<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 September 30, 1996
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- ---------
Commission file number 0-16079
-----------------
AIR METHODS CORPORATION
- ---------------------------------------------------------------------
(Exact name of Registrant as Specified in Its Charter)
Delaware 84-0915893
- ---------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
7301 South Peoria, Englewood, Colorado 80112
- ------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (303) 792-7400
-------------------
- ----------------------------------------------------------------------
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
----------- -------------
The number of shares of Common Stock, par value $.06,
outstanding as of November 1, 1996 was 8,115,730.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1996 and
December 31, 1995 1
Statements of Operations for the three and
nine months ended September 30, 1996 and 1995 3
Statements of Cash Flows for the nine months
ended September 30, 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 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security
Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 9
SIGNATURES 10
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIR METHODS CORPORATION
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- --------------
(unaudited)
<S> <C> <C>
Assets
- ------
Current Assets:
Cash and cash equivalents $ 3,320 2,699
Current installment of notes receivable 382 356
Receivables:
Trade 863 881
Insurance proceeds 117 249
Other 207 367
-------- -------
1,187 1,497
-------- -------
Inventories 1,429 1,263
Work-in-progress on medical interiors 514 131
Prepaid expenses and other 584 611
-------- -------
Total current assets 7,416 6,557
-------- -------
Equipment and leasehold improvements:
Flight and ground support equipment 40,542 37,228
Furniture and office equipment 1,387 1,326
-------- -------
41,929 38,554
Less accumulated depreciation and amortization (9,132) (7,138)
-------- -------
Net property and equipment 32,797 31,416
-------- -------
Excess of cost over the fair value of net assets acquired,
net of accumulated amortization of $478 and $405 at
September 30, 1996 and December 31, 1995, respectively 1,949 2,022
Notes receivable, less current installments 1,555 1,843
Patent application costs and other assets, net of
accumulated amortization of $568 and $510 at
September 30, 1996 and December 31, 1995, respectively 821 748
-------- -------
$ 44,538 42,586
======== =======
</TABLE>
See accompanying notes to financial statements. (continued)
-1-
<PAGE>
AIR METHODS CORPORATION
BALANCE SHEETS, Continued
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
- -------------------------------------
Current Liabilities:
Notes payable $ 574 693
Current installments of long-term debt 1,965 1,435
Current installments of obligations under capital leases 798 751
Accounts payable 728 974
Accrued overhaul and parts replacement costs 2,353 1,407
Deferred revenue 553 1,052
Other accrued liabilities 1,179 883
-------- --------
Total current liabilities 8,150 7,195
Long-term debt, less current installments 8,449 6,671
Obligations under capital leases, less current installments 3,936 4,552
Accrued overhaul and parts replacement costs 3,855 4,329
Other liabilities 810 777
-------- ---------
Total liabilities 25,200 23,524
-------- ---------
Stockholders' equity:
Common stock, $.06 par value. Authorized 16,000,000 shares;
issued 8,141,336 and 8,103,502 shares at September 30,
1996 and December 31, 1995, respectively 486 485
Additional paid-in capital 49,710 49,640
Accumulated deficit (note 3) (30,858) (31,063)
-------- --------
Total stockholders' equity 19,338 19,062
-------- --------
$ 44,538 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)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Flight revenue $ 6,816 6,658 19,829 19,782
Sales of medical interiors and products 859 1,056 2,638 2,761
International franchise revenue -- 100 150 100
-------- ------ ------ ------
7,675 7,814 22,617 22,643
Operating expenses:
Flight centers 2,025 1,800 5,965 6,070
Aircraft operations 2,071 2,580 6,363 6,412
Aircraft rental 366 321 1,128 1,124
Medical interiors and parts 1,213 869 3,216 2,407
Depreciation and amortization 714 670 2,131 1,973
Loss on disposition of assets, net -- 5 18 16
General and administrative 904 1,032 2,894 2,970
-------- ------ ------- -------
7,293 7,277 21,715 20,972
-------- ------ ------- -------
Operating income 382 537 902 1,671
Other income (expense):
Interest expense (320) (326) (982) (1,078)
Interest and dividend income 94 69 282 206
Other, net 2 -- 3 54
-------- ------ ------- -------
Net income $ 158 280 205 853
======== ====== ======= =======
Income per common share $ .02 .03 .03 .11
======== ===== ======= =======
Weighted average number of
common shares outstanding 8,110,730 8,075,695 8,096,094 8,068,769
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE>
AIR METHODS CORPORATION
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------
1996 1995
-------- ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 205 853
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense 2,131 1,973
Vesting of common stock and options issued for
services and in connection with employee stock
compensation agreements, net of forfeitures 25 69
Loss on retirement and sale of equipment 18 16
Changes in assets and liabilities:
Decrease in prepaid and other current assets 27 1,257
Decrease (increase) in receivables 310 (502)
Decrease (increase) in inventories (166) 109
Decrease (increase) in work-in-progress on medical interiors (383) 193
Increase (decrease) in accounts payable and
other accrued liabilities 50 (194)
Increase (decrease) in deferred revenue and
