SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-16079
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AIR METHODS CORPORATION
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(Exact name of Registrant as Specified in Its Charter)
Delaware 84-0915893
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
7301 South Peoria, Englewood, Colorado 80112
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (303) 792-7400
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Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report: N/A
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
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<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1995 and December 31,
1994 . . . . . . . . . . . . . . . . . . . . 1
Statements of Operations for the three months and
for the six months ended June 30, 1995 and
1994 . . . . . . . . . . . . . . . . . . . . 3
Statements of Cash Flows for the six months ended
June 30, 1995 and 1994. . . . . . . . . . . . 4
Notes to Financial Statements. . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . 8
Item 2. Changes in Securities . . . . . . . . . . . . 8
Item 3. Defaults Upon Senior Securities . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . 8
Item 5. Other Information . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K. . . . . . . 8
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
<TABLE>
<CAPTION> PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Air Methods Corporation
BALANCE SHEETS
(Amounts in thousands, except share amounts)
June 30, December 31,
1995 1994
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(unaudited)
<S> <C> <C>
Assets
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Current Assets:
Cash and cash equivalents $ 1,604 696
Current installment of notes receivable 340 324
Receivables:
Trade 1,078 900
Insurance proceeds 199 49
Employees and other 56 65
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1,333 1,014
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Inventories 1,371 1,522
Work-in-progress on medical interiors 430 240
Assets held for sale 14 4,529
Prepaid expenses and other 433 1,511
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Total current assets 5,525 9,836
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Equipment and leasehold improvements:
Flight and ground support equipment 36,585 36,221
Furniture and office equipment 1,160 1,161
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37,745 37,382
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Less accumulated depreciation and amortization (5,875) (4,667)
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Net property and equipment 31,870 32,715
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Excess of cost over the fair value of net assets acquired,
net of accumulated amortization of $356 and $308 at June
30,1995 and December 31, 1994, respectively 2,071 2,119
Notes receivable, less current installments 2,024 2,197
Patent application costs and other assets, net of
accumulated amortization of $468 and $424 at
June 30, 1995 and December 31, 1994, respectively 959 1,267
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$42,449 48,134
======= =======
(Continued)
See accompanying notes to financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Air Methods Corporation
BALANCE SHEETS, Continued
(Amounts in thousands, except share amounts)
June 30, December 31,
1995 1994
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(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
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Current Liabilities:
Notes payable $ 500 2,278
Current installments of long-term debt 1,101 4,870
Current installments of obligations under capital leases 727 722
Accounts payable 637 746
Accrued overhaul and parts replacement costs 1,010 804
Deferred revenue 515 10
Accrued restructuring expenses and
other accrued liabilities 2,007 2,298
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Total current liabilities 6,497 11,728
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Long-term debt, less current installments 7,003 7,569
Obligations under capital leases, less current installments 4,943 5,302
Accrued overhaul and parts replacement costs 4,411 4,559
Other liabilities 928 945
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Total liabilities 23,782 30,103
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Stockholders' equity:
Common stock, $.06 par value. Authorized 16,000,000 shares;
issued 8,100,629 and 8,051,765 shares at June 30, 1995
and December 31, 1994, respectively 484 481
Additional paid-in capital 49,632 49,572
Accumulated deficit (note 3) (31,449) (32,022)
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Total stockholders' equity 18,667 18,031
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$42,449 48,134
======= =======
See accompanying notes to financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Air Methods Corporation
STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share amounts)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue:
Flight revenue $ 6,528 6,519 13,124 13,026
Sales of medical interiors and products 424 -- 1,705 474
Gain on disposition of assets, net 4 -- -- --
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6,956 6,519 14,829 13,500
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Operating expenses:
Flight centers 2,139 2,280 4,270 4,576
Aircraft operations 1,887 1,941 3,832 4,163
Aircraft rental 322 691 803 1,542
Medical interiors and parts 451 729 1,538 1,053
Depreciation and amortization 647 630 1,303 1,214
Loss on disposition of assets, net -- 1,737 11 1,712
General and administrative 947 1,178 1,938 2,915
Restructuring and other non-recurring expenses -- 375 -- 3,010
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6,393 9,561 13,695 20,185
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Operating income (loss) 563 (3,042) 1,134 (6,685)
Other income (expense):
Interest expense (313) (316) (752) (638)
Interest and dividend income 71 74 137 142
Other, net (1) 12 54 6
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Net income (loss) 320 (3,272) 573 (7,175)
======= ======== ======== ========
Income (loss) per common share $ .04 $ .41 .07 (.92)
======= ======== ======== ========
Weighted average number of
common shares outstanding 8,075,023 8,015,220 8,065,307 7,838,621
========== ========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Air Methods Corporation
STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)
Six Months Ended June 30,
------------------------------
1995 1994
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<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $ 573 $ (7,175)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization expense 1,303 1,214
Vesting of common stock and options issued for services and in connection
with employee stock compensation agreements, net of forfeitures 63 (291)
Loss on retirement and sale of equipment, net 15 1,712
Provision for restructuring and non-recurring expenses -- 2,218
Changes in assets and liabilities:
Decrease (increase) in prepaid and other current assets 1,470 (569)
Decrease (increase) in receivables (274) 1,017
Decrease in inventories 152 483
Increase in work-in-progress on medical interiors (227) (49)
Increase (decrease) in accounts payable,
accrued restructuring expenses and other accrued liabilities (400) 617
Increase in deferred revenue and other liabilities 487 1,039
Increase in accrued overhaul and parts replacement costs 58 542
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Net cash flow provided by operating activities 3,220 758
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Cash flow from investing activities:
Acquisition of equipment and leasehold improvements (376) (3,106)
Proceeds from retirement and sale of equipment and assets held for sale 4,109 353
Proceeds from sale or maturity of short-term investments -- 504
Net decrease (increase) in notes receivable, patent application costs
and other assets 421 (74)
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Net cash provided (used) by investing activities 4,154 (2,323)
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Cash flow from financing activities:
Issuance of common stock and warrants for cash -- 6,059
Net payments under short-term notes payable (1,778) (2,055)
Payments for syndication and solicitation costs -- (152)
Proceeds from issuance of debt -- 985
Payments of long-term debt (4,334) (566)
Payments of capital lease obligations (354) (1,439)
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Net cash provided (used) by financing activities (6,466) 2,832
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Increase in cash and cash equivalents 908 1,267
Cash and cash equivalents at beginning of period 696 2,154
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Cash and cash equivalents at end of period $ 1,604 3,421
======== =======
See accompanying notes to financial statements.
</TABLE>
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<PAGE>
Notes to Financial Statements
(1) Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited
financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly
the financial statements for the respective periods.
Interim results are not necessarily indicative of results
for a full year. The financial statements should be read in
conjunction with the Company's audited consolidated
financial statements and notes thereto for the transitional
fiscal year ended December 31, 1994.
(2) Income (Loss) per Share
-----------------------
Per-share information is based on the weighted-average
number of shares of common stock outstanding during each of
the periods. Shares issuable upon the exercise of warrants
and stock options are not included in the calculations,
since their inclusion would be anti-dilutive.
