Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
______________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2011
[ ] TRANSITION REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to____________
Commission File No. 000-27011
ALPINE AIR EXPRESS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 33-0619518 |
(State or Other Jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) |
|
|
|
1177 Alpine Air Way
Provo, Utah 84601
(Address of Principal Executive Offices)
(801) 373-1508
(Registrants telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark 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 check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer ___
Accelerated filer ___
Non-accelerated filer ___
Smaller reporting company _X__
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
1
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: June 3, 2011 - 34,475,857 shares of common stock.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed consolidated financial statements of Alpine Air Express, Inc., a Delaware corporation, (the Company) and its subsidiary Alpine Aviation, Inc., a Utah corporation, as required to be filed with this 10-Q Quarterly Report were prepared by management, and commence on the following page, together with related notes. In the opinion of management, the financial statements present fairly the consolidated financial condition, results of operations, and cash flows of Alpine Air for the periods presented.
2
ALPINE AIR EXPRESS, INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2011
3
ALPINE AIR EXPRESS, INC.
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
| PAGE |
Consolidated Balance Sheets at April 30, 2011 (Unaudited) and October 31, 2010 (Audited) | 5 |
|
|
Unaudited Condensed Consolidated Statements of Income for the three and six Months ended April 30, 2011 and 2010 | 6 |
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended April 30, 2011 and 2010 | 7-8 |
|
|
Notes to Unaudited Condensed Consolidated Financial Statements | 9-12 |
|
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|
|
4
ALPINE AIR EXPRESS, INC.
CONSOLIDATED BALANCE SHEETS
|
| April 30, 2011 |
| October 31, 2010 |
|
|
| (Unaudited) |
| (Audited) |
|
ASSETS |
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
Cash and cash equivalents | $ | 1,221,813 | $ | 1,129,890 |
|
Trade accounts receivable, net |
| 1,919,447 |
| 1,601,287 |
|
Note receivable |
| 237,949 |
| 0 |
|
Inventories |
| 2,323,260 |
| 1,899,293 |
|
Prepaid expenses |
| 238,780 |
| 423,001 |
|
Deposits |
| 64,268 |
| 38,575 |
|
Cash value life insurance |
| 85,572 |
| 85,572 |
|
Income taxes receivable |
| 0 |
| 16,100 |
|
Deferred tax asset, current |
| 170,000 |
| 138,000 |
|
Total current assets |
| 6,261,089 |
| 5,331,718 |
|
PROPERTY AND EQUIPMENT, NET |
| 22,372,047 |
| 22,125,782 |
|
RESTRICTED CASH |
| 0 |
| 206,433 |
|
OTHER ASSETS, NET |
| 133,377 |
| 119,491 |
|
Total assets | $ | 28,766,513 | $ | 27,783,424 |
|
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LIABILITIES AND STOCKHOLDERS EQUITY |
|
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CURRENT LIABILITIES: |
|
|
|
|
|
Trade accounts payable | $ | 794,038 | $ | 506,673 |
|
Income taxes payable |
| 51,000 |
| 0 |
|
Accrued liabilities |
| 1,167,944 |
| 1,143,751 |
|
Dividends payable |
| 35,992 |
| 41,212 |
|
Deferred revenue |
| 260,797 |
| 98,457 |
|
Current portion of long-term debt |
| 1,259,000 |
| 1,286,000 |
|
Total current liabilities |
| 3,568,771 |
| 3,076,093 |
|
|
|
|
|
|
|
DEFERRED TAX LIABILITY |
| 2,569,000 |
| 1,947,000 |
|
LONG-TERM DEBT, net of current portion |
| 7,147,657 |
| 7,283,335 |
|
Total liabilities |
| 13,285,428 |
| 12,306,428 |
|
|
|
|
|
|
|
PREFERRED STOCK |
| 6,736,960 | [1] | 7,465,280 | [2] |
|
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STOCKHOLDERS' EQUITY: |
|
|
|
|
|
Common stock |
| 34,476 | [3] | 36,130 | [4] |
Additional paid-in capital |
| 2,286,349 |
| 2,446,080 |
|
Retained earnings |
| 6,423,300 |
| 5,535,239 |
|
Treasury stock |
| 0 | [5] | (5,733) | [6] |
Total stockholders equity |
| 8,744,125 |
| 8,011,716 |
|
Total liabilities and stockholders' equity | $ | 28,766,513 | $ | 27,783,424 |
|
[1] $0.001 par value, $9.104 stated value, 1,000,000 shares authorized, 740,000 shares issued and outstanding.
[2] $0.001 par value, $9.104 stated value, 1,000,000 shares authorized, 820,000 shares issued and outstanding.
[3] $0.001 par value, 100,000,000 shares authorized, 34,475,857 shares issued and outstanding.
[4] $0.001 par value, 100,000,000 shares authorized, 36,130,141 shares issued and outstanding.
[5] Less treasury stock, 0 shares at cost.
