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EX-32 - EXHIBIT 32 - AIR METHODS CORPex32.htm


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________

FORM 10-Q/A
 
(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, 2011
 
OR
 
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)   (I.R.S. 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

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
                                                                                                      
Large accelerated Filer o Accelerated Filer x
Non-accelerated Filer o    (Do not check if a smaller reporting company) Smaller reporting company o
 
Indicate by check mark whether the registrant is a shell company (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 28, 2011, was 12,708,185.
 


 
 

 
 
TABLE OF CONTENTS
 
PART I.
FINANCIAL INFORMATION
 
       
 
Item 1.
Consolidated Financial Statements (unaudited)
 
       
   
2
       
   
4
       
   
5
       
   
7
       
 
Item 2.
17
       
 
Item 3.
25
       
 
Item 4.
25
       
       
PART II.
OTHER INFORMATION
 
       
 
Item 1.
27
       
 
Item 1A.
27
       
 
Item 2.
27
       
 
Item 3.
27
       
 
Item 4.
27
       
 
Item 5.
27
       
 
Item 6.
27
       
 
28

 
EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A (Amendment No. 1) amends the Quarterly Report on Form 10-Q of Air Methods Corporation (the Company) for the quarterly period ended September 30, 2011, as originally filed with the Securities and Exchange Commission (SEC) on November 9, 2011 (Original Filing). This Form 10-Q/A amends the Original Filing to change the classification of most of the Company’s aircraft leases from operating leases to capital leases. Further explanation regarding such change is set forth in Note 2 to the consolidated financial statements contained in this Amendment No. 1. This Amendment No. 1 amends and restates the Original Filing in its entirety. Revisions to the Original Filing have been made to the following sections:
 
·
Item 1 – Financial Statements
·
Item 1A – Risk Factors
·
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
·
Item 4 – Controls and Procedures
 
In addition, the Company’s principal executive officer and principal financial officer have provided certifications in connection with this Amendment No. 1 (Exhibits 31.1, 31.2, and 32).

Except as described above, no other amendments have been made to the Original Filing. This Amendment continues to speak as of the date of the Original Filing, and the Company has not updated the disclosure contained herein to reflect events that have occurred since the date of the Original Filing. Notwithstanding the foregoing, the modifications made herein resulted from the guidance the Company received from the SEC after the date of the Original Filing concerning the appropriate GAAP interpretation of the maximum amount the Company could be required to pay as described in ASC 840-10-25-14, in the event of a non-performance-related default under the Company’s aircraft leases. Accordingly, this Amendment No. 1 should be read in conjunction with the Company’s other filings made with the SEC subsequent to the filing of the Original Filing, including any amendments to those filings.


PART I: FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Air Methods Corporation and Subsidiaries

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

   
September 30,
2011
   
December 31,
2010
 
   
(Restated)
   
(Restated)
 
Assets
           
             
Current assets:
           
Cash and cash equivalents
  $ 2,515       60,710  
Current installments of notes receivable
    4       4  
Receivables:
               
Trade, net
    179,462       132,329  
Refundable income taxes
    --       2,403  
Other
    2,050       3,510  
Total receivables
    181,512       138,242  
                 
Inventories, including work-in-process on medical interiors and products contracts
    37,039       26,820  
Assets held for sale
    322       2,442  
Costs and estimated earnings in excess of billings on uncompleted contracts
    1,161       160  
Prepaid expenses and other
    21,845       9,614  
                 
Total current assets
    244,398       237,992  
                 
Property and equipment:
               
Land
    251       251  
Flight and ground support equipment
    304,095       217,133  
Aircraft under capital leases (notes 2 and 4)
    407,969       382,171  
Aircraft rotable spare parts
    41,962       35,375  
Buildings and other equipment
    41,265       37,371  
      795,542       672,301  
Less accumulated depreciation and amortization
    (263,136 )     (227,558 )
Net property and equipment
    532,406       444,743  
                 
Goodwill (note 4)
    120,393       25,506  
Intangible assets, net of accumulated amortization of $4,191 and $2,716 at September 30, 2011 and December 31, 2010, respectively (notes 3 and 4)
    65,877       2,616  
Notes receivable, less current installments
    118       121  
Other assets
    23,180       12,132  
                 
Total assets
  $ 986,372       723,110  

 (Continued)
 
 
Air Methods Corporation and Subsidiaries
 
CONSOLIDATED BALANCE SHEETS, Continued
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
   
September 30,
2011
   
December 31,
2010
 
   
(Restated)
   
(Restated)
 
Liabilities and Stockholders' Equity
           
             
Current liabilities:
           
Notes payable
  $ 20,353       --  
Current installments of long-term debt
    16,888       14,871  
Current installments of obligations under capital leases (notes 2 and 4)
    49,034       42,327  
Accounts payable
    16,656       13,633  
Deferred revenue
    3,767       6,089  
Billings in excess of costs and estimated earnings on uncompleted contracts
    936       638  
Accrued wages and compensated absences
    11,489       13,941  
Due to third party payers
    5,590       4,628  
Deferred income taxes
    7,059       7,143  
Other accrued liabilities
    26,651       12,123  
                 
Total current liabilities
    158,423       115,393  
                 
Long-term debt, less current installments
    238,193       80,352  
Obligations under capital leases, less current installments (notes 2 and 4)
    239,357       232,464  
Deferred income taxes
    47,523       31,409  
Other liabilities
    29,669       30,063  
                 
Total liabilities
    713,165       489,681  
                 
Stockholders' equity (note 5):
               
Preferred stock, $1 par value.  Authorized 5,000,000 shares, none issued
    --       --  
Common stock, $.06 par value. Authorized 23,500,000 shares; issued 12,765,185 and 12,602,164 shares at September 30, 2011, and December 31, 2010, respectively; outstanding 12,708,185 and 12,600,998 shares at September 30, 2011, and December 31, 2010, respectively
    762       756  
Additional paid-in capital
    93,669       88,069  
Retained earnings
    178,776       144,604  
                 
Total stockholders' equity
    273,207       233,429  
                 
Total liabilities and stockholders’ equity
  $ 986,372       723,110  
 
See accompanying notes to unaudited consolidated financial statements.
 
