AIR METHODS CORP - 10-Q Quarterly Report

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, 2003


o		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 Incorporation or Organization)		(IRS Employer 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 o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

The number of shares of Common Stock, par value $.06, outstanding as of October 24, 2003, was 9,602,594.

TABLE OF CONTENTS


PART I: FINANCIAL INFORMATION
	Item 1. Consolidated Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		Notes to Unaudited Consolidated Financial Statements
	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4. Controls and Procedures
PART II: OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes in Securities
	Item 3. Defaults upon Senior Securities
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Exhibit Index
EX-10.1 Employment Agreement - Aaron D. Todd
EX-10.2 Employment Agreement - David L. Dolstein
EX-10.3 Employment Agreement - Neil M. Hughes
EX-10.4 Consulting Agreement - George W. Belsey
EX-10.5 Employment Agreement - Trent J. Carman
EX-10.6 Employment Agreement - Sharon J. Keck
EX-10.7 4th Amend./Waiver to Sec. Purchase Agmt.
EX-31.1 Certification of CEO - Section 302
EX-31.2 Certification of CFO - Section 302
EX-32 Certification Pursuant to Section 906

TABLE OF CONTENTS

PART I.

FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements

Consolidated Balance Sheets – September 30, 2003 and December 31, 2002

Consolidated Statements of Operations for the three and nine months ended September 30, 2003 and 2002

Consolidated Statements of Cash Flows for the nine months ended September 30, 2003 and 2002

Notes to Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

Item 2.

Changes in Securities

Item 3.

Defaults upon Senior Securities

Item 4.

Submission of Matters to a Vote of Security Holders

Item 5.

Other Information

Item 6.

Exhibits and Reports on Form 8-K

SIGNATURES

PART I: FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Air Methods Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share amounts)
(unaudited)


				September 30,			December 31,
				2003			2002

Assets
Current assets:
	Cash and cash equivalents			$	3,182			1,410
	Current installments of notes receivable				70			45
	Receivables:
		Trade			72,925			54,814
		Less allowance for doubtful accounts			(17,805	)		(16,996	)

					55,120			37,818
		Insurance proceeds			532			256
		Other			2,439			4,243

			Total receivables		58,091			42,317

	Inventories				9,471			12,003
	Work-in-process on medical interiors and products contracts				111			203
	Assets held for sale				2,138			3,242
	Costs and estimated earnings in excess of billings on uncompleted contracts				1,043			703
	Deferred tax asset				—			1,684
	Prepaid expenses and other				1,836			1,921

			Total current assets		75,942			63,528

Equipment and leasehold improvements:
	Land				190			190
	Flight and ground support equipment				147,791			145,715
	Furniture and office equipment				9,458			8,951

					157,439			154,856
	Less accumulated depreciation and amortization				(44,446	)		(36,551	)

			Net equipment and leasehold improvements		112,993			118,305

Goodwill					5,646			4,291
Notes receivable, less current installments					263			124
Other assets, net of accumulated amortization of $1,185 and $720 at September 30, 2003 and December 31, 2002, respectively					9,189			10,148

			Total assets	$	204,033			196,396

(Continued)

See accompanying notes to consolidated financial statements.

Air Methods Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS, Continued
(Amounts in thousands, except share and per share amounts)
(unaudited)


			September 30,			December 31,
			2003			2002

Liabilities and Stockholders’ Equity
Current liabilities:
	Notes payable		$	1,483			2,604
	Current installments of long-term debt			6,836			5,604
	Current installments of obligations under capital leases			759			737
	Accounts payable			2,888			4,846
	Accrued overhaul and parts replacement costs			10,109			8,657
	Deferred revenue			2,107			1,258
	Billings in excess of costs and estimated earnings on uncompleted contracts			189			530
	Accrued wages and compensated absences			4,124			5,417
	Deferred income taxes			2,527			—
	Other accrued liabilities			6,676			5,300

		Total current liabilities		37,698			34,953
Long-term debt, less current installments				80,526			77,247
Obligations under capital leases, less current installments				2,553			3,150
Accrued overhaul and parts replacement costs				28,493			25,871
Deferred income taxes				1,326			3,450
Other liabilities				3,265			5,507