(3) Stockholders' Equity
--------------------
Changes in the stockholders' equity for the six months ended
June 30, 1995 consisted of the following (amounts in
thousands except share amounts):
Six Months Ended
June 30, 1995
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Shares Amount
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Balance at January 1, 1995 8,051,765 $ 18,031
Issuance of common shares for
options exercised and
services rendered 48,864 64
Amortization of deferred compensation
expense, net of forfeitures -- (1)
Net income -- 573
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Balance at June 30, 1995 8,100,629 $18,667
========== =======
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<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The Company reported net income of $320,000 and $573,000 for
the three and six months ended June 30, 1995, respectively,
compared to net losses of $3,272,000 and $7,175,000 for the
comparable periods in 1994. The losses for the three and
six months ended June 30, 1994, included restructuring
charges of $375,000 and $3,010,000, respectively, and net
losses on disposition of assets and other non-recurring
items of $2,390,000 and $2,365,000, respectively. Without
the restructuring charges and other non-recurring items, the
losses for the three- and six-month periods would have been
$507,000 and $1,800,000, respectively. The improvement in
operating results is primarily attributable to the improved
performance of the Company's Products Division and to a
reduction in general and administrative expenses.
Sales of medical interiors increased $424,000 and $1,231,000
for the three and six months ended June 30, 1995,
respectively, in comparison to the comparable periods in
1994. In the second quarter of 1995 the Company recognized
revenue of $188,000 from the sale of passenger oxygen
systems and $100,000 from the installation of an advanced
navigational and weather detection system on a fixed wing
aircraft. The remainder of the sales of medical interiors
for the quarter consisted of revenue recognized upon
completion of projects begun in the first quarter of 1995.
The six months ended June 30, 1995 also included revenue
from the sale of a medical interior to an outside customer
and from the refurbishment of an interior for an existing
customer, as well as revenue recognized in the first quarter
of 1995 from the sale of passenger oxygen systems. The
revenue recorded in the comparable six-month period in 1994
related to the completion of five emergency medical
interiors for Bell Helicopters, Inc. for use outside the
United States. The cost of medical interiors decreased by
38.1% for the second quarter of 1995 and increased by 46.1%
for the six months ended June 30, 1995 as compared to the
previous year. The increase in cost for the six months is
related to the increase in the volume of products sold. In
the three months ended June 30, 1994, the cost of medical
interiors also included $653,000 of payments for work on a
medical interior that the Company had subcontracted to an
outside vendor. The work done by the subcontractor was
subsequently determined to be unsatisfactory and was
reperformed by the Company.
Flight revenue remained basically unchanged in the three and
six months ended June 30, 1995 in comparison to the same
periods in the previous year. The majority of the Company's
contracts with hospital clients are subject to annual
increases based on changes in the Consumer Price Index
(CPI). The Company has successfully negotiated increases
greater than CPI changes for two contracts which have been
renewed since June 30, 1994. In addition, during the six
months ended June 30, 1995, the Company earned $460,000 from
the short-term lease of one of its aircraft. The resulting
increase in revenue has been offset by the termination of
air charter operations and three airplane medical contracts
during the quarter ended September 1994. Flight center
costs decreased 6.2% and 6.7% for the three and six months
ended June 30, 1995, due to the decrease in the number of
airplane medical contracts. These expenses, consisting
primarily of pilot and mechanic salaries and fringe
benefits, generally vary with the number of contracts served
by the Company.
Aircraft operating expenses decreased by 2.8% and 8.0% for
the three and six months ended June 30, 1995, respectively,<PAGE>
in comparison to the three and six months ended June 30,
1994. The decreases are primarily a result of the
elimination of eight fixed wing aircraft from the Company's
fleet since the quarter ended June 30, 1994. Aircraft
operating expenses consist of fuel, insurance, and
maintenance costs and generally are a function of the size
of the fleet, the type of aircraft flown, and the number of
hours flown.
Aircraft rental expense decreased by 53.4% and 47.9% for the
three and six months ended June 30, 1995, as compared to
1994. The Company has eliminated six leased aircraft from
its fleet which had been in operation during all or part of
the six months ended June 30, 1994. A seventh previously
leased aircraft was purchased by one of the Company's
hospital customers during the six months ended June 30,
1995, and is still operated by the Company.
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<PAGE>
Depreciation and amortization expense increased 2.7% and
7.3% for the three and six months ended June 30, 1995,
respectively as compared to 1994. The minimal increases in
depreciation reflect the 3% increase in the depreciable
asset base from June 30, 1994, to June 30, 1995.
