<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
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 March 31, 1996
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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 (I.R.S. Employer
of 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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N/A
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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
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The number of shares of Common Stock, par value $.06, outstanding
as of May 1, 1996 was 8,090,320.
<PAGE>
TABLE OF CONTENTS
Form 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1996 and
December 31, 1995 1
Statements of Operations for the three months
ended March 31, 1996 and 1995 3
Statements of Cash Flows for the three months
ended March 31, 1996 and 1995 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>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIR METHODS CORPORATION
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
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Assets (unaudited)
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,745 2,699
Current installments of notes receivable 365 356
Receivables:
Trade 1,478 881
Insurance proceeds 110 249
Employees and other 91 367
-------- --------
1,679 1,497
-------- --------
Inventories 1,284 1,263
Work-in-progress on medical interiors 241 131
Prepaid expenses and other 592 611
-------- --------
Total current assets 7,906 6,557
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Equipment and leasehold improvements:
Flight and ground support equipment 38,208 37,228
Furniture and office equipment 1,335 1,326
-------- --------
39,543 38,554
Less accumulated depreciation and amortization (7,790) (7,138)
-------- --------
Net property and equipment 31,753 31,416
-------- --------
Excess of cost over the fair value of net assets acquired,
net of accumulated amortization of $429 and $405 at
March 31, 1996 and December 31, 1995, respectively 1,998 2,022
Notes receivable, less current installments 1,749 1,843
Patent application costs and other assets, net of
accumulated amortization of $532 and $510 at
March 31, 1996 and December 31, 1995, respectively 818 748
-------- --------
$ 44,224 42,586
======== ========
</TABLE>
(Continued)
See accompanying notes to financial statements.
1<PAGE>
AIR METHODS CORPORATION
BALANCE SHEETS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
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Liabilities and Stockholders' Equity (unaudited)
- ------------------------------------
<S> <C> <C>
Current liabilities:
Notes payable $ 604 693
Current installments of long-term debt 1,902 1,435
Current installments of obligations under capital leases 766 751
Accounts payable 848 974
Accrued overhaul and parts replacement costs 1,496 1,407
Deferred revenue 492 1,052
Accrued restructuring expenses and
other accrued liabilities 992 883
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Total current liabilities 7,100 7,195
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Long-term debt, less current installments 8,359 6,671
Obligations under capital leases, less current installments 4,381 4,552
Accrued overhaul and parts replacement costs 4,352 4,329
Other liabilities 800 777
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Total liabilities 24,992 23,524
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Stockholders' equity:
Common stock, $.06 par value. Authorized 16,000,000 shares;
issued 8,115,926 and 8,103,502 shares at March 31, 1996
and December 31, 1995, respectively 485 485
Additional paid-in capital 49,666 49,640
Accumulated deficit (note 3) (30,919) (31,063)
-------- --------
Total stockholders' equity 19,232 19,062
-------- --------
$ 44,224 42,586
======== ========
</TABLE>
See accompanying notes to financial statements.
2<PAGE>
AIR METHODS CORPORATION
STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
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(unaudited) (unaudited)
<S> <C> <C>
Revenue:
Flight revenue $ 6,348 6,596
Sales of medical interiors and products 1,405 1,281
International franchise revenue 150 -
Loss on disposition of assets (17) (15)
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7,886 7,862
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Operating expenses:
Flight centers 2,116 2,131
Aircraft operations 2,050 1,945
Aircraft rental 390 481
Medical interiors and parts 1,261 1,087
Depreciation and amortization 704 656
General and administrative 997 991
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7,518 7,291
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Operating income 368 571
Other income (expense):
Interest expense (311) (439)
Interest and dividend income 86 66
Other, net 1 55
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Net income $ 144 253
======= =======
Income per common share $ .02 .03
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Weighted average number of
common shares outstanding 8,082,037 8,048,233
========= =========
</TABLE>
See accompanying notes to financial statements.