		Total liabilities		153,861			150,178

Stockholders’ equity (note 3):
	Preferred stock, $1 par value. Authorized 5,000,000 shares, none issued			—			—
	Common stock, $.06 par value. Authorized 16,000,000 shares; issued 9,637,109 and 9,488,679 shares at September 30, 2003 and December 31, 2002, respectively			578			569
	Additional paid-in capital			55,590			55,127
	Accumulated deficit			(5,994	)		(9,477	)
	Treasury stock at par, 34,861 and 15,700 common shares at September 30, 2003 and December 31, 2002, respectively			(2	)		(1	)

		Total stockholders’ equity		50,172			46,218

		Total liabilities and stockholders’ equity	$	204,033			196,396

See accompanying notes to consolidated financial statements.

Air Methods Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share amounts)
(unaudited)


			Three Months Ended						Nine Months Ended
			September 30,						September 30,

			2003			2002			2003			2002

Revenue:
	Flight revenue		$	65,023			26,577			171,381			76,892
	Sales of medical interiors and products			1,702			1,775			4,614			5,002
	Parts and maintenance sales and services			234			556			726			1,093
	Gain on disposition of assets, net			18			—			—			—

				66,977			28,908			176,721			82,987

Operating expenses:
	Flight centers			22,844			9,132			64,241			25,586
	Aircraft operations			14,475			6,780			41,759			18,931
	Aircraft rental			3,251			1,294			9,111			3,652
	Medical interiors and products sold			1,070			1,267			3,573			3,444
	Cost of parts and maintenance sales and services			251			512			742			1,005
	Depreciation and amortization			2,905			1,436			8,461			4,221
	Bad debt expense			10,158			3,865			22,060			10,588
	Loss on disposition of assets, net			—			65			8			51
	General and administrative			5,444			2,609			15,668			7,685

				60,398			26,960			165,623			75,163

		Operating income		6,579			1,948			11,098			7,824
Other income (expense):
	Interest expense			(2,218	)		(425	)		(6,152	)		(1,287	)
	Interest income			80			10			86			26
	Other, net			(28	)		32			678			89

Income before income taxes				4,413			1,565			5,710			6,652
Income tax expense				1,721			610			2,227			2,593

		Net income	$	2,692			955			3,483			4,059

Basic income per common share			$	.28			.10			.36			.45

Diluted income per common share			$	.27			.10			.35			.44

Weighted average number of common shares outstanding – basic				9,577,916			9,440,442			9,554,040			9,090,782

Weighted average number of common shares outstanding – diluted				9,974,973			9,564,604			9,926,561			9,250,558

See accompanying notes to consolidated financial statements.

Air Methods Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)


					Nine Months Ended September 30,

					2003			2002

Cash flows from operating activities:
	Net income				$	3,483			4,059
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization expense				8,461			4,221
		Vesting of common stock options issued for services				75			40
		Bad debt expense				22,060			10,588
		Deferred income tax expense				2,087			2,313
		Loss on retirement and sale of equipment, net				8			51
		Changes in assets and liabilities:
			Decrease (increase) in prepaid expenses and other current assets			525			(449	)
			Increase in receivables			(36,764	)		(17,825	)
			Decrease (increase) in inventories			1,264			(738	)
			Decrease (increase) in work-in-process on medical interiors and costs in excess of billings			(281	)		142
			Decrease in accounts payable and other accrued liabilities			(3,521	)		(32	)
			Increase (decrease) in deferred revenue, billings in excess of costs, and other liabilities			(769	)		763
			Increase in accrued overhaul and parts replacement costs			3,583			2,193

				Net cash provided by operating activities		211			5,326

Cash flows from investing activities:
	Acquisition of equipment and leasehold improvements					(2,884	)		(2,782	)
	Proceeds from disposition and sale of equipment					10			818
	Decrease (increase) in notes receivable and other assets					620			(1,198	)

				Net cash used by investing activities		(2,254	)		(3,162	)

(Continued)

Air Methods Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(Amounts in thousands)
(unaudited)


		Nine Months Ended September 30,

		2003			2002

Cash flows from financing activities:
	Proceeds from issuance of common stock, net	$	562			3,035
	Payments for purchases of common stock		(166	)		(1,071	)
	Net borrowings under line of credit		6,261			—

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