 
Air Methods Corporation and Subsidiaries

(Amounts in thousands, except share and per share amounts)
(unaudited)
 
   
Three Months Ended
September 30,
   
Nine Months Ended
 September 30,
 
   
2011
   
2010
   
2011
   
2010
 
   
(Restated)
   
(Restated)
   
(Restated)
   
(Restated)
 
Revenue:
                       
Flight revenue, net
  $ 174,713       145,120       440,126       392,725  
Medical interiors and products revenue
    8,702       7,277       22,044       14,740  
Other
    1,757       1,537       5,069       4,153  
      185,172       153,934       467,239       411,618  
Operating expenses:
                               
Flight centers
    70,479       53,773       182,456       159,878  
Aircraft operations
    30,871       31,419       88,892       84,558  
Cost of medical interiors and products sold
    6,058       4,443       15,452       10,782  
Depreciation and amortization
    19,030       16,055       52,217       47,483  
Gain on disposition of assets, net
    (264 )     (157 )     (290 )     (498 )
General and administrative
    23,331       17,219       60,338       50,175  
      149,505       122,752       399,065       352,378  
                                 
Operating income
    35,667       31,182       68,174       59,240  
                                 
Other income (expense):
                               
Interest expense
    (5,383 )     (4,707 )     (14,204 )     (14,558 )
Other, net
    872       1,213       2,985       2,998  
                                 
Income before income taxes
    31,156       27,688       56,955       47,680  
                                 
Income tax expense
    (12,616 )     (9,579 )     (22,783 )     (17,456 )
                                 
Net income
  $ 18,540       18,109       34,172       30,224  
                                 
Basic income per common share (note 6)
  $ 1.46       1.45       2.70       2.42  
                                 
Diluted income per common share (note 6)
  $ 1.44       1.44       2.67       2.41  
                                 
Weighted average number of common shares outstanding – basic
    12,688,791       12,504,382       12,651,949       12,476,577  
                                 
Weighted average number of common shares outstanding – diluted
    12,837,530       12,583,414       12,806,716       12,556,788  
 
See accompanying notes to unaudited consolidated financial statements.
 
 
Air Methods Corporation and Subsidiaries

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

   
Nine Months Ended September 30,
 
   
2011
   
2010
 
   
(Restated)
   
(Restated)
 
Cash flows from operating activities:
           
Net income
  $ 34,172       30,224  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization expense
    52,217       47,483  
Deferred income tax expense
    9,076       772  
Stock-based compensation
    2,022       1,149  
Excess tax benefit from exercise of stock options
    (725 )     (383 )
Gain on disposition of assets, net
    (290 )     (498 )
Unrealized loss on derivative instrument
    305       343  
Changes in assets and liabilities, net of effects of acquisitions:
               
Increase in prepaid expenses and other current assets
    (13,922 )     (7,575 )
Increase in receivables
    (14,379 )     (16,343 )
Decrease (increase) in inventories
    (5,256 )     1,182  
Decrease (increase) in costs in excess of billings
    (1,001 )     5,289  
Increase (decrease) in accounts payable, other accrued liabilities, and other liabilities
    (6,381 )     10,883  
Decrease in deferred revenue and billings in excess of costs
    (1,534 )     (895 )
Net cash provided by operating activities
    54,304       71,631  
                 
Cash flows from investing activities:
               
Acquisition of OF Air Holdings Corporation (note 4)
    (201,728 )     --  
Acquisition of membership interest of United Rotorcraft Solutions, LLC (note 3)
    (1,554 )     --  
Acquisition of property and equipment
    (33,717 )     (27,173 )
Proceeds from disposition and sale of equipment and assets held for sale
    7,595       6,644  
Decrease in notes receivable and other assets
    40       574  
Net cash used in investing activities
    (229,364 )     (19,955 )

 (Continued)


Air Methods Corporation and Subsidiaries

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

   
Nine Months Ended September 30,
 
   
2011
   
2010
 
   
(Restated)
   
(Restated)
 
Cash flows from financing activities:
           
Proceeds from issuance of common stock, net
  $ 2,859       1,203  
Excess tax benefit from exercise of stock options
    725       383  
Proceeds from issuance of long-term debt
    200,000       6,188  
Payments for financing costs
    (1,788 )     (159 )
Payments of long-term debt and notes payable
    (40,626 )     (11,826 )
Payments of capital lease obligations
    (44,305 )     (39,941 )
Net cash provided (used) by financing activities
    116,865       (44,152 )
                 
Increase (decrease) in cash and cash equivalents
    (58,195 )     7,524  
                 
Cash and cash equivalents at beginning of period
    60,710       38,073  
                 
Cash and cash equivalents at end of period
  $ 2,515       45,597  
                 
Interest paid in cash during the period
  $ 13,321       14,348  
Income taxes paid in cash during the period
  $ 5,091       11,385  
 
Non-cash investing and financing activities:

In the nine months ended September 30, 2011, the Company entered into notes payable of $20,353 to finance the purchase of aircraft which were held in property and equipment pending permanent lease financing as of September 30, 2011, and entered into capital leases of $18,966 to finance the purchase of aircraft and other equipment.

In the nine months ended September 30, 2010, the Company settled notes payable of $4,510 in exchange for the aircraft securing the debt and entered into capital leases of $15,126 to finance the purchase of aircraft and other equipment. The Company also entered into notes payable of $10,322 to finance the purchase of aircraft which were held in property and equipment pending permanent lease financing as of September 30, 2010.
 
See accompanying notes to unaudited consolidated financial statements.
 
 
Air Methods Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(unaudited)

(1)           Basis of Presentation

 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and instructions to Form 10-Q and Regulation S-X. Accordingly, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the condensed consolidated financial statements for the respective periods. Interim results are not necessarily indicative of results for a full year. The condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2010, as restated.

 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company considers its critical accounting policies involving more significant judgments and estimates to be those related to revenue recognition, deferred income taxes, valuation of long-lived assets, and fair values of assets acquired and liabilities assumed in business combinations. Actual results could differ from those estimates.

(2)           Restatement – Accounting for Leases

The Company has restated most of its aircraft operating leases that should have been classified as capital leases based upon certain provisions included in the aircraft lease agreements. Specifically, the leases have certain default clauses, including material adverse change, cross-default provisions and other provisions which are not objectively determinable or do not represent pre-defined criteria at the inception of the lease. As a result, the maximum consideration the Company could be required to pay the lessor in the event of a default is included in the lease payments for lease classification purposes at the inception of the lease. For these leases, the maximum consideration usually approximates or exceeds the cost of the aircraft at the inception of the lease and, when included in minimum lease payments for purposes of applying ASC 840-10-25-1(d) (i.e., the 90% test), results in capital lease classification, in accordance with the guidance for default covenants related to non-performance as discussed in ASC 840-10-25-14. The Company has made an accounting policy election to exclude the maximum consideration it could be required to pay the lessor in the event of default from the calculation of the present value of the minimum lease payments in measuring the capital lease asset and related obligation, since there is no likely scenario whereby an aircraft lessor would require the Company to pay the full stipulated loss value in the event of a non-performance-related default, and, therefore, this maximum consideration has a remote probability of payment.