[6] Less treasury stock, 70,660 shares at cost.
The accompanying notes are an integral part of these condensed consolidated financial statements
5
ALPINE AIR EXPRESS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
|
| Feb. 1, 2011 to Apr. 30, 2011 |
| Feb. 1, 2010 to Apr. 30, 2010 |
| Nov. 1, 2010 to Apr. 30, 2011 |
| Nov. 1, 2009 to Apr. 30, 2010 | ||||
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| OPERATING REVENUE: |
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| ||||
| Operations | $ | 5,084,108 | $ | 5,038,910 | $ | 10,559,155 | $ | 10,102,317 | ||||
| Public services |
| 22,378 |
| 14,125 |
| 28,905 |
| 21,044 | ||||
| Total operating revenues |
| 5,106,486 |
| 5,053,035 |
| 10,588,060 |
| 10,123,361 | ||||
| Direct costs - Operations |
| 3,774,944 |
| 3,585,602 |
| 7,639,053 |
| 7,198,013 | ||||
| Direct costs - Public services |
| 32,080 |
| 32,553 |
| 79,589 |
| 73,367 | ||||
| Total direct costs |
| 3,807,024 |
| 3,618,155 |
| 7,718,642 |
| 7,271,380 | ||||
| Gross profit |
| 1,299,462 |
| 1,434,880 |
| 2,869,418 |
| 2,851,981 | ||||
| OPERATING EXPENSES: |
|
|
|
|
|
|
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| ||||
| General and administrative |
| 343,672 |
| 404,359 |
| 792,118 |
| 846,068 | ||||
| Total operating expenses |
| 343,672 |
| 404,359 |
| 792,118 |
| 846,068 | ||||
| Operating income |
| 955,790 |
| 1,030,521 |
| 2,077,300 |
| 2,005,913 | ||||
| OTHER INCOME (EXPENSE): |
|
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| ||||
| Interest income |
| 1,062 |
| 2,632 |
| 4,972 |
| 6,443 | ||||
| Interest expense |
| (121,075) |
| (182,579) |
| (261,228) |
| (385,324) | ||||
| Loss on disposal of assets |
| 0 |
| (258) |
| 0 |
| (1,216) | ||||
| Total other income (expense) |
| (120,013) |
| (180,205) |
| (256,256) |
| (380,097) | ||||
| INCOME BEFORE TAXES AND PREFERRED STOCK DIVIDEND |
| 835,777 |
| 850,316 |
| 1,821,044 |
| 1,625,816 | ||||
| Current income tax expense |
| 48,000 |
| 0 |
| 115,000 |
| 0 | ||||
| Deferred income tax expense |
| 288,000 |
| 323,150 |
| 590,000 |
| 612,150 | ||||
| NET INCOME |
| 499,777 |
| 527,166 |
| 1,116,044 |
| 1,013,666 | ||||
| Preferred stock dividend declared |
| (108,269) |
| (118,319) |
| (227,983) |
| (240,627) | ||||
| NET INCOME AVAILABLE TO COMMON SHAREHOLDERS | $ | 391,508 | $ | 408,847 | $ | 888,061 | $ | 773,039 | ||||
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| NET INCOME PER COMMON SHARE |
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| ||||
| Basic | $ | 0.01 | $ | 0.01 | $ | 0.03 | $ | 0.02 | ||||
| Diluted | $ | 0.00 | $ | 0.00 | $ | 0.01 | $ | 0.01 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
ALPINE AIR EXPRESS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Nov. 1, 2010 to April 30, 2011 |
| Nov. 1, 2009 to April 30, 2010 |
|
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income | $ | 1,116,044 | $ | 1,013,666 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
Loss on disposal of assets |
| 0 |
| 1,216 |
Deferred tax expense |
| 590,000 |
| 612,000 |
Depreciation and amortization |
| 1,736,780 |
| 1,702,550 |
Stock based compensation |
| 0 |
| 25,559 |
Provision for losses on accounts receivable |
| 57,624 |
| (13,402) |
Provision for inventory obsolescence |
| 6,000 |
| 5,402 |
(Increase) decrease in trade accounts receivable |
| (672,933) |
| 12,758 |
(Increase) decrease in other assets |
| (24,851) |
| 15,000 |
(Increase) decrease in inventories |
| (429,967) |
| (204,912) |
(Increase) decrease in income taxes receivable |
| 16,100 |
| 324 |
(Increase) decrease in prepaid expenses |
| 256,344 |
| 92,655 |
(Increase) decrease in deposits |
| (25,693) |
| 50,912 |
Increase (decrease) in trade accounts payable |
| 287,365 |
| (237,087) |
Increase (decrease) in accrued liabilities |
| 24,193 |
| 458 |
Increase (decrease) in deferred revenue |
| 162,340 |
| (117,413) |
Increase (decrease) in income taxes payable |
| 51,000 |
| 0 |
Net cash provided by operating activities |
| 3,150,346 |
| 2,959,686 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
Purchases of property and equipment |
| (1,972,080) |
| (2,684,218) |
Payments on note receivable |
| 59,200 |
| 0 |
Net cash used in investing activities |
| (1,912,880) |
| (2,684,218) |
|
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CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
Payment on long-term debt |
| (734,801) |
| (2,128,356) |
Payment on dividends payable |
| (233,203) |
| (445,360) |
Payment for redemption of preferred stock |
| (728,320) |
| 0 |
Proceeds from long-term debt |
| 500,000 |
| 1,855,247 |
Change in line of credit |
| 0 |
| (192,854) |
Common stock purchased and retired |
| (155,652) |
| (5,733) |
Net cash used in financing activities |
| (1,351,976) |
| (917,056) |
|
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Net change in cash and cash equivalents |
| (114,510) |
| (641,588) |
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BEGINNING CASH AND CASH EQUIVALENTS |
| 1,336,323 |
| 1,192,936 |
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ENDING CASH AND CASH EQUIVALENTS | $ | 1,221,813 | $ | 551,348 |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
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Cash paid during the period for: |
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Interest |
| 261,228 |
| 385,324 |
Income taxes |
| 47,280 |
| 0 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
ALPINE AIR EXPRESS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Non-cash investing and financing activities:
For the six months ended April 30, 2011, the Company:
·
Applied prepaid expenses to notes payable of $32,283.