3<PAGE>
AIR METHODS CORPORATION
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
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(unaudited) (unaudited)
<S> <C> <C>
Cash flow from operating activities:
Net income $ 144 253
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 704 656
Vesting of common stock and options issued for services and in connection
with employee stock compensation agreements, net of forfeitures 26 60
Loss on retirement and sale of equipment 17 15
Changes in assets and liabilities:
Decrease in prepaid and other current assets 19 970
Increase in receivables (182) (370)
Decrease (increase) in parts inventories (21) 143
Decrease (increase) in work-in-process on medical interiors (110) 23
Increase (decrease) in accounts payable, accrued restructuring expenses
and other accrued liabilities (17) 46
Increase (decrease) in deferred revenue and other liabilities (537) 497
Increase in accrued overhaul and parts replacement costs 112 96
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Net cash flow provided by operating activities 155 2,389
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Cash flows from investing activities:
Acquisition of equipment and leasehold improvements (1,013) (322)
Proceeds from retirement and sale of equipment 1 4,109
Net decrease (increase) in patent development costs and other assets (7) 85
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Net cash provided (used) by investing activities (1,019) 3,872
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Cash flows from financing activities:
Net payments under short-term notes payable (89) (833)
Proceeds from issuance of debt 2,500 --
Payments of long-term debt (345) (4,076)
Payments of capital lease obligations (156) (152)
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Net cash provided (used) by financing activities 1,910 (5,061)
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Increase in cash and cash equivalents 1,046 1,200
Cash and cash equivalents at beginning of period 2,699 696
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Cash and cash equivalents at end of period $ 3,745 1,896
======= =======
</TABLE>
See accompanying notes to financial statements.
4<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
financial statements and notes thereto for the fiscal year ended
December 31, 1995.
(2) INCOME 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 three months ended
March 31, 1996 consisted of the following (amounts in thousands
except share amounts):
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996
------------------
Shares Amount
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<S> <C> <C>
Balance at January 1, 1996 8,103,502 $ 19,062
Issuance of common shares for
options exercised and services rendered 12,424 26
Net income -- 144
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Balance at March 31, 1996 8,115,926 $ 19,232
========= ========
</TABLE>
As of March 31, 1996 the Company's total accumulated deficit was
$30,919,000. Of that amount, $20,467,000 relates to Cell
Technology, a predecessor company, which was involved in the
research and development of a biological response modifier.
5<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported net income of $144,000 for the three months ended
March 31, 1996 compared to net income of $253,000 for the quarter ended
March 31, 1995. The decrease in net income from the first quarter of
1995 to the first quarter of 1996 resulted primarily from the inclusion
of $376,000 of revenue net of direct costs from the short-term lease of
one of the Company's aircraft in the three months ended March 31, 1995.
Flight revenue decreased $248,000, or 3.8%, from $6,596,000 for the
three months ended March 31, 1995, to $6,348,000 for the three months
ended March 31, 1996. In 1995 the Company recognized revenue of
$460,000 from the short-term lease of one aircraft but had no similar
lease contracts in 1996. This decrease was partially offset by an
increase in flight hours from 2,800 to 3,000 at the Company's hospital
bases. In addition, most of the Company's contracts with hospital
clients are subject to annual increases based on changes in the Consumer
Price Index (CPI). Flight center costs remained basically unchanged for
the three months ended March 31, 1996, compared to 1995 primarily
because the number of hospital clients served did not change from 1995
to 1996. Flight center costs consist of pilot and mechanic salaries and
benefits, training, and miscellaneous costs and generally vary with the
number of hospital contracts.
Sales of medical interiors and products increased $124,000, or 9.7%, for
the three months ended March 31, 1996, in comparison to the comparable
period in 1995. In the first quarter of 1996 the Company recognized
revenue of $1,009,000 from the design of a medical interior for a
Lockheed L-1011 aircraft and $309,000 primarily from the design and
installation of an interior for an MD900 Explorer helicopter. The
revenue recorded in the comparable quarter in 1995 consisted primarily
of $520,000 for the sale of passenger oxygen systems and $480,000 for
the sale of an interior for a Bell 412 helicopter. The cost of medical
interiors increased 16.0% for the three months ended March 31, 1996 as
compared to the previous year, reflecting the increase in the value of
the products designed and manufactured in the current year. In
addition, the cost of medical interiors for 1996 included $321,000 of
nonrecurring modular medical interior development costs.