As a result of the restatement, the Company has recorded additional capital lease assets and related capital lease obligations on the consolidated balance sheets. The impact of deferred rent and unfavorable lease liability related to the acquisition of FSS Airholdings, LLC, (FSS) in 2007 was also reversed from other assets, other accrued liabilities, and other liabilities. Goodwill associated with the acquisition of FSS was revised to reflect capital lease classification and appropriate fair value measurement of FSS leases as of the acquisition date.  The Company also adjusted its deferred income tax liability to take into account the temporary differences created to reflect the capital lease obligations and assets for financial reporting purposes. Lease payments related to these aircraft are now recognized as principal reductions in the capital lease obligations and interest expense, rather than as aircraft rental expense. The consolidated statements of income also include depreciation on the capital lease assets over the terms of the respective leases. Rental expense related to the few remaining aircraft operating leases has now been combined into aircraft operations in the consolidated statements of income, due to immateriality. The restatement also impacted the classification of cash flows from operations, financing activities and investing activities and increased the non-cash investing and financing activities; however, there was no impact on the net increase or decrease in cash and cash equivalents reported in the consolidated statements of cash flows.
 
 
Air Methods Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(unaudited)

(2)           Restatement – Accounting for Leases, continued

The adjustment to net income for the three and nine months ended September 30, 2011 and 2010, is summarized below (amounts in thousands):

   
Three Months Ended
September 30,
   
Nine Months ended
September 30,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Net income, as previously reported
  $ 18,462       18,629       34,531       31,492  
Aircraft operations
    (1,117 )     (394 )     (1,699 )     (1,099 )
Aircraft rental
    12,612       11,820       36,245       35,834  
Depreciation and amortization
    (9,449 )     (9,674 )     (28,869 )     (29,369 )
Gain on disposition of assets, net
    192       10       192       241  
Interest expense
    (2,928 )     (3,249 )     (9,130 )     (10,013 )
Other income, net
    822       823       2,682       2,520  
Tax effect of restatement adjustment
    (54 )     144       220       618  
Net income, as restated
  $ 18,540       18,109       34,172       30,224  

 
The impact of the restatement on the consolidated financial statements is summarized below (amounts in thousands except per share amounts):

   
September 30, 2011
   
December 31, 2010
 
   
As
Previously
Reported
   
 
As Restated
   
As
Previously
Reported
   
 
As Restated
 
Consolidated Balance Sheets:
                       
Assets held for sale
  $ 22,769       322       2,523       2,442  
Total current assets
    266,845       244,398       238,073       237,992  
Flight and ground support equipment
    286,079       304,095       220,591       217,133  
Aircraft under capital leases
    28,422       407,969       --       382,171  
Total property and equipment
    397,979       795,542       293,588       672,301  
Accumulated depreciation and amortization
    (109,430 )     (263,136 )     (92,713 )     (227,558 )
Net property and equipment
    288,549       532,406       200,875       444,743  
Goodwill
    114,132       120,393       20,291       25,506  
Other assets
    23,606       23,180       12,703       12,132  
Total assets
    759,127       986,372       474,679       723,110  
Current installments of obligations under capital leases
    7,719       49,034       964       42,327  
Deferred income taxes
    6,436       7,059       7,143       7,143  
Other accrued liabilities
    26,440       26,651       12,145       12,123  
Total current liabilities
    116,274       158,423       74,052       115,393  
Obligations under capital leases, less current installments
    30,514       239,357       953       232,464  
Deferred income taxes
    59,470       47,523       42,392       31,409  
Other liabilities
    28,783       29,669       31,174       30,063  
Total liabilities
    473,234       713,165       228,923       489,681  
Retained earnings
    191,462       178,776       156,931       144,604  
Total stockholders' equity
    285,893       273,207       245,756       233,429  
Total liabilities and stockholders’ equity
    759,127       986,372       474,679       723,110  
 
 
Air Methods Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(unaudited)

(2)           Restatement – Accounting for Leases, continued

   
Three Months Ended
September 30, 2011
   
Three Months Ended
September 30, 2010
 
   
As
Previously
Reported
   
 
As Restated
   
As
Previously
Reported
   
 
As Restated
 
Consolidated Statements of Income:
                       
Aircraft operations
  $ 29,754       30,871       31,025       31,419  
Aircraft rental
    12,612       --       11,820       --  
Depreciation and amortization
    9,581       19,030       6,381       16,055  
Gain on disposition of assets, net
    (72 )     (264 )     (147 )     (157 )
Total operating expenses
    151,743       149,505       124,514       122,752  
Operating income
    33,429       35,667       29,420       31,182  
Interest expense
    (2,455 )     (5,383 )     (1,458 )     (4,707 )
Other, net
    50       872       390       1,213  
Income before income taxes
    31,024       31,156       28,352       27,688  
Income tax expense
    (12,562 )     (12,616 )     (9,723 )     (9,579 )
Net income
    18,462       18,540       18,629       18,109  
Basic income per common share
    1.45       1.46       1.49       1.45  
Diluted income per common share
    1.44       1.44       1.48       1.44  

   
Nine Months Ended
September 30, 2011
   
Nine Months Ended
 September 30, 2010
 
   
As
Previously
Reported
   
 
As Restated
   
As
Previously
Reported
   
 
As Restated
 
Consolidated Statements of Income:
                       
Aircraft operations
  $ 87,193       88,892       83,459       84,558  
Aircraft rental
    36,245       --       35,834       --  
Depreciation and amortization
    23,348       52,217       18,114       47,483  
Gain on disposition of assets, net
    (98 )     (290 )     (257 )     (498 )
Total operating expenses
    404,934       399,065       357,985       352,378  
Operating income
    62,305       68,174       53,633       59,240  
Interest expense
    (5,074 )     (14,204 )     (4,545 )     (14,558 )
Other, net
    303       2,985       478       2,998  
Income before income taxes
    57,534       56,955       49,566       47,680  
Income tax expense
    (23,003 )     (22,783 )     (18,074 )     (17,456 )
Net income
    34,531       34,172       31,492       30,224  
Basic income per common share
    2.73       2.70       2.52       2.42  
Diluted income per common share
    2.70       2.67       2.51       2.41  


Air Methods Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(unaudited)

(2)           Restatement – Accounting for Leases, continued

   
Nine Months Ended
September 30, 2011
   
Nine Months Ended
September 30, 2010
 
   
As
Previously
Reported
   
 
As Restated
   
As
Previously
Reported
   
 
As Restated
 
Consolidated Statements of Cash Flows:
                       
Net income
    34,531       34,172       31,492       30,224  
Depreciation and amortization expense
    23,348       52,217       18,114       47,483  
Deferred income tax expense
    9,507       9,076       1,390       772  
Gain on disposition of assets, net
    (98 )     (290 )     (257 )     (498 )
Increase (decrease) in accounts payable, other accrued liabilities, and other liabilities
    (9,078 )     (6,381 )     8,403       10,883  
Net cash provided by operating activities
    23,720       54,304       41,909       71,631  
Acquisition of property and equipment
    (44,600 )     (33,717 )     (36,762 )     (27,173 )
Decrease in notes receivable and other assets
    183       40       719       574  
Net cash used in investing activities
    (240,104 )     (229,364 )     (29,399 )     (19,955 )
Payments of capital lease obligations
    (2,981 )     (44,305 )     (775 )     (39,941 )
Net cash provided (used) by financing activities
    158,189       116,865       (4,986 )     (44,152 )
Increase (decrease) in cash and cash equivalents
    (58,195 )     (58,195 )     7,524       7,524  
Interest paid in cash during the period
    3,945       13,321       4,398       14,348  
Noncash investing and financing activities – new capital lease obligations
    359       18,966       273       15,126  

The cumulative effect of the restatement on retained earnings for all periods prior to January 1, 2010, was a decrease of $10,969,000.