other liabilities (466) 656
Increase in accrued overhaul and parts replacement costs 472 219
---------- --------
Net cash provided by operating activities 2,223 4,649
---------- --------
Cash flows from investing activities:
Acquisition of equipment and leasehold improvements (3,400) (430)
Proceeds from retirement and sale
of equipment and assets held for sale 1 4,109
Decrease in notes receivable, patent application
costs and other assets 131 490
-------- --------
Net cash provided (used) by investing activities (3,268) 4,169
-------- --------
Cash flows from financing activities:
Issuance of common stock for cash 46 --
Net payments under short-term notes payable (119) (1,497)
Proceeds from issuance of debt 3,540 --
Payments of long-term debt (1,232) (4,597)
Payments of capital lease obligations (569) (556)
-------- --------
Net cash provided (used) by financing activities 1,666 (6,650)
-------- --------
Increase in cash and cash equivalents 621 2,168
Cash and cash equivalents at beginning of period 2,699 696
-------- --------
Cash and cash equivalents at end of period $ 3,320 2,864
======== ========
</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 consolidated financial statements and notes
thereto for the 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 nine months ended
September 30, 1996 consisted of the following (amounts in
thousands except share amounts):
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1996
------------------
Shares Amount
------ ------
<S> <C> <C>
Balances at January 1, 1996 8,103,502 $ 19,062
Issuance of common shares for
services rendered 12,424 25
Issuance of common shares for cash 25,410 46
Net income -- 205
--------- --------
Balances at September 30, 1996 8,141,336 $ 19,338
========= ========
</TABLE>
The Company's accumulated deficit as of September 30, 1996 included
$20,467,000 related 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 $158,000 and $205,000 for
the three and nine months ended September 30, 1996,
respectively, compared to net income of $280,000 and $853,000
for the comparable periods in 1995. The decrease in net
income is primarily attributable to developmental costs
associated with the Company's new modular medical interior.
The difference in net income between the quarters ended
September 30, 1996 and 1995, also reflects the recognition of
international franchise revenue in the third quarter of 1995;
in 1996 revenue from the same franchise was recognized in the
first quarter.
Flight revenue increased $158,000, or 2.4%, and $47,000, or
0.2%, for the three and nine months ended September 30, 1996,
respectively, in comparison to the same periods in the
previous year. The increase in the third quarter is due
almost entirely to annual increases in the majority of the
Company's hospital contracts based on changes in the Consumer
Price Index (CPI). The nine months ended September 30, 1995,
included $654,000 from the lease of two of the Company's
aircraft which were both sold in 1995. Without revenue earned
on these two leases, flight revenue would have increased 3.7%
in the nine months ended September 30, 1996. Total revenue
hours for the nine months ended September 30, 1996, remained
basically unchanged at 9,700 hours compared to 9,600 for the
same period in 1995; for the quarter ended September 30,
revenue hours increased 6% from 3,400 in 1995 to 3,600 in
1996.
Sales of medical interiors and products decreased $197,000, or
18.7%, and $123,000, or 4.5%, for the three and nine months
ended September 30, 1996, respectively, in comparison to 1995.
In the third quarter of 1996 the Company recognized revenue of
approximately $580,000 from the manufacture of a Bell 412
helicopter interior for an international customer and $200,000
from the design of medical interior systems for the U.S. Army
UH-60Q helicopter. The nine months ended September 30, 1996,
also included revenue from the design and installation of
medical interiors for a Lockheed L-1011 aircraft and two MD900
Explorer helicopters. The revenue recorded in the comparable
nine-month period in 1995 primarily related to the design of
the interior for the Lockheed L-1011, the sale of passenger
oxygen systems, and the sale of a medical interior for a Bell
206 helicopter to a Brazilian customer. The cost of medical
interiors increased 39.6% and 33.6% for the three and nine
months ended September 30, 1996, as compared to the previous
year. The increases reflect the Company's investment of over
$630,000 during the nine months ended September 30, 1996, in
the development of a lightweight, modular medical interior
adaptable to various types of aircraft. Projects completed
during the same period were priced to recover approximately
20% of the development costs. In addition, the nine months
ended September 30, 1996, included an investment of
approximately $200,000 in the design of the medical interior
systems for the UH-60Q.
The Company recognized $150,000 in international franchise
revenue during the nine months ended September 30, 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 first installment of the franchise agreement
was received in the third quarter of 1995.
-6- <PAGE>
Flight center costs increased 12.5% for the third quarter of
1996 but decreased 1.7% for the nine months ended September
30, 1996. In both 1995 and 1996 the Company realized a
decrease in workers compensation insurance premiums due to the
low level of claims filed for the policy years; the reduction
in premiums was recognized in the third quarter of 1995 but in
the second quarter of 1996. The effective date of the
reduction was dependent upon the completion of a review of
claim activity by the insurance carrier. Flight center costs
consist primarily of pilot and mechanic salaries and fringe
benefits.