·
Increased prepaid expenses by $104,406 through the issuance of debt.
·
Retired 70,660 shares of treasury stock valued at $5,733.
·
Refinanced $2,524,583 of debt.
·
Exchanged accounts receivable for a note receivable of $297,149.
For the six months ended April 30, 2010, the Company:
·
Capitalized debt issuance costs of $53,247.
·
Refinanced $1,204,803 of long-term debt.
·
Exchanged accounts receivable for a note receivable of $48,822.
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
ALPINE AIR EXPRESS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed Financial Statements The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at April 30, 2011 and 2010 and for the periods then ended have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Companys October 31, 2010 audited financial statements. The results of operations for the periods ended April 30, 2011 and 2010 are not necessarily indicative of the operating results for the full year.
Recently Enacted Accounting Standards The Companys management has evaluated the recently issued accounting pronouncements through the filing date of these financial statements and has determined that the application of these pronouncements will have no material impact on the Companys financial position and results of operations.
NOTE 2 - TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable consist of the following:
| April 30, 2011 |
| October 31, 2010 | |||||
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|
| |||
Trade accounts receivable Employee advances | $ | 2,010,571 76 |
| $ | 1,634,205 658 | |||
Less allowance for doubtful accounts |
| (91,200) |
|
| (33,576) | |||
| $ | 1,919,447 |
| $ | 1,601,287 |
NOTE 3 NOTE RECEIVABLE
The Company has an unsecured note receivable from a current equipment lessee due in monthly installments of $45,000, bearing interest at 0%, and maturing on September 10, 2011. As of April 30, 2011 the outstanding balance is $237,949.
NOTE 4 - PREPAID EXPENSES
Prepaid expenses consist of the following:
| April 30, 2011 |
| October 31, 2010 | |||||
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| |||
Prepaid expenses and credits | $ | 70,086 |
| $ | 110,493 | |||
Prepaid other taxes Prepaid insurance Prepaid training |
| 52,754 111,599 4,341 |
|
| 37,197 271,797 3,514 | |||
| $ | 238,780 |
| $ | 423,001 |
9
ALPINE AIR EXPRESS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - INVENTORIES
Inventories consist of the following:
| April 30, 2011 |
| October 31, 2010 | |||||
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| |||
Aircraft parts | $ | 2,039,769 |
| $ | 1,660,923 | |||
Work in process |
| 243,228 |
|
| 229,235 | |||
Fuel |
| 62,872 |
|
| 25,744 | |||
Allowance for obsolescence |
| (22,609) |
|
| (16,609) | |||
| $ | 2,323,260 |
| $ | 1,899,293 |
NOTE 6 PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
| Estimated life in years |
| April 30, 2011 |
| October 31, 2010 | |
Building and improvements | 10 - 40 |
| $ | 1,369,559 | $ | 1,369,559 |
Aircraft | 15 |
|
| 20,808,518 |
| 20,318,537 |
Engines | 7 - 10 |
|
| 14,393,873 |
| 13,017,789 |
Equipment | 3 - 10 |
|
| 312,809 |
| 295,758 |
Furniture and fixtures | 3 - 10 |
|
| 338,204 |
| 338,204 |
Vehicles | 5 - 7 |
|
| 127,648 |
| 126,913 |
|
|
|
| 37,350,611 |
| 35,466,760 |
Less: accumulated depreciation and amortization |
|
|
| (14,978,564) |
| (13,340,978) |
|
|
| $ | 22,372,047 | $ | 22,125,782 |
NOTE 7 LONG TERM DEBT
Long term debt consists of the following:
|
| April 30, 2011 |
|
| October 31, 2010 |
|
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|
Note payable issued on August 19, 2009 for $2,524,200 due August 19, 2012.Current interest rate of 6.5%. Secured by four aircraft Reg #N154GA, N99GH, N326CA, and N239AL and personally guaranteed by an officer/shareholder. |
| 1,903,689 |
|
| 2,097,256 |
Note payable originally issued on January 7, 2010 for $2,700,000 due January 7, 2016 and refinanced on March 11, 2011 increasing the principal by $500,000 and now due March 7, 2016. Original interest rate of 7.147% was refinanced to 6.641%. Secured by four aircraft Reg #N172GA, N125BA, N219VP, and N198GA. |
| 3,008,629 |
|
| 2,576,151 |
| |||||