Certain amounts in Notes 4, 5, and 9 have been restated to reflect the adjustments described above.

(3)           Acquisition of United Rotorcraft Solutions, LLC

On March 2, 2011, the Company used cash reserves to acquire 100% of the membership interest of United Rotorcraft Solutions, LLC (URS), a Texas limited liability company, for $1,554,000. The purchase agreement contains a provision whereby the sellers may receive additional consideration based on the profitability of URS during an earn-out period ending December 31, 2011. The Company does not expect that any additional payments will be due to the sellers, and, therefore, no liability has been accrued related to this earn-out provision.

URS is a full-service helicopter and fixed-wing completions center and maintenance repair operation. The acquisition is expected to expand Products Division’s capabilities and product lines and to provide additional capacity to perform completions and maintenance activities. The results of URS’s operations have been included with those of the Company since March 2, 2011.
 
 
Air Methods Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(unaudited)

(3)           Acquisition of United Rotorcraft Solutions, LLC, continued

During the second quarter, the Company completed its valuation of the URS customer list and, as a result, adjusted the purchase price allocation to reduce goodwill and increase the value assigned to the customer list. The current allocation of the purchase price is as follows (amounts in thousands):

Assets purchased:
     
Receivables
  $ 1,034  
Inventories, including work-in-process on medical interiors and products contracts
    325  
Equipment and other property
    526  
Customer list
    1,507  
Other
    183  
Total assets
    3,575  
         
Long-term debt
    (484 )
Other liabilities assumed
    (1,537 )
Total liabilities assumed
    (2,021 )
Purchase price
  $ 1,554  

 (4)
Acquisition of OF Air Holdings Corporation

On August 1, 2011, the Company acquired 100% of the outstanding common stock of OF Air Holdings Corporation and its subsidiaries, including Omniflight Helicopters, Inc. (together, Omniflight), for a cash purchase price of $201.7 million, subject to final determination of working capital, as defined in the merger agreement, as of the closing date. The Company has estimated the increase to the purchase price for the change in working capital to be $777,000 and has recorded the related liability as of September 30, 2011. The estimate is subject to review by the sellers during the fourth quarter of 2011, and payment of the additional amount is expected to be made prior to the end of the year. The purchase price was financed primarily through a term loan under the Company’s Amended Credit Facility.

Omniflight provides air medical transport services throughout the United States and provides these services under both the community-based and hospital-based service delivery models, utilizing a fleet of approximately 100 helicopters and fixed-wing aircraft. The acquisition is expected to further strengthen the Company’s position as the largest provider of air medical transport services in the U.S. and to result in certain operating efficiencies.

The Company is in the process of conducting counts of Omniflight’s aircraft spare parts inventory, reviewing related airworthiness documentation, verifying open repair orders with aircraft parts vendors, and confirming other liabilities relating to pre-acquisition events. In addition, the Company is analyzing the payer mix comprising Community-Based Services (CBS) receivables and obtaining historical collection data as of the acquisition date. Fair value and estimated useful lives of other intangible assets are based on preliminary estimates and are subject to review and finalization by the Company’s management. Other intangible assets are primarily attributed to CBS operating locations and are amortized to the CBS division on a straight-line basis over a sixteen-year life.
 
 
Air Methods Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(unaudited)

(4)
Acquisition of OF Air Holdings Corporation, continued

For the reasons described in the foregoing paragraph, the allocation of the purchase price is still subject to refinement. The initial allocation of the purchase price was as follows (amounts in thousands):

Assets purchased:
     
Receivables
  $ 28,673  
Aircraft
    33,500  
Goodwill
    94,887  
Amortizable intangible and other assets
    72,347  
Aircraft under capital leases
    29,405  
Equipment and other property
    5,614  
Spare parts inventories
    4,429  
Other
    2,073  
Total assets
    270,928  
         
Capital lease obligations assumed
    (38,938 )
Net deferred tax liabilities
    (6,953 )
Other liabilities assumed
    (22,532 )
Total liabilities assumed
    (68,423 )
Purchase price
  $ 202,505  

The results of Omniflight’s operations have been included with those of the Company since August 1, 2011. The unaudited pro forma revenue, net income, and income per common share for the nine months ended September 30, 2011 and 2010, assuming the acquisition occurred at the beginning of the periods presented, are as follows (amounts in thousands, except per share amounts):
 
   
Nine Months ended September 30,
 
   
2011
   
2010
 
   
(Restated)
   
(Restated)
 
Revenue
  $ 573,130       530,893  
Net income
  $ 41,012       29,974  
Basic income per common share
  $ 3.24       2.40  
Diluted income per common share
  $ 3.20       2.39  

(5)           Stockholders’ Equity
 
 
Changes in stockholders’ equity for the nine months ended September 30, 2011, consisted of the following (amounts in thousands except share amounts):
 
   
Shares
Outstanding
   
Amount
 
         
(Restated)
 
             
Balances at January 1, 2011
    12,600,998     $ 233,429  
Issuance of common shares for options exercised
    106,021       2,859  
Stock-based compensation
    1,166       2,022  
Tax benefit from exercise of stock options
    --       725  
Net income
    --       34,172  
Balances at September 30, 2011
    12,708,185     $ 273,207  
 
 
Air Methods Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(unaudited)

 (6)           Income per Share

 
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by all common shares outstanding during the period and dilutive potential common shares.

