
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<PAGE>
OTHER MATTERS
The Company will file an Annual Report on Form 10-K with the Securities and
Exchange Commission for the year ended December 31, 1999. The Company will
provide a copy of this Form 10-K report (without exhibits) without charge to
each person who is a record or beneficial holder of shares of Common Stock on
the record date for the Meeting and who submits a written request for it.
Requests for copies of the Form 10-K should be addressed to Midwest Express
Holdings, Inc., Attention: Investor Relations HQ-14, 6744 South Howell Avenue,
Oak Creek, Wisconsin 53154.
The cost of solicitation of proxies will be borne by the Company. The
Company expects to solicit proxies primarily by mail. Proxies may also be
solicited personally and by telephone by certain officers and regular employees
of the Company. Brokers, nominees and custodians who hold stock in their names
and who solicit proxies from the beneficial owners will be reimbursed by the
Company for out-of-pocket and reasonable clerical expenses.
The Board of Directors does not intend to present at the Meeting any
matters other than those set forth herein and does not presently know of any
other matters that may be presented to the Meeting by others. However, if any
other matters should properly come before the Meeting, it is the intention of
the persons named in the enclosed proxy to vote said proxy on any such matters
in accordance with their best judgment.
A shareholder who intends to present a shareholder's proposal at the 2001
Annual Meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
as amended ("Rule 14a-8"), must deliver the proposal to the Company no later
than November 17, 2000 if such proposal is to be included in the Company's proxy
materials for the 2001 annual meeting.
A shareholder who intends to present business, other than a shareholder's
proposal pursuant to Rule 14a-8, at the 2001 Annual Meeting must comply with the
requirements set forth in the Company's By-laws. Among other things, a
shareholder must give written notice to the Secretary of the Company not less
than 45 days and not more than 70 days prior to the first anniversary of the
date on which the Company first mailed its proxy materials for the 2000 Annual
Meeting. Therefore, since the Company anticipates mailing its proxy statement on
March 17, 2000, the Company must receive notice of a shareholder's intent to
present business, other than pursuant to Rule 14a-8, at the 2001 Annual Meetings
no sooner than January 6, 2001, and no later than January 31, 2001.
If the notice is received after January 31, 2001, then the Company is not
required to present such proposal at the 2001 Annual Meeting because the notice
will be considered untimely. If the Board of Directors chooses to present such a
shareholder's proposal submitted after January 31, 2001 at the 2001 Annual
Meeting, then the persons named in proxies solicited by the Board of Directors
for the 2001 Annual Meeting may exercise discretionary voting power with respect
to such proposal.
By Order of the Board of Directors,
Carol N. Skornicka
Senior Vice President-Corporate Development,
Secretary and General Counsel
Milwaukee, Wisconsin
March 17, 2000
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<PAGE>
PROXY
2000 ANNUAL MEETING OF SHAREHOLDERS
MIDWEST EXPRESS HOLDINGS, INC.
The undersigned does hereby constitute and appoint Timothy E. Hoeksema and
Brenda F. Skelton, or either of them, as proxies for the undersigned at the
Annual Meeting of Shareholders of Midwest Express Holdings, Inc. to be held on
Wednesday, April 26, 2000, at the Midwest Express Center, 400 West Wisconsin
Avenue, Milwaukee, Wisconsin, at 10:00 a.m., and any adjournments or
postponements thereof, to vote thereat the shares of stock held by the
undersigned as fully and with the same effect as the undersigned might or could
do if personally present at said Annual Meeting or any adjournments or
postponements thereof, hereby revoking any other Proxy heretofore executed by
the undersigned for such Annual Meeting. The undersigned acknowledges receipt of
the notice of Annual Meeting of Shareholders and the Proxy Statement.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, then the Proxy
will be voted FOR the election of the nominees listed.
^PLEASE COMPLETE AND SIGN BELOW, DETACH AND RETURN USING THE ENVELOPE PROVIDED^
<PAGE>
MIDWEST EXPRESS HOLDINGS, INC. ANNUAL MEETING
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1.ELECTION 1-Brenda F. Skelton 2-Samuel K. Skinner [ ] FOR all [ ] WITHHOLD
OF DIRECTORS: 3-Richard H. Sonnentag nominees listed AUTHORITY
to the left to vote for
(except as all nominees
specified listed to
below) the left.
(Instructions: To withhold authority to [---------------------------------]
vote for any indicated nominee, write the [ ]
number(s) of the nominee(s) in the box [ ]
provided to the right.) --> [_________________________________]
2. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Check appropriate box Date____________________ NO. OF SHARES
Indicate changes below:
[ ] Address Change [ ] Name Change
[ ] Please check this box [---------------------------------]
if you plan to attend [ ]
the Annual Meeting. [ ]
Number of persons [ ]
attending: ____ [_________________________________]
Signature(s) in Box
Please sign exactly as your name
appears on your stock certificate
as shown directly to the left.
Joint owners should each sign
personally. A corporation should
sign in full corporate name by duly
authorized officers. When signing
as attorney, executor,
administrator, trustee or guardian,
please give full title as such.