Unsecured note payable issued on May 4, 2010 for $400,775 due February 1, 2011. Interest rate of 7.78%. Note payable issued on June 11, 2010 for $3,087,407 due June 11, 2015. Interest rate of 5.865%. Secured by four aircraft, Reg #N114AX, N127BA, N24BH, and N950AA. |
| - 2,780,232 |
|
| 136,190 2,964,757 |
| |||||
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Unsecured note payable issued on December 16, 2010 for $104,406 due August 1, 2011. Interest rate of 7.98%. |
| 35,259 |
|
| - |
Capital Lease Obligations |
| 678,848 |
|
| 794,981 |
|
| 8,406,657 |
|
| 8,569,335 |
Less current portion |
| (1,259,000) |
|
| (1,286,000) |
Long-term portion | $ | 7,147,657 |
| $ | 7,283,335 |
10
ALPINE AIR EXPRESS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of Series A $.001 par value preferred stock. The preferred
stock provides for monthly dividends at an annual rate of 6.5%. As of April 30, 2011 and October 31, 2010 there were 740,000 and 820,000 shares, respectively, issued and outstanding. This preferred stock is convertible at any time by the holder until December 1, 2011 based on the current market price of the Companys stock. The Company can redeem the preferred stock any time and the Holder can call for redemption of the preferred stock any time after December 1, 2011 at a liquidation value of $9.104 per share.
During the period ending April 30, 2011, the Company redeemed 80,000 shares of the preferred stock at its stated value of $9.104 per share for a total of $728,320.
NOTE 9 - INCOME PER COMMON SHARE
The following data show the amounts used in computing net income per common share:
For Three Months Ended For Six Months Ended
April 30, April 30,
|
| 2011 |
|
| 2010 |
|
| 2011 |
|
| 2010 |
Net income available to common shareholders | $ | 391,508 |
| $ | 408,847 |
| $ | 888,061 |
| $ | 773,039 |
Weighted average number of common shares used in basic EPS |
| 34,866,848 |
|
| 36,271,461 |
|
| 35,473,438 |
|
| 36,271,461 |
|
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|
|
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|
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|
|
Dilutive effect of preferred stock Dilutive effect of stock options |
| 58,244,611 - |
|
| 78,307,133 - |
|
| 67,708,141 - |
|
| 68,072,462 - |
Weighted average number of common shares and dilutive potential common stock used in diluted EPS |
| 93,111,459 |
|
| 114,578,594 |
|
| 103,181,579 |
|
| 104,343,923 |
NOTE 10 CONCENTRATIONS
U.S. Postal Service Contracts - The Company receives the majority of its revenues from contracts with the U.S. Postal Service (USPS). For the six months ended April 30, 2011 and 2010, the revenues from contracts with the USPS represented 66% and 69% of total revenues, respectively. At April 30, 2011 and October 31, 2010, accounts receivable from the USPS totaled $1,013,361 and $966,855, or 50% and 60%, respectively. The contracts
currently in effect for USPS routes will expire in September 2015 for mainland US operations. The loss of contracts
with this customer would have a material negative effect on the operations of the Company.
11
ALPINE AIR EXPRESS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 COMMITMENTS AND CONTINGENCIES
The Company operates its aircraft under a certificate which allows it to accumulate time between overhauls (TBO) in excess of manufacturer's recommendations. The Company regularly inspects its engines. A majority of the
engines used by the Company have accumulated TBO in excess of manufacturer's recommendations.
One allegation and one proposed penalty have been put forth by the Federal Aviation Administration (FAA) and are currently being reviewed by the Company. Management has assessed the probability and has estimated and accrued a reasonable amount to cover any penalties the Company may incur. None of these assertions have resulted in any enforcement action against the Company, nor does the Company expect any actions as a result of the allegations.
NOTE 12 SUBSEQUENT EVENTS
On May 4, 2011 the Company entered into an agreement with a shareholder to purchase 105,000 shares of Common Stock for $10,500.
On May 25, 2011 the Company Board of Directors approved a one-time redemption of 20,000 shares of Series A 6.5% Preferred Stock of Alpine Air held by Mallette Holdings, LLLP to be redeemed at its stated value of $9.104 per share. The Company redeemed the preferred shares on June 1, 2011.
