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, 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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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
----- -----
The number of shares of Common Stock, par value $.06,
outstanding as of May 11, 1995 was 8,072,976.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1995 and
December 31, 1994 1
Consolidated Statements of Operations for the
three months ended March 31, 1995 and 1994 3
Consolidated Statements of Cash Flows for the
three months ended March 31, 1995 and 1994 4
Notes to Consolidated 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 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
March 31, December 31,
1995 1994
------------ ------------
Assets (unaudited) (unaudited)
------
Current Assets:
Cash and cash equivalents $ 1,896 696
Short-term investments -- --
Current installment of notes receivable 332 324
Receivables:
Trade 1,183 900
Insurance proceeds 65 49
Employees and other 174 65
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1,422 1,014
------- -------
Inventories 1,273 1,522
Work-in-progress on medical interiors 287 240
Assets held for sale 14 4,529
Prepaid expenses and other 933 1,511
------- -------
Total current assets 6,157 9,836
------- -------
Equipment and leasehold improvements:
Flight and ground support equipment 37,479 36,900
Furniture and office equipment 891 1,161
------- -------
38,370 38,061
------- -------
Less accumulated depreciation and amortization (5,276) (4,667)
------- -------
Net property and equipment 33,094 33,394
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Excess of cost over the fair value of net assets acquired,
net of accumulated amortization of $357 and $308 at March 31,
1995 and December 31, 1994, respectively 2,095 2,119
Notes receivable, less current installments 2,111 2,197
Patent application costs and other assets, net of
accumulated amortization of $444 and $424 at
March 31, 1995 and December 31, 1994, respectively 1,246 1,267
------- -------
$44,703 48,813
======= =======
(Continued)
See accompanying notes to consolidated financial statements.
1
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
March 31, December 31,
1995 1994
------------ ------------
Liabilities and Stockholders' Equity (unaudited) (unaudited)
------------------------------------
Current Liabilities:
Notes Payable $ 1,445 2,278
Current installments of long-term debt 1,075 4,870
Current installments of obligations under capital leases 725 722
Accounts payable 1,099 746
Accrued overhaul and parts replacement costs 1,058 804
Deferred revenue 519 10
Accrued restructuring expenses and
other accrued liabilities 1,991 2,298
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Total current liabilities 7,912 11,728
-------- --------
Long-term debt, less current installments 7,287 7,569
Obligations under capital leases, less current installments 5,147 5,302
Accrued overhaul and parts replacement costs 4,401 4,559
Other liabilities 933 945
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Total liabilities 25,680 30,103
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Stockholders' equity:
Common stock, $.06 par value. Authorized 16,000,000 shares;
issued 8,098,582 and 8,051,765 shares at March 31, 1995
and December 31, 1994, respectively 484 481
Additional paid-in capital 49,630 49,572
Accumulated deficit (note 3) (31,091) (31,343)
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Total Stockholders' equity 19,023 18,710
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$ 44,703 48,813
======== ========
See accompanying notes to consolidated financial statements.
2
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Ended
----------------------------
March 31, March 31,
(unaudited) (unaudited)
1995 1994
------------ ------------
Revenue:
Flight revenue 6,596 $ 6,507
Sales of medical interiors and products 1,281 497
Gain (loss) on disposition of assets (15) 25
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7,862 7,029
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Operating expenses:
Flight centers 2,131 2,296
Aircraft operations 1,945 2,222
Aircraft rental 481 851
Medical interiors and parts 1,087 347
Depreciation and amortization 656 584
General and administrative 991 1,737
Restructuring and other non-recurring expenses -- 2,635
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7,291 10,672
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Operating income (loss) 571 (3,643)
Other income (expense):
Interest expense (439) (322)
Interest and dividend income 66 68
Other, net 55 (5)
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Net income (loss) 253 $(3,902)
======= =======
Income (loss) per common share $ .03 $ (.53)
======= =======
Weighted average number of
common shares outstanding 8,048,233 7,309,973
========= ==========
See accompanying notes to consolidated financial statements.