 
The reconciliation of basic to diluted weighted average common shares outstanding is as follows:

   
2011
   
2010
 
For quarter ended September 30:
           
Weighted average number of common shares outstanding – basic
    12,688,791       12,504,382  
Dilutive effect of:
               
Common stock options
    135,078       74,721  
Unvested restricted stock
    13,661       4,311  
Weighted average number of common shares outstanding – diluted
    12,837,530       12,583,414  
                 
For nine months ended September 30:
               
Weighted average number of common shares outstanding – basic
    12,651,949       12,476,577  
Dilutive effect of:
               
Common stock options
    148,304       76,243  
Unvested restricted stock
    6,463       3,968  
Weighted average number of common shares outstanding – diluted
    12,806,716       12,556,788  

 
Common stock options of 43,500 and 108,500 were not included in the diluted income per share calculation for the quarter and nine months ended September 30, 2010, respectively, because their effect would have been anti-dilutive.

(7)
New Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. Some amendments clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements and others change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The ASU is effective for periods beginning after December 15, 2011. The Company does not expect the implementation of ASU No. 2011-04 to have a material effect on its financial position or results of operations.

In July 2011, the FASB issued ASU No. 2011-07, Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities, requiring health care entities that recognize significant amounts of patient service revenue to present the provision for bad debts related to patient service revenue as a deduction from patient service revenue (net of contractual allowances and discounts) on their statement of operations. The ASU also requires enhanced disclosures about revenue recognition and bad debt assessment policies related to patient service revenue. The ASU is effective for periods beginning after December 15, 2011. The Company does not expect the implementation of ASU No. 2011-07 to have a material effect on its financial position or results of operations since it currently presents patient service revenue net of related provision for bad debts.
 
 
Air Methods Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(unaudited)

(7)
New Accounting Pronouncements, continued

In September 2011, the FASB issued ASU No. 2011-08, Testing for Goodwill Impairment, which allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under this ASU, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The ASU is effective for periods beginning after December 15, 2011. The Company does not expect the implementation of ASU No. 2011-08 to have a material effect on its financial position or results of operations.

(8)
Fair Value of Financial Instruments

 
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

 
Cash and cash equivalents, accounts receivable, notes receivable, notes payable, accounts payable, and accrued liabilities:

 
The carrying amounts approximate fair value because of the short maturity of these instruments.

 
Derivative instruments:

The Company endeavors to acquire jet fuel at the lowest possible cost and to reduce volatility in operating expenses through the use of short-term purchased call options. Financial derivative instruments covering fuel purchases are included in prepaid expenses and other current assets at fair value. Fair value is determined based on quoted prices in active markets for similar instruments. The fair value of all fuel derivative instruments included in prepaid expenses and other current assets was $281,000 at September 30, 2011 and $586,000 at December 31, 2010. The Company’s financial derivatives do not qualify for hedge accounting, and, therefore, realized and non-cash mark to market adjustments are included in aircraft operations expense in the Company’s statement of income. Aircraft operations expense included non-cash mark to market derivative losses of $528,000 and $305,000 for the quarter and nine months ended September 30, 2011, compared to non-cash mark to market losses of $26,000 and $343,000 for the quarter and nine months ended September 30, 2010. Cash settlements under the terms of the agreements totaled $307,000 and $884,000 in the quarter and nine months ended September 30, 2011, respectively. There were no cash settlements under the agreements in the quarter and nine months ended September 30, 2010.

 
Long-term debt:

 
The fair value of long-term debt is determined based on the present value of future contractual cash flows discounted at an interest rate that reflects the risks inherent in those cash flows. Based on the borrowing rates currently available to the Company for loans with similar terms and average maturities and on recent transactions, the fair value of long-term debt as of September 30, 2011, is estimated to be $256,098,000, compared to a carrying value of $255,081,000. The fair value of long-term debt as of December 31, 2010, was estimated to be $99,747,000, compared to a carrying value of $95,223,000.
 
 
Air Methods Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(unaudited)

(9)
Business Segment Information

 
Summarized financial information for the Company’s operating segments is shown in the following table (amounts in thousands). Amounts in the “Corporate Activities” column represent corporate headquarters expenses, corporate income tax expense, and results of insignificant operations. The Company does not allocate assets between operating segments for internal reporting and performance evaluation purposes. Operating segments and their principal products or services are as follows:

 
·
Community-Based Services (CBS) - provides air medical transportation services to the general population as an independent service in 28 states at September 30, 2011. Services include aircraft operation and maintenance, medical care, dispatch and communications, and medical billing and collection.
 
·
Hospital-Based Services (HBS) - provides air medical transportation services to hospitals in 33 states under exclusive operating agreements at September 30, 2011. Services include aircraft operation and maintenance.
 
·
Products Division - designs, manufactures, and installs aircraft medical interiors and other aerospace and medical transport products for domestic and international customers.


Air Methods Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements, continued
(unaudited)

(9)           Business Segment Information, continued

 
 
For quarter ended September 30:
 
CBS
(Restated)
   
HBS
(Restated)
   
Products
Division
   
Corporate
Activities
(Restated)
   
Intersegment
Eliminations
   
Consolidated
(Restated)
 
2011
                                   
External revenue
  $ 123,405       53,078       8,687       2       --       185,172  
Intersegment revenue
    20       --       7,946       --       (7,966 )     --  
Total revenue
    123,425       53,078       16,633       2       (7,966 )     185,172  
Operating expenses, excluding depreciation & amortization
    (78,424 )     (37,867 )     (11,979 )     (7,858 )       5,653       (130,475 )
Depreciation & amortization
    (10,249 )     (8,164 )     (335 )     (282 )     --       (19,030 )
Interest expense
    (2,732 )     (2,392 )     (4 )     (255 )     --       (5,383 )
Other income, net
    444       394       --       34       --       872  
Income tax expense
    --       --       --       (12,616 )     --       (12,616 )
Segment net income (loss)
  $ 32,464       5,049       4,315       (20,975 )     (2,313 )     18,540  
                                                 
2010
                                               
External revenue
  $ 96,038       50,630       7,266       --       --       153,934  
Intersegment revenue
    56       --       2,919       --       (2,975 )     --  
Total revenue
    96,094       50,630       10,185       --       (2,975 )     153,934  
                                                 
Operating expenses, excluding depreciation & amortization
    (59,541 )     (37,000 )     (6,873 )     (5,450 )     2,167       (106,697 )
Depreciation & amortization
    (7,997 )     (7,594 )     (213 )     (251 )     --       (16,055 )
Interest expense
    (2,233 )     (2,336 )     (6 )     (132 )     --       (4,707 )
Other income, net
    439       394       --       380       --       1,213  
Income tax expense
    --       --       --       (9,579 )     --       (9,579 )
Segment net income (loss)
  $ 26,762       4,094       3,093       (15,032 )     (808 )     18,109  

For nine months ended September 30:
                                   
2011
                                   
External revenue
  $ 297,381       147,850       21,986       22       --       467,239  
Intersegment revenue
    135       --       17,470       --       (17,605 )     --  
Total revenue
    297,516       147,850       39,456       22       (17,605 )     467,239  
                                                 