Alpine Air Express has evaluated subsequent events through the date the financial statements were issued, and concluded there were no other events or transactions during this period that required recognition or disclosure in its financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
General.
Alpine Aviation Inc. operates two business divisions. The operations division provides air cargo transportation services in the United States in Montana, North Dakota, and South Dakota (66% of revenue). In addition to air cargo transportation, the Company flies charters for other cargo carriers (25% of revenue), and leases passenger aircraft to other air carriers (9% of revenue). The public division segment provides maintenance service on aircraft owned and operated by third parties (less than 1% of revenue), and operates a First Officer training program (less than 1% of revenue).
During the three months ended April 30, 2011, cargo volumes were higher (5%) when compared to the same period last year. The Company carried 2,177 tons of cargo this quarter in 2011 compared to 2,066 tons in the same quarter in 2010.
In 2009 the Company was successful in its attempts to renew the Montana/South Dakota/North Dakota contract with the US Postal Service. The contract began in 2009 and runs for six years through 2015. In the future, if the Company were unable to renew this contract, it would have a significant impact on earnings and revenues. However, management has had substantial success in renewing contracts with the USPS over the past 20 years. The Company is also under contract with a major US cargo carrier until 2013.
The current US Postal Service contract includes a per pound rate increase over previous contracts as well as a monthly fuel cost adjustment. The Company continues to experience moderate rising costs. Fuel, insurance, aircraft maintenance, and repairs place a demand on the Companys cash resources, however, management has been exceptionally proactive in containing and reducing operating costs in order to better maximize the use of cash resources.
12
Liquidity and Capital Resources
April 30, 2011 and October 31, 2010.
Historical Source of Cash and Capital Expenditures:
The Company has a working capital position on April 30, 2011 of $2,692,318, as compared to working capital on October 31, 2010, of $2,255,625. The increase in working capital has been the direct result of an $929,371 increase in current assets coupled with an increase of $492,678 in current liabilities. The Company presently has no material off-balance sheet financing arrangements.
Total assets increased to $28,766,513 on April 30, 2011 from $27,783,424 on October 31, 2010. Total liabilities increased to $13,285,428 from $12,306,428 during the same period. Stockholders' equity has also increased a total of $732,409, from $8,011,716 to 8,744,125 for October 31, 2010 and April 30, 2011, respectively.
For the six months ended April 30, 2011 the Company had a net profit from operations before income taxes and preferred stock dividends of $1,821,044. This is an increase of $195,228 from the previous years net income of $1,625,816. Depreciation and amortization expense for the six months ending April 30, 2011 was $1,736,780 for an increase of $34,230 over last year.
During the six months ended April 30, 2011, the Companys tax net operating loss carryforward decreased by $1,666,000 and deferred taxes totaled $590,000.
Investing activities for the six months ended April 30, 2011, primarily consisted of the purchases of property and equipment of $1,972,080.
For the six months ended April 30, 2010, net cash used in financing activities was $1,351,976. The subsequent use of these funds was the retiring of $734,801 of long-term debt, the payment of preferred stock dividends of $233,203, the redemption of $155,652 of Common Stock of the Company, and the redemption of $728,320 of Preferred Stock of the Company. The Company also received $500,000 from the refinance of a note payable.
For the six months ended April 30, 2011 and April 30, 2010, net decreases in cash and cash equivalents were $114,510 and $641,588, and ending cash and cash equivalents were $1,221,813 and $551,348, respectively.
Cash Requirements:
The following table summarizes the Companys contractual obligations as of April 30, 2011:
|
|
| Total |
|
| One Year |
|
| 2-5 Years |
|
| After 5 Years |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt principal |
| $ | 7,727,809 |
| $ | 1,011,997 |
| $ | 6,715,812 |
| $ | - |
Capital leases principal |
|
| 678,848 |
|
| 246,489 |
|
| 432,359 |
|
| - |
Interest payments |
|
| 1,527,003 |
|
| 509,316 |
|
| 1,017,687 |
|
| - |
Operating leases |
|
| 466,493 |
|
| 62,857 |
|
| 155,186 |
|
| 248,450 |
Dividend payment of preferred shares |
|
| 2,043,691 |
|
| 437,902 |
|
| 1,605,789 |
|
| - |
Total |
| $ | 12,443,844 |
| $ | 2,268,561 |
| $ | 9,926,833 |
| $ | 248,450 |
Future Capital Expenditures:
The Company, as of April 30, 2011, had no open commitments to purchase additional aircraft.
Results of Operations.
Three months ended April 30, 2011 and 2010.