3
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
Three Months Ended March 31,
----------------------------
1995 1994
------------ ------------
(unaudited) (unaudited)
Cash flow from operating activities:
Net income (loss) 253 $ (3,902)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense 656 584
Vesting of common stock and options issued for services and in connection
with employee stock compensation agreements, net of forfeitures 60 (295)
Gain on retirement and sale of equipment 15 (206)
Loss (Gain) on extinguishment of debt -- 181
Provision for restructuring and non-recurring expenses 2,332
Changes in assets and liabilities:
Decrease (Increase) in prepaid and other current assets 970 (1,090)
Decrease (Increase) in receivables (370) 302
Decrease (Increase) in parts inventories 143 (190)
Decrease in work-in-process on medical interiors 23 109
Increase in accounts payable, accrued expenses
and accrued restructuring expenses 46 1,144
Increase in deferred revenue and other liabilities 497 164
Increase in accrued overhaul and parts replacement costs 96 267
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Net cash flow provided (used) by operating activities 2,389 (600)
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Cash flows from investing activities:
Acquisition of equipment and leasehold improvements (322) (1,751)
Proceeds from retirement and sale of equipment 4,109 351
Net decrease (increase) in patent development costs and other assets 85 (143)
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Net cash provided (used) by investing activities 3,872 (1,543)
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Cash flows from financing activities:
Issuance of common stock and warrants for cash -- 6,058
Net payments under short-term notes payable (833) (1,827)
Payments for syndication and solicitation costs -- (152)
Proceeds from issuance of debt -- 600
Payments of long-term debt (4,076) (288)
Payments of capital lease obligations (152) (1,253)
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Net cash provided (used) by financing activities (5,061) 3,138
-------- --------
Increase in cash and cash equivalents 1,200 995
Cash and cash equivalents at beginning of period 696 2,154
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Cash and cash equivalents at end of period 1,896 $ 3,149
======== ========
See accompanying notes to consolidated financial statements.
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to
present fairly the consolidated financial statements for the
respective periods. Interim results are not necessarily
indicative of results for a full year. The consolidated
financial statements should be read in conjunction with the
Company's audited consolidated financial statements and
notes thereto for the fiscal year ended June 30, 1994.
(2) GAIN (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 three months
ended March 31, 1995 consisted of the following (amounts in
thousands except share amounts):
Three Months Ended
March 31, 1995
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Shares Amount
--------- --------
Balance at January 1, 1995 8,051,765 $18,710
Issuance of common shares for
options exercised and services rendered 46,817 63
Amortization of deferred compensation expense -- (3)
Net loss -- 253
Balance at March 31, 1995 8,098,582 $19,023
========= =======
As of March 31, 1995 the Company's total accumulated deficit was
$31,091,000. 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
(4) CHANGE IN FISCAL YEAR END
On March 29, 1995, the Company announced that it would
change its fiscal year end from June 30 to December 31.
Comparative periods on this quarterly statement have been
modified to be consistent with the Company's new fiscal
year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported a net income of $253,000 for the three
months ended March 31, 1995, as compared to a loss of
$3,902,000 for the three months ended March 31, 1994. The
results for the quarter ended March 1994 included a
restructuring charge of $2,635,000. Without this
restructuring charge, the Company would have reported a net
loss of $1,267,000. The significant improvement in
operating results of the current quarter can be attributed
primarily to a $746,000 reduction of general and
administrative expenses, the elimination of three
unprofitable airplane contracts, improved performance in the
Company's Products Division, renegotiation of the Company's
least profitable air medical service contracts, and income
received from the short-term sublease of one of its
aircraft.
Sales of medical interiors increased by 157.7% for the three
months ended March 31, 1995, in comparison to the three
months ended March 31, 1994 and increased by 322.8% over
revenues for period ended December 31, 1994. This increase
is due primarily to revenue generated by the sale of
passenger oxygen systems, the sale of a medical interior to
an outside customer, and the refurbishment of an interior
for an existing customer. The cost of medical interiors
also increased by 213.2% and 321.3% over the quarters ended
March 31, 1994 and December 31, 1994, respectively, due to
increases in manufactured products sales.
Flight revenue increased 1.4% for the three months ended
March 31, 1995, compared to the quarter ended March 31,
1994. Revenue received from the sublease of one of the
Company's aircraft, which was subsequently sold in the
quarter, was largely offset by the termination of the
Company's air charter operations and three airplane medical
contracts during the quarter ended September 1994. Charter
operations and the discontinued airplane medical contracts
contributed approximately $571,000 of the total flight
revenue in the quarter ended March 1994. Flight center
expenses, which include pilot and mechanic salaries,
benefits, and training, decreased by 7.2% in the first
quarter of fiscal 1995 related to the decrease in airplane
medical contracts. These expenses generally vary with the
number of customer bases and, to a lesser degree, with the
number of aircraft operated by the Company.
6
Aircraft operating expenses decreased by 12.4% for the
quarter ended March 31, 1995, compared to the quarter ended
March 31, 1994, primarily because of the discontinuation of
unprofitable airplane medical contracts. 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 by the
fleet.
Depreciation and amortization expense also fluctuates with
the size and value of the Company's fleet, as reflected by
the 12.3% increase in the first quarter of fiscal 1995 as
compared to fiscal 1994. The Company has increased its
depreciable asset base by $6.9 million since March 31, 1994,
through the acquisition of additional equipment and the
manufacture and installation of additional medical interiors
to service existing hospital contracts. The primary change
in asset base resulted from placing a medical interior into
service on one of the Company's aircraft in May 1994.