The 19.6% and 33.5% decreases in general and administrative
expenses for the three- and six-month periods ended June 30,
1995, respectively, reflect the effects of the Company's
restructuring plan which was implemented in the quarters
ended March 31 and June 30, 1994. The restructuring plan
included a reduction in the administrative work force and a
decreased reliance on outside contractors and other
professional services, resulting in declines in
administrative expense of approximately $368,000 and
$124,000, respectively, for the six months ended June 30,
1995. The Company's Board of Directors has met quarterly in
the current year as compared to monthly during the
restructuring, causing a decrease of $129,000 in costs for
the six months ended June 30, 1995.
Interest expense remained constant in the second quarter of
1995 as compared to the same quarter in the previous year
but increased 17.9% for the six months ended June 30, 1995.
The increase is due to interest incurred on notes to finance
the acquisition of two aircraft; one aircraft was placed in
service in May 1994 and the other in January 1995. The
aircraft placed in service in January 1995 was subsequently
sold in March 1995.
Operating expenses for the six months ended June 30, 1994,
included $1,712,000 of valuation allowances and losses on
the disposition of aircraft and $3,010,000 of restructuring
expenses. The Company did not incur any similar costs in
the six months ended June 30, 1995.
Financial Condition
The Company had cash and cash equivalents of $1,604,000 and
a working capital deficit of $972,000 as of June 30, 1995,
as compared to cash and cash equivalents of $696,000 and a
working capital deficit of $1,892,000 at December 31, 1994.
The increase in cash and cash equivalents and the
improvement in the working capital position in the six
months ended June 30, 1995, is primarily due to the sale of
one of the Company's aircraft which generated approximately
$700,000 in cash after the retirement of the related debt
and to the positive cash flow generated by the Company's two
operating divisions.
Flight revenues for the Air Medical Services Division have
historically been higher each year during the summer and
fall than during the winter. In addition, the Company has
signed a Letter Subcontract to design and manufacture a
medical interior for a Lockheed L-1011 aircraft over a
period of 10 months. Formal contract negotiations are
expected to be finalized in the third quarter of 1995. The
Company has also entered into an agreement to manufacture
and install a medical interior for a Bell 206 helicopter
during the third quarter. The Company believes that cash
flow generated from operations will allow the Company to
continue normal operations during fiscal 1995 without
additional external financing. In addition, the Company has
four unencumbered aircraft valued at approximately $7.4
million which could be used to obtain additional financing,
if necessary.
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<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K - none
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<PAGE>
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.
AIR METHODS CORPORATION
Date: August 11, 1995 By Aaron D. Todd
------------------------------
On behalf of the Company, and
as Principal Financial and
Accounting Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S INTERIM UNAUDITED FINANCIAL STATEMENTS FOR THE
SIX MONTHS ENDED JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1604
<SECURITIES> 0
<RECEIVABLES> 1685
<ALLOWANCES> (12)
<INVENTORY> 1801
<CURRENT-ASSETS> 5525
<PP&E> 37745
<DEPRECIATION> (5875)
<TOTAL-ASSETS> 42449
<CURRENT-LIABILITIES> 6497
<BONDS> 0
<COMMON> 484
0
0
<OTHER-SE> 49632
<TOTAL-LIABILITY-AND-EQUITY> 42449
<SALES> 1705
<TOTAL-REVENUES> 14829
<CGS> 1538
<TOTAL-COSTS> 13695
<OTHER-EXPENSES> 54<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 615<F2>
<INCOME-PRETAX> 573
<INCOME-TAX> 0
<INCOME-CONTINUING> 573
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 573
<EPS-PRIMARY> .07
<EPS-DILUTED> .0
<FN>
<F1> Net non-operating income
<F2> Net of interest income of 137
</FN>
</TABLE>