Operating Revenue
During the three months ended April 30, 2011 total operating revenues were $5,106,486, representing a 1%
13
increase over 2010 revenues for the same period of $5,053,035. The following tables summarize Alpine Airs operating revenue and associated percentage-of-change for the periods indicated.
|
| Three months ended April 30, 2011 |
|
| Three months ended April 30, 2010 |
| 2011 over 2010 Change |
Operating Revenue: |
|
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
|
Mail revenue | $ | 3,532,898 |
| $ | 3,435,931 |
| 3% |
Contract cargo revenue and ad-hoc charters |
| 1,257,538 |
|
| 1,131,214 |
| 11% |
Aircraft leasing |
| 293,672 |
|
| 471,765 |
| (38)% |
Total operations |
| 5,084,108 |
|
| 5,038,910 |
| 1% |
Public services |
|
|
|
|
|
|
|
First officer |
| 550 |
|
| 10,515 |
| (95)% |
Maintenance |
| 21,828 |
|
| 3,610 |
| 505% |
Total public services |
| 22,378 |
|
| 14,125 |
| 58% |
Total operating revenue | $ | 5,106,486 |
| $ | 5,053,035 |
| 1% |
|
| Three months ended April 30, 2011 |
| Three months ended April 30, 2010 |
| 2011 over 2010 Change |
Operating Revenue: |
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
Mail revenue |
| 69% |
| 68% |
| 1% |
Contract cargo revenue and ad-hoc charters |
| 25% |
| 23% |
| 2% |
Aircraft leasing |
| 6% |
| 9% |
| (3)% |
Total operations |
| 100% |
| 100% |
| - |
Public services |
|
|
|
|
|
|
First officer |
| Less than 1% |
| Less than 1% |
| - |
Maintenance |
| Less than 1% |
| Less than 1% |
| - |
Total public services |
| Less than 1% |
| Less than 1% |
| - |
Total operating revenue |
| 100% |
| 100% |
| - |
Direct Costs
Total direct costs increased to $3,807,024 from $3,618,155 for the three months ending April 30, 2011 and 2010, respectively. This increase is mainly due to an increase of $230,636 in fuel expense that occurred because of an increase in overall fuel prices and additional charter flights flown during 2011. Depreciation and amortization expense for the three months ended April 30, 2011 decreased to $817,532 from $849,151 during the same period in 2010. This decrease was due to an decrease in engine times for aircraft leases to third parties and offset by an increase in depreciation on major engine and airframe component overhauls capitalized in 2010 and 2011. The following table summarizes the Companys direct costs and the associated percentages-of-change for the periods indicated.
|
| Three months ended April 30, 2011 |
|
| Three months ended April 30, 2010 |
| 2011 over 2010 Change |
Direct Costs: |
|
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
|
Depreciation and amortization | $ | 817,532 |
| $ | 849,151 |
| (4)% |
Other direct costs |
| 2,957,412 |
|
| 2,736,451 |
| 8% |
Total operations |
| 3,774,944 |
|
| 3,585,602 |
| 5% |
Public services |
|
|
|
|
|
|
|
Total public services |
| 32,080 |
|
| 32,553 |
| (2)% |
Total direct costs | $ | 3,807,024 |
| $ | 3,618,155 |
| 5% |
14
Operating Expenses
Operating expenses decreased to $343,672 from $404,359 for the three months ended April 30, 2011 and 2010, respectively. This small decrease was due mainly to the timing and payment of a bonus paid to the general manager. The following table summarizes Alpine Airs operating expenses and the associated percentages-of-change for the periods indicated.
|
| Three months ended April 30, 2011 |
|
| Three months ended April 30, 2010 |
| 2011 over 2010 Change |
Operating Expenses: |
|
|
|
|
|
|
|
General and administrative | $ | 343,672 |
| $ | 404,359 |
| (15)% |
Total operating expenses |
| 343,672 |
|
| 404,359 |
| (15)% |
Interest Income
Interest income for the three months ended April 30, 2011 decreased to $1,062 from the amount at April 31, 2010 of $2,632. This decrease in interest income is due to an decrease in interest rates earned on interest bearing accounts.
Interest Expense
Total interest expense for the three months ended April 30, 2011 and 2010 was $121,075 and $182,579, respectively. This decrease in interest expense is due to a refinance of a capital lease to a note payable with more favorable terms.
Gain (Loss) on Disposal of Assets
Gain (loss) on disposal of assets for the three months ended April 30, 2011 changed to $0 from $(258) as of April 30, 2010. This increase is due to no sales or dispositions of assets occurring during the current quarter versus a small loss on asset sales for the same quarter last year.
Income Tax Expense
The provision for income tax expense for the three months ended April 30, 2011 and 2010 was $336,000 and $323,150, respectively. The small increase in income taxes as a percentage of income before taxes of 40.2% in 2011 and 38.0% in 2010 was due to state income taxes.
Net Income
For the three months ended April 30, 2011 and 2010, income before preferred dividends was $499,777 and $527,166, or $0.01 per share and $0.01 per share, respectively. For the same periods net income available to shareholders was $391,508 and $408,847, or $0.01 per share and $0.01 per share, respectively. The difference for both years presented is $108,269 and $118,319, respectively ($0.00 and $0.00 per share, respectively), which is related to dividends declared on preferred stock.