The Company recognized $150,000 in international franchise revenue
during the quarter ended March 31, 1996. This payment is the second
installment of a 10-year, $2,250,000 franchise agreement signed in
February 1995 with a Brazilian company. Under the exclusive franchise
agreement, the Brazilian company purchased the right to use the
trademarks and expertise of the Company in providing air medical
services in Brazil. The franchise commenced air medical operations in
January 1996.
Aircraft operating expenses increased 5.4% for the three months ended
March 31, 1996, in comparison to the three months ended March 31, 1995.
The increase is primarily due to a 7.5% increase in hull and liability
insurance for the fleet in 1996, as well as the addition of two fixed
wing aircraft to the Company's insurance policy subsequent to March 31,
1995. 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 18.9% for the three months ended
March 31, 1996 as compared to 1995. A previously leased aircraft, which
accounted for lease expense of $122,000 in the first quarter of 1995,
was purchased by one of the Company's hospital customers subsequent to
March 31, 1995. This decrease was offset in part by the cost to rent a
backup helicopter during the refurbishment of one of the Company's
aircraft.
Depreciation and amortization expense increased 7.3% for the three
months ended March 31, 1996. The increase is primarily the result of
the addition of approximately $1,050,000 of equipment to the Company's
rotable equipment inventory since March 31, 1995.
6<PAGE>
General and administrative expenses increased by 0.6% during the quarter
ended March 31, 1996, compared to the quarter ended March 31, 1995. The
level of staffing in and the types of activities pursued by the
administrative departments of the Company are basically unchanged from
the previous year.
Interest expense decreased 29.2% in the first quarter of 1996 as
compared to the same quarter in the previous year. In March 1995 the
Company sold one of its aircraft and retired the related note. In
addition, in the previous year the Company financed its aircraft hull
and liability insurance premium through a note payable but chose not to
finance the new premium beginning in July 1995. The elimination of
these two notes caused the decrease in interest expense for the quarter.
FINANCIAL CONDITION
Cash and cash equivalents increased $1,046,000 from $2,699,000 at
December 31, 1995, to $3,745,000 as of March 31, 1996. The Company had
a working capital deficit of $638,000 as of December 31, 1995, but net
working capital of $806,000 as of March 31, 1996. The increase in cash
and cash equivalents and the improvement in the working capital position
in the three months ended March 31, 1996, is primarily due to proceeds
of $2,500,000 received from a note payable signed in March 1996 and to
the positive cash flow generated by the Company's two operating
divisions.
In the second quarter of 1996 the Company expects to complete the design
of a medical interior for a Lockheed L-1011 aircraft and the design and
installation of an interior for an MD900 Explorer aircraft. During the
second and third quarters of 1996 the Company has contractual
commitments to install a medical interior in a Bell 412 helicopter.
Remaining revenue from these three projects is expected to total
approximately $850,000. The Company has renewed contracts with three of
its hospital clients in the first quarter of 1996; two of the new
agreements provided for an upgrade in the type of aircraft servicing the
contract. Five other agreements are due for renewal in 1996 and the
Company also expects successful renewals for these contracts. Based on
the backlog of projects for the Products Division and the anticipated
contract renewals with hospital customers, the Company expects to
generate sufficient cash flow to meet its operational needs.
7<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
8<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: May 8 , 1996 By Aaron D. Todd
----------- --------------------------------------
Aaron D. Todd
On behalf of the Company, and as
Principal Financial and Accounting
Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S INTERIM UNAUDITED FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3745
<SECURITIES> 0
<RECEIVABLES> 1683
<ALLOWANCES> (4)
<INVENTORY> 1525
<CURRENT-ASSETS> 7906
<PP&E> 39543
<DEPRECIATION> (7790)
<TOTAL-ASSETS> 44224
<CURRENT-LIABILITIES> 7100
<BONDS> 0
<COMMON> 485
0
0
<OTHER-SE> 49666
<TOTAL-LIABILITY-AND-EQUITY> 19232
<SALES> 1405
<TOTAL-REVENUES> 7886
<CGS> 1261
<TOTAL-COSTS> 7518
<OTHER-EXPENSES> 1<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 225<F2>
<INCOME-PRETAX> 144
<INCOME-TAX> 0
<INCOME-CONTINUING> 144
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144
<EPS-PRIMARY> .02
<EPS-DILUTED> .0
<FN>
<F1> Net non-operating income
<F2> Net of interest income of $86
</FN>
</TABLE>