Operating expenses, excluding depreciation & amortization
    (202,492 )     (108,402 )     (29,272 )     (19,687 )     13,005       (346,848 )
Depreciation & amortization
    (26,968 )     (23,513 )     (913 )     (823 )     --       (52,217 )
Interest expense
    (6,940 )     (6,686 )     (13 )     (565 )     --       (14,204 )
Other income, net
    1,437       1,285       --       263       --       2,985  
Income tax expense
    --       --       --       (22,783 )     --       (22,783 )
Segment net income (loss)
  $ 62,553       10,534       9,258       (43,573 )     (4,600 )     34,172  
                                                 
2010
                                               
External revenue
  $ 249,227       147,683       14,708       --       --       411,618  
Intersegment revenue
    167       --       11,848       --       (12,015 )     --  
Total revenue
    249,394       147,683       26,556       --       (12,015 )     411,618  
                                                 
Operating expenses, excluding depreciation & amortization
    (172,755 )     (106,595 )     (21,059 )     (14,569 )     10,083       (304,895 )
Depreciation & amortization
    (23,511 )     (22,736 )     (509 )     (727 )     --       (47,483 )
Interest expense
    (6,871 )     (7,098 )     (20 )     (569 )     --       (14,558 )
Other income, net
    1,345       1,207       --       446       --       2,998  
Income tax expense
    --       --       --       (17,456 )     --       (17,456 )
Segment net income (loss)
  $ 47,602       12,461       4,968       (32,875 )     (1,932 )     30,224  


ITEM 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations presented below reflects certain restatements to our previously reported results of operations for these periods. See Note 2 to the consolidated financial statements for a discussion of this matter.

The following discussion of the results of operations and financial condition should be read in conjunction with our consolidated financial statements and notes thereto included in Item 1 of this report. This report, including the information incorporated by reference, contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The use of any of the words “believe,” “expect,” “anticipate,” “plan,” “estimate,” and similar expressions are intended to identify such statements. Forward-looking statements include statements concerning the integration of Omniflight; the amount of the purchase price adjustment for the Omniflight acquisition, our possible or assumed future results; flight volume and collection rates for CBS operations; size, structure and growth of our air medical services and products markets; continuation and/or renewal of HBS contracts; acquisition of new and profitable Products Division contracts; and other matters. The actual results that we achieve may differ materially from those discussed in such forward-looking statements due to the risks and uncertainties described in the Risk Factors contained in Part II, Item 1A of this report, in Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in other sections of this report, as well as in our annual report on Form 10-K/A. We undertake no obligation to update any forward-looking statements.

Overview

We provide air medical transportation services throughout the United States and design, manufacture, and install medical aircraft interiors and other aerospace products for domestic and international customers. Our divisions, or business segments, are organized according to the type of service or product provided and consist of the following:
·
Community-Based Services (CBS) - provides air medical transportation services to the general population as an independent service. Revenue consists of flight fees billed directly to patients, their insurers, or governmental agencies, and cash flow is dependent upon collection from these individuals or entities. In the nine months ended September 30, 2011, the CBS Division generated 64% of our total revenue, compared to 60% in the nine months ended September 30, 2010.
·
Hospital-Based Services (HBS) - provides air medical transportation services to hospitals throughout the U.S. under exclusive operating agreements. Revenue consists of fixed monthly fees (approximately 78% of total contract revenue) and hourly flight fees (approximately 22% of total contract revenue) billed to hospital customers. In the nine months ended September 30, 2011, the HBS Division generated 32% of our total revenue, compared to 36% in the nine months ended September 30, 2010.
·
Products Division - designs, manufactures, and installs aircraft medical interiors and other aerospace and medical transport products for commercial and governmental entities. The Products Division generated 4% of our total revenue in the nine months ended September 30, 2011 and 2010.

See Note 9 to the consolidated financial statements included in Item 1 of this report for operating results by segment.
 
 
We believe that the following factors have the greatest impact on our results of operations and financial condition:

·
Flight volume. Fluctuations in flight volume have a greater impact on CBS operations than HBS operations because almost all of CBS revenue is derived from flight fees, as compared to approximately 22% of HBS revenue. By contrast, 80% of our costs primarily associated with flight operations (including salaries, aircraft ownership costs, hull insurance, and general and administrative expenses) incurred during the nine months ended September 30, 2011, were mainly fixed in nature. While flight volume is affected by many factors, including competition and the effectiveness of marketing and business development initiatives, the greatest single variable in quarterly comparatives has historically been weather conditions. Adverse weather conditions—such as fog, high winds, or heavy precipitation—hamper our ability to operate our aircraft safely and, therefore, result in reduced flight volume. Total patient transports for CBS operations were approximately 13,200 and 32,400 for the quarter and nine months ended September 30, 2011, respectively, compared to approximately 10,900 and 30,000 for the quarter and nine months ended September 30, 2010, respectively. Patient transports for CBS bases open longer than one year, and excluding transports for Omniflight bases, (Same-Base Transports) were approximately 9,800 and 27,700 in the quarter and nine months ended September 30, 2011, respectively, compared to approximately 10,700 and 29,400 in the quarter and nine months ended September 30, 2010, respectively. Cancellations due to unfavorable weather conditions for CBS bases open longer than one year were 55 lower and 613 higher in the quarter and nine months ended September 30, 2011, compared to 2010. Requests for community-based services decreased by 7.6% and 3.0% for the quarter and nine months ended September 30, 2011, respectively, for bases open greater than one year.

·
Reimbursement per transport. We respond to calls for air medical transports without pre-screening the creditworthiness of the patient and are subject to collection risk for services provided to insured and uninsured patients. Medicare and Medicaid also receive contractual discounts from our standard charges for flight services. Flight revenue is recorded net of provisions for contractual discounts and estimated uncompensated care. Both provisions are estimated during the period the related services are performed based on historical collection experience and any known trends or changes in reimbursement rate schedules and payer mix. The provisions are adjusted as required based on actual collections in subsequent periods. Net reimbursement per transport for CBS operations is primarily a function of price, payer mix, and timely and effective collection efforts. Both the pace of collections and the ultimate collection rate are affected by the overall health of the U.S. economy, which impacts the number of indigent patients and funding for state-run programs, such as Medicaid. Medicaid reimbursement rates in many jurisdictions have remained well below the cost of providing air medical transportation. In addition, the collection rate is impacted by changes in the cost of healthcare and health insurance; as the cost of healthcare increases, health insurance coverage provided by employers may be reduced or eliminated entirely, resulting in an increase in the uninsured population. The impact of recently enacted healthcare legislation is still unknown since many of the legislation’s provisions have yet to take effect. Net reimbursement per transport increased 10.2% in the nine months ended September 30, 2011, compared to 2010, attributed to recent price increases. Provisions for contractual discounts and estimated uncompensated care for CBS operations are as follows:

   
For quarters ended
September 30,
   
For nine months ended
 September 30,
 
   
2011
   
2010
   
2011
   
2010
 
Gross billings
    100 %     100 %     100 %     100 %
Provision for contractual discounts
    43 %     38 %     43 %     39 %
Provision for uncompensated care
    21 %     20 %     19 %     20 %

Although price increases generally increase the net reimbursement per transport from insurance payers, the amount per transport collectible from private patient payers, Medicare, and Medicaid does not increase proportionately with price increases. Therefore, depending upon overall payer mix, price increases will usually result in an increase in the percentage of uncollectible accounts. Although we have not yet experienced significant increased limitations in the amount reimbursed by insurance companies, continued price increases may cause insurance companies to limit coverage for air medical transport to amounts less than our standard rates. The increase in the percentage of uncollectible accounts in the third quarter of 2011 also reflects the addition of Omniflight which had a higher gross charge structure and, therefore, a higher percentage of uncollectible accounts. In addition, the percentage of transports covered by insurance for Omniflight’s CBS operations is approximately three percentage points lower than the percentage of insured transports for the Company’s historical operations.
 
 
·
Aircraft maintenance. Both CBS and HBS operations are directly affected by fluctuations in aircraft maintenance costs. Proper operation of the aircraft by flight crews and standardized maintenance practices can help to contain maintenance costs. Increases in spare parts prices from original equipment manufacturers tend to be higher for aircraft which are no longer in production. Two models of aircraft within our fleet, representing 21% of the rotor wing fleet, are no longer in production and are, therefore, susceptible to price increases which outpace general inflationary trends. In addition, on-condition components are more likely to require replacement with age. Since January 1, 2010, we have taken delivery of 28 new aircraft and expect to take delivery of a total of 23 additional aircraft during 2011 and 2012. We have replaced discontinued models and other older aircraft with the new aircraft, as well as provided capacity for base expansion. Replacement models of aircraft typically have higher ownership costs than the models targeted for replacement but lower maintenance costs. Total maintenance expense for CBS and HBS operations decreased 17.3% and increased 1.2% for the quarter and nine months ended September 30, 2011, respectively, compared to 2010. Total flight volume for CBS and HBS operations increased 26.9% and 10.2% for the quarter and nine months ended September 30, 2011, respectively, compared to 2010. The decrease in maintenance expense is due to normal fluctuations in the timing of overhaul and replacement cycles for aircraft parts.

·
Competitive pressures from low-cost providers. We are recognized within the industry for our standard of service and our use of cabin-class aircraft. Many of our competitors utilize aircraft with lower ownership and operating costs and do not require a similar level of experience for aviation and medical personnel. Reimbursement rates established by Medicare, Medicaid, and most insurance providers are not contingent upon the type of aircraft used or the experience of personnel. However, we believe that higher quality standards help to differentiate our service from competitors and, therefore, lead to higher utilization.

·
Employee recruitment and relations. The ability to deliver quality services is partially dependent upon our ability to hire and retain employees who have advanced aviation, nursing, and other technical skills. In addition, hospital contracts typically contain minimum certification requirements for pilots and mechanics. The collective bargaining agreement covering our pilots expired on April 30, 2009. Negotiations on a new CBA commenced in the fourth quarter of 2008 and were referred for mediation during the second quarter of 2009. Under the Railway Labor Act, mediation decisions are non-binding on either party, and the duration of the process may vary depending upon the mediator assigned and the complexity of the issues negotiated. Although negotiations are active, no agreement has yet been reached. Other employee groups may also elect to be represented by unions in the future.
 
Results of Operations

We reported net income of $18,540,000 and $34,172,000 for the quarter and nine months ended September 30, 2011, respectively, compared to $18,109,000 and $30,224,000 for the three and nine months ended September 30, 2010, respectively. The results for 2011 included the impact of the acquisition of Omniflight effective August 1, 2011. Net reimbursement per transport for CBS operations increased 5.8% and 10.2% in the quarter and nine months ended September 30, 2011, compared to 2010, while Same-Base Transports for CBS operations were 8.5% and 5.7% lower over the same periods, respectively.

Flight Operations – Community-based Services and Hospital-based Services

Net flight revenue increased $29,593,000, or 20.4%, and $47,401,000, or 12.1%, for the quarter and nine months ended September 30, 2011, respectively, compared to 2010. Flight revenue is generated by both CBS and HBS operations and is recorded net of provisions for contractual discounts and uncompensated care.

·
CBS – Net flight revenue increased $27,145,000, or 28.7%, to $121,635,000 for the third quarter of 2011 and $47,234,000, or 19.3%, to $292,276,000 for the nine months ended September 30, 2011, for the following reasons:
 
·
Net revenue of $21,284,000 from Omniflight’s CBS operations from the acquisition date through September 30, 2011.
 
·
Increases of 5.8% and 10.2% in net reimbursement per transport for the quarter and nine months ended September 30, 2011, respectively, compared to 2010, due to the benefit of recent price increases net of the change in payer mix resulting from the Omniflight acquisition described above.
 
 
 
·
Decreases of 908, or 8.5%, and 1,687, or 5.7%, in Same-Base Transports for the quarter and nine months ended September 30, 2011, respectively, compared to 2010. Cancellations due to unfavorable weather conditions for CBS bases open longer than one year were 55 lower and 613 higher in the quarter and nine months ended September 30, 2011, respectively, compared to 2010. Requests for community-based services decreased by 7.6% and 3.0% for the quarter and nine months ended September 30, 2011, respectively, for bases open greater than one year.
 
·
Incremental net revenue of $7,365,000 and $17,908,000 for the quarter and nine months ended September 30, 2011, respectively, generated from the addition of nineteen new CBS bases, including eleven bases resulting from the conversion of HBS contracts, during either 2011 or 2010.
 
·
Closure of three bases due to insufficient flight volume during 2010, resulting in decreases in net revenue of approximately $714,000 and $4,247,000 during the quarter and nine months ended September 30, 2011, respectively.

·
HBS – Net flight revenue increased $2,448,000, or 4.8%, to $53,078,000 for the third quarter of 2011 and $167,000, or 0.1%, to $147,850,000 for the nine months ended September 30, 2011, for the following reasons:
 
·
Net revenue of $5,386,000 from Omniflight’s HBS operations from the acquisition date through September 30, 2011.
 
·
Cessation of service under three contracts and the conversion of five contracts to CBS operations during either 2011 or 2010, resulting in decreases in net revenue of approximately $4,097,000 and $10,640,000 for the quarter and nine months ended September 30, 2011, respectively.
 
·
Incremental net revenue of $1,003,000 and $4,016,000 for the quarter and nine months ended September 30, 2011, generated from the expansion of five contracts to additional bases of operation during either 2011 or 2010.
 