Aircraft rental expense decreased by 43.5% for the quarter
ended March 31, 1995 compared to the same period in fiscal
1994. Subsequent to March 31, 1994, the Company eliminated
four leased aircraft from its fleet. A fifth previously
leased aircraft was purchased by one of the Company's
hospital customers during the quarter ended March 31, 1995
and is still operated by the Company.
The 42.9% decrease in general and administrative expenses
reflects the effects of the Company's restructuring plan
which was implemented in fiscal 1994. The restructuring
plan included a reduction in the administrative work force
and a decreased reliance on outside contractors, resulting
in a decline in administrative expense of approximately
$191,000 and $126,000, respectively, compared to the quarter
ended March 1995. In addition, the Company's Board of
Directors has met quarterly in the current year as compared
to monthly in previous years, resulting in a decrease of
$110,000 in costs for the quarter ended March 31, 1995.
Interest and dividend income remained constant in the first
quarter of fiscal 1995 compared to the same period in the
prior year and in both periods consists primarily of
interest earned on two promissory notes held by the Company.
The income reflected in Other net income includes a write-
off of a $53,000 liability carried over from the recently
discontinued operations of Golden Eagle Charters, Inc.
following the Company's disposition of Golden Eagle.
FINANCIAL CONDITION
The Company had cash and cash equivalents of $1,896,000 and
a working capital deficit of $1,755,000 as of March 31,
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 in the
7
first quarter of fiscal 1995 is primarily due to the sale of
one of the Company's aircraft which generated approximately
$700,000 in cash to the Company after retirement of the
related debt and to incremental cash generated by the
Company's two operating divisions during the first quarter.
The quarters ending June 30 and September 30 have
historically been the most profitable for the Air Medical
Services Division, as flight revenues increase in the summer
and fall and as operating costs per hour decrease with
higher utilization and lower scheduled maintenance. The
Company's Products Division is also currently negotiating a
contract to provide design and installation services on a
medical interior for a Lockheed L-1011. If the Company
succeeds in concluding favorable negotiations on this
contract, increases are expected in both cash flow and
operating income for the Company. Should negotiations be
unsuccessful, the Company believes that additional
downsizing of the Products Division is possible and that
sufficient cash resources are available from existing
business to carry on normal operations without additional
financing. In addition, the Company has four unencumbered
aircraft valued at approximately $7,400,000 which could be
used to obtain additional financing, if needed.
8
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
The 1994 Annual Meeting of Stockholders was held on
February 9, 1995. At the meeting, Messrs. Donald R. Segner and
George W. Belsey were elected to Class 1 directorships. Two
additional matters were brought before stockholders:
Proposal II, amending the Company's Employee Stock Option Plan to
provide the Board of Directors greater flexibility in
establishing post-employment expiration dates of stock options;
and Proposal III, permitting the Company to issue shares of its
Common Stock in partial payment of its severance obligation to
Marilyn J. Pauley, a former executive officer of the Company.
Voting results were as follows:
SCHEDULE OF VOTES CAST FOR EACH DIRECTOR
----------------------------------------
Total Vote For Total Vote Withheld
Each Director From Each Director
-------------- -------------------
Donald R. Segner 6,958,379 151,450
George W. Belsey 6,997,760 112,069
Broker
Proposal II For Against Abstain Non-Votes
(Employee Stock --- ------- ------- ---------
Option Plan) 5,978,998 372,944 43,142 714,745
Broker
Proposal III For Against Abstain Non-Votes
(Stock to Marilyn J. --- ------- ------- ---------
Pauley) 5,979,892 356,613 58,879 714,445
9
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation/1/
3.2 Amendments to Certificate of Incorporation/2/
3.3 Bylaws, as amended/3/
4.1 Air Methods Corporation Employee Stock Option Plan, as
amended
27.1 Financial Data Schedule
____________________
/1/ Filed as an exhibit to the Company's Registration Statement
on Form S-1 (Registration No. 33-15007), as declared
effective on August 27, 1987, and incorporated herein by
reference.
/2/ Filed as an exhibit to the Company's Registration Statement
on Form 10-K for the fiscal year ended June 30, 1992, and
incorporated herein by reference.
/3/ Filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1994, and
incorporated herein by reference.
(b) Reports on Form 8-K
(1) Current Report on Form 8-K, dated April 5, 1995
and filed with the Securities and Exchange
Commission on April 7, 1995, reporting the change
in the Company's fiscal year.
10
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 22, 1995 By GEORGE W. BELSEY
---------------------------------
On behalf of the Company, and as
Principal Financial and Accounting
Officer
11