Six months ended April 30, 2011 and 2010.
Operating Revenue
During the six months ended April 30, 2011 total operating revenues were $10,588,060, representing an 5% increase over 2010 revenues for the same period of $10,123,361. The following tables summarize Alpine Airs operating revenue and associated percentage-of-change for the periods indicated.
15
|
| Six months ended April 30, 2011 |
|
| Six months ended April 30, 2010 |
| 2011 over 2010 Change |
Operating Revenue: |
|
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
|
Mail revenue | $ | 6,961,074 |
| $ | 6,935,326 |
| <1% |
Contract cargo revenue and ad-hoc charters |
| 2,646,480 |
|
| 2,353,719 |
| 12% |
Aircraft leasing |
| 951,601 |
|
| 813,272 |
| 17% |
Total operations |
| 10,559,155 |
|
| 10,102,317 |
| 5% |
Public services |
|
|
|
|
|
|
|
First officer |
| 4,239 |
|
| 13,301 |
| (68)% |
Maintenance |
| 24,666 |
|
| 7,743 |
| 219% |
Total public services |
| 28,905 |
|
| 21,044 |
| 37% |
Total operating revenue | $ | 10,588,060 |
| $ | 10,123,361 |
| 5% |
|
| Six months ended Six 30, 2011 |
| Six months ended April 30, 2010 |
| 2011 over 2010 Change |
Operating Revenue: |
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
Mail revenue |
| 66% |
| 69% |
| (3)% |
Contract cargo revenue and ad-hoc charters |
| 25% |
| 23% |
| 2% |
Aircraft leasing |
| 9% |
| 8% |
| 1% |
Total operations |
| 100% |
| 100% |
| - |
Public services |
|
|
|
|
|
|
First officer |
| Less than 1% |
| Less than 1% |
| - |
Maintenance |
| Less than 1% |
| Less than 1% |
| - |
Total public services |
| Less than 1% |
| Less than 1% |
| - |
Total operating revenue |
| 100% |
| 100% |
| - |
Direct Costs
Total direct costs increased to $7,718,642 from $7,271,380 for the six months ending April 30, 2011 and 2010, respectively. This increase is mainly due to an increase of $411,857 in fuel expense that occurred because of an increase in overall fuel prices and additional charter flights flown during 2011. Depreciation and amortization expense for the six months ended April 30, 2011 increased to $1,736,780 from $1,702,550 during the same period in 2010. The following table summarizes the Companys direct costs and the associated percentages-of-change for the periods indicated.
|
| Six months ended April 30, 2011 |
|
| Six months ended April 30, 2010 |
| 2011 over 2010 Change |
Direct Costs: |
|
|
|
|
|
|
|
Operations |
|
|
|
|
|
|
|
Depreciation and amortization | $ | 1,736,780 |
| $ | 1,702,550 |
| 2% |
Other direct costs |
| 5,902,273 |
|
| 5,495,463 |
| 7% |
Total operations |
| 7,639,053 |
|
| 7,198,013 |
| 6% |
Public services |
|
|
|
|
|
|
|
Total public services |
| 79,589 |
|
| 73,367 |
| 8% |
Total direct costs | $ | 7,718,642 |
| $ | 7,271,380 |
| 6% |
Operating Expenses
Operating expenses decreased to $792,118 from $846,068 for the six months ended April 30, 2011 and 2010, respectively. This small decrease was due mainly to a decrease in bad debt expense of $49,453. The following table
16
summarizes Alpine Airs operating expenses and the associated percentages-of-change for the periods indicated.
|
| Six months ended April 30, 2011 |
|
| Six months ended April 30, 2010 |
| 2011 over 2010 Change |
Operating Expenses: |
|
|
|
|
|
|
|
General and administrative | $ | 792,118 |
| $ | 846,068 |
| (6)% |
Total operating expenses |
| 792,118 |
|
| 846,068 |
| (6)% |
Interest Income
Interest income for the six months ended April 30, 2011 decreased to $4,972 from the amount at April 30, 2010 of $6,443. This decrease in interest income is due to a decrease in interest rates earned on interest bearing accounts.
Interest Expense
Total interest expense for the six months ended April 30, 2011 and 2010 was $261,228 and $385,324, respectively. This decrease in interest expense is due to a refinance of a capital lease to a note payable with more favorable terms.
Gain (Loss) on Disposal of Assets
Gain (loss) on disposal of assets for the six months ended April 30, 2011 changed to $0 from $(1,216) as of April 30, 2010. This increase is due to no sales or dispositions of assets occurring during the current quarter versus a small loss on asset sales for the same period last year.
Income Tax Expense
The provision for income tax expense for the six months ended April 30, 2011 and 2010 was $705,000 and $612,150 respectively. The small increase in income taxes as a percentage of income before taxes of 38.7% in 2011 and 37.7% in 2010 was due to state income taxes.