Aircraft operating expenses decreased 19.7% and 0.8% for the
three and nine months ended September 30, 1996, respectively,
in comparison to the three and nine months ended September 30,
1995. Due to a reduction in hull insurance premiums, the
Company's hull insurance expense decreased approximately
$120,000 in the third quarter of 1996 compared to 1995.
Repairs and maintenance costs also decreased 18.3% for the
quarter ended September 30, 1996. The quarter ended September
30, 1995, included the cost of refurbishing and upgrading the
interior for one of the Company's aircraft as well as the cost
of repainting two aircraft. 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. Each of these
variables has remained relatively constant between the nine
months ended September 30, 1996 and 1995.
Aircraft rental expense increased 14.0% and 0.4% for the three
and nine months ended September 30, 1996, respectively, as
compared to 1995. The quarter ended September 30, 1996,
included $44,000 for the short-term lease of an aircraft while
one of the Company's helicopters was undergoing engine
overhaul. Short-term leases for backup aircraft in 1996
totaling $163,000 were offset by the elimination of rental
expense on a previously leased aircraft purchased by one of
the Company's hospital customers during 1995.
Depreciation and amortization expense increased 6.6% and 8.0%
for the three and nine months ended September 30, 1996,
respectively. The increases are primarily the result of the
addition of approximately $280,000 of medical interior costs,
$800,000 of rotable and shop equipment, and $144,000 of office
equipment, including computer hardware and software, since
September 30, 1995.
General and administrative expenses decreased 12.4% and 2.6%
for the three and nine months ended September 30, 1996,
compared to the previous year, reflecting consistency in
staffing levels and types of services provided in 1995 and
1996. The decrease in the third quarter reflects a 40%
reduction in Directors' and Officers' liability insurance
premiums effective August 1, 1996. General and administrative
expense for the third quarter of 1995 also included $45,000 of
costs associated with the commencement of the Company's
Brazilian franchise.
FINANCIAL CONDITION
Cash and cash equivalents increased $621,000 from $2,699,000
at December 31, 1995, to $3,320,000 as of September 30, 1996;
the working capital deficit increased from $638,000 to
$734,000 over the same period. The increase in cash and cash
equivalents in the nine months ended September 30, 1996, is
primarily due to proceeds of $2.5 million received from a note
payable in 1996 and to positive cash flow generated by the
Company's operations. In the third quarter of 1996, the
Company also financed the acquisition of a Bell 407 helicopter
with a note payable over ten years at 9.84% interest.
-7- <PAGE>
The change in the working capital position reflects an
increase in the current portion of accrued overhaul and parts
replacement costs as several significant helicopter components
are scheduled for overhaul within the next twelve months.
The Company has successfully completed the renewal of
contracts with seven hospital customers in 1996 and expects
one more renewal in the fourth quarter. The Company has a
contract to install a medical interior in a Bell 206
helicopter for the Brazilian franchisee in the fourth quarter
and will also continue the design and manufacture of two
medical systems for the U.S. Army UH-60Q helicopter. The
Memorandum of Agreement between the Company and the prime
contractor for the UH-60Q project includes an option
exercisable by the U.S. Army for two more interiors in 1997
and 1998 and an additional 87 units with delivery dates from
1998 to 2002. The Company believes that cash flow generated
from operations will remain sufficient to meet its obligations
throughout fiscal 1996 without additional external financing.
In October 1996 the Company also entered into an agreement
with a financial institution establishing a $2 million line of
credit with a two-year term and an interest rate of prime plus
.25%. The line is secured by flight equipment.
-8- <PAGE>
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 1 of the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996.
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
-9-<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: November 13, 1996 By:\s\ Aaron D. Todd
----------------------------------------
On behalf of the Company, and as
Principal Financial and Accounting
Officer
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S INTERIM UNAUDITED FINANCIAL STATEMENTS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3320
<SECURITIES> 0
<RECEIVABLES> 1191
<ALLOWANCES> (4)
<INVENTORY> 1943
<CURRENT-ASSETS> 7416
<PP&E> 41929
<DEPRECIATION> (9132)
<TOTAL-ASSETS> 44538
<CURRENT-LIABILITIES> 8150
<BONDS> 0
0
0
<COMMON> 486
<OTHER-SE> 49710
<TOTAL-LIABILITY-AND-EQUITY> 44538
<SALES> 2638
<TOTAL-REVENUES> 22617
<CGS> 3216
<TOTAL-COSTS> 21715
<OTHER-EXPENSES> 3<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 700<F2>
<INCOME-PRETAX> 205
<INCOME-TAX> 0
<INCOME-CONTINUING> 205
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 205
<EPS-PRIMARY> .03
<EPS-DILUTED> .0
<FN>
<F1>Net non-operating income
<F2>Net of interest income of $282
</FN>