Net Income
For the six months ended April 30, 2011 and 2010, income before preferred dividends was $1,116,044 and $1,013,666, or $0.03 per share and $0.03 per share, respectively. For the same periods net income available to shareholders was $888,061 and $773,039, or $0.03 per share and $0.02 per share, respectively. The difference for both years presented is $227,983 and $240,627, respectively ($0.00 and $0.01 per share, respectively), which is related to dividends declared on preferred stock.
Off-balance sheet arrangements
We have no off balance sheet arrangements during the quarter ended April 30, 2011.
Forward Looking Statements.
Statements made in this Form 10-Q which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and business of the Company, including, without limitation, (i) our ability to retain existing commercial relationships and to obtain additional profitable sources of revenue, and (ii) statements preceded by, followed by or that include the words "may", "would", "could", "should", "expects", "projects", "anticipates", "believes", "estimates", "plans", "intends", "targets" or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond the Company's control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, in addition to those contained in the Company's reports on file with the SEC: general economic or industry conditions, nationally and/or in the communities in which the Company conducts business, legislation or regulatory requirements, the economic condition of the U.S. Postal
17
Service, changes in the air cargo, charter and leasing industries, demand for air cargo, charter and leasing services, competition, changes in the quality or composition of the Company's services, our ability to develop profitable new sources of revenue, changes in accounting principals, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting the Company's operations, services and prices.
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. The Company does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Managements report on disclosure controls and procedures.
As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our CEO and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our CEO and Principal Financial Officer concluded that information required to be disclosed is recorded, processed, summarized and reported within the specified periods and is accumulated and communicated to management, including our CEO and Principal Financial Officer, to allow for timely decisions regarding required disclosure of material information required to be included in our periodic Securities and Exchange Commission reports. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our CEO and Principal Financial Officer have concluded that our disclosure controls and procedures are effective to a reasonable assurance level of achieving such objectives. However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. In addition, we reviewed our internal controls over financial reporting, and there have been no changes in our internal controls or in other factors in the last fiscal quarter that have materially affected our internal controls over financial reporting.
Changes in internal control over financial reporting
The Company had no changes in internal control over financial reporting during the quarter ended April 30, 2011.
18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 1A. Risk Factors.
Not applicable to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Securities
During the quarter ended April 30, 2011, we did not issue any unregistered securities.
Use of Proceeds of Registered Securities
We had no proceeds from the sale of registered securities during the quarter ended April 30, 2011.
Purchases of Equity Securities by Us and Affiliated Purchasers
SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be Purchased Under the Plans or Programs |
Month #1 February 1, 2011 through February 28, 2011 | 1,512,964 shares of Alpine Air Express, Inc. from SCS, Inc. | $.099 | None | None |
Month #2 March 1, 2011 through March 31, 2011 | None | None | None | None |
Month #3 April 1, 2011 through April 30, 2011 | None | None | None | None |
Total | 1,512,964 | $.099 | None | None |
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. (Removed and Reserved).
Item 5. Other Information.
(a)
On May 4, 2011, which is subsequent to the end of the period covered by this Report, the Company entered into an agreement with a shareholder to purchase 105,000 shares of Common Stock for $10,500.
On May 25, 2011, which is subsequent to the end of the period covered by this Report, the Companys Board of Directors approved a one-time redemption of 20,000 shares of Series A 6.5% Preferred Stock of Alpine Air held by Mallette Holdings, LLLP to be redeemed at its stated value of $9.104 per share. The Company redeemed
19
the preferred shares on June 1, 2011.
Alpine Air Express has evaluated subsequent events through the date the financial statements were issued, and concluded there were no other events or transactions during this period that required recognition or disclosure in its financial statements.
(b)
During the quarterly period ended April 30, 2011, there were no changes in the procedures by which security holders may recommend nominees to the Companys Board of Directors.
Item 6. Exhibits
(a) Exhibits and index of exhibits.
31.1 302 Certification of Eugene R. Mallette
31.2 302 Certification of Rick C. Wood
32 906 Certification
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ALPINE AIR EXPRESS, INC.
Date: | 06/13/11 |
| By: | /s/Eugene R. Mallette |
|
|
|
| Eugene R. Mallette |
|
|
|
| Chief Executive Officer and Director |
|
|
|
|
|
Date: | 06/13/11 |
| By: | /s/Rick C. Wood |
|
|
|
| Rick C. Wood |
|
|
|
| Principal Financial Officer |
|
|
|
|
|
Date: | 06/13/11 |
| By: | /s/Max A. Hansen |
|
|
|
| Max A. Hansen |
|
|
|
| Secretary/Treasurer and Director |
|
|
|
|
|
Date: | 06/13/11 |
| By: | /s/Joseph O. Etchart |
|
|
|
| Joseph O. Etchart |
|
|
|
| Chairman |
|
|
|
|
|
Date: | 06/13/11 |
| By: | /s/Ronald L. Pattison |
|
|
|
| Ronald L. Pattison |
|
|
|
| Director |
21