·
Decreases of 1.9% and 2.7% in flight volume for the quarter and nine months ended September 30, 2011, for all contracts excluding contract expansions and closed contracts discussed above, as well as Omniflight’s HBS operations from the acquisition date through September 30, 2011.
 
·
Annual price increases in the majority of contracts based on stipulated contractual increases, changes in the Consumer Price Index or spare parts prices from aircraft manufacturers.

Flight center costs (consisting primarily of pilot, mechanic, and medical staff salaries and benefits) increased $16,706,000, or 31.1%, and $22,578,000, or 14.1%, for the quarter and nine months ended September 30, 2011, respectively, compared to 2010. Changes by business segment are as follows:

·
CBS – Flight center costs increased $14,448,000, or 41.4%, to $49,363,000 for the third quarter of 2011 and $20,081,000, or 19.5%, to $123,280,000 for the nine months ended September 30, 2011, for the following reasons:
 
·
Flight center costs of approximately $9,247,000 related to Omniflight’s CBS operations from the acquisition date through September 30, 2011.
 
·
Increases of approximately $3,575,000 and $7,552,000 for the quarter and nine months ended September 30, 2011, respectively, for the addition of personnel to staff new base locations described above.
 
·
Decreases of approximately $761,000 and $2,836,000 for the quarter and nine months ended September 30, 2011, respectively, due to the closure of base locations described above.
 
·
Increases in salaries for merit pay raises and in the cost of employee medical benefits.

·
HBS - Flight center costs increased $2,258,000, or 12.0%, to $21,116,000 for the third quarter of 2011 and $2,497,000, or 4.4%, to $59,176,000 for the nine months ended September 30, 2011, primarily due to the following:
 
·
Flight center costs of approximately $2,127,000 related to Omniflight’s CBS operations from the acquisition date through September 30, 2011.
 
·
Decreases of approximately $1,475,000 and $3,527,000 for the quarter and nine months ended September 30, 2011, respectively, due to the closure of base locations described above.
 
·
Increases of approximately $515,000 and $1,435,000 for the quarter and nine months ended September 30, 2011, respectively, for the addition of personnel to staff new base locations described above.
 
·
Increases in salaries for merit pay raises and in the cost of employee medical benefits.
 
 
Aircraft operating expenses decreased $548,000, or 1.7%, and increased $4,334,000, or 5.1%, for the quarter and nine months ended September 30, 2011, respectively, compared to 2010. Aircraft operating expenses consist primarily 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. The change in costs is due to the following:
·
Decrease in aircraft maintenance expense of $4,136,000, or 17.3%, to $19,815,000 for the third quarter of 2011 and increase of $744,000, or 1.2%, to $62,824,000 for the nine months ended September 30, 2011, compared to the prior year. Total flight volume for CBS and HBS operations increased 26.9% and 10.2% for the quarter and nine months ended September 30, 2011, respectively, compared to 2010. Excluding the impact of the Omniflight fleet, aircraft maintenance expense decreased 32.0% and 4.5% for the quarter and nine months ended September 30, 2011, respectively. Total flight volume for CBS and HBS operations, excluding the Omniflight fleet, increased 7.2% and 3.0% for the quarter and nine months ended September 30, 2011, respectively. The decrease in maintenance expense is due to normal fluctuations in the timing of overhaul and replacement cycles for aircraft parts. Maintenance expense in the third quarter also included a credit of approximately $1.6 million related to a negotiated revision in an agreement covering main rotor blade replacement costs for our BK-117 twin-engine aircraft. We recorded $1.3 million of expense related to this same agreement during the six months ended June 30, 2011.
·
Increases of approximately 47.4% and 29.3% in the cost of aircraft fuel per hour flown for the quarter and nine months ended September 30, 2011, respectively. Total fuel costs increased $2,751,000 to $6,264,000 and $3,950,000 to $13,950,000 for the quarter and nine months ended September 30, 2011, respectively, compared to 2010. We have a financial derivative agreement to protect against aircraft fuel price increases greater than 20%, covering approximately 90% of our anticipated fuel consumption for 2011, excluding the impact of the Omniflight fleet. Fuel expense included non-cash mark to market derivative losses of $528,000 and $305,000 for the quarter and nine months ended September 30, 2011, respectively, compared to non-cash mark to market losses of $26,000 and $343,000 for the quarter and nine months ended September 30, 2010. Cash settlements under the terms of the agreements totaled $307,000 and $884,000 in the quarter and nine months ended September 30, 2011, respectively. We received no cash settlements under the agreements in the quarter and nine months ended September 30, 2010.
·
Decreases in hull insurance rates effective July 2011 and 2010.
·
Total aircraft operating expenses related to the Omniflight fleet were $5,979,000 from the acquisition date through September 30, 2010.

Products Division

Medical interiors and products revenue increased $1,425,000, or 19.6%, and $7,304,000, or 49.6%, for the quarter and nine months ended September 30, 2011, respectively, compared to 2010. Significant projects in process during 2011 included work under two contracts to produce a total of fifty multi-mission interiors for the U.S. Army’s HH-60M helicopter, 77 interiors for an older generation of the U.S. Army’s Blackhawk helicopter, approximately 187 litter systems for the U.S. Army’s Medical Evacuation Vehicle (MEV), and six aircraft medical interior kits for commercial customers. Revenue by product line for the quarter and nine months ended September 30, 2011, was as follows:
·
$5,748,000 and $15,537,000 – governmental entities
·
$2,954,000 and $6,507,000 – commercial customers

Significant projects in process during 2010 included 32 multi-mission interiors for the U.S. Army’s HH-60M helicopter, eight interiors for an older generation of the U.S. Army’s Blackhawk helicopter, approximately 187 MEV litter systems, and eight aircraft medical interior kits for commercial customers. Revenue by product line for the quarter and nine months ended September 30, 2010, was as follows:
·
$5,806,000 and $10,004,000 – governmental entities
·
$1,471,000 and $4,736,000 – commercial customers

Cost of medical interiors and products increased $1,615,000, or 36.3%, and $4,670,000, or 43.3%, for the quarter and nine months ended September 30, 2011, respectively, as compared to the prior year, due primarily to changes in sales volume.
 
 
Other Revenue and General Expenses

Other revenue—consisting of fees earned for dispatch, transfer center, and patient billing services provided to third parties—increased $220,000, or 14.3%, and $916,000, or 22.1%, for the quarter and nine months ended September 30, 2011, respectively, compared to 2010, primarily due to ten new contracts entered into during either 2011 or 2010.

Depreciation and amortization expense increased $2,975,000, or 18.5%, and $4,734,000, or 10.0%, for the quarter and nine months ended September 30, 2011, compared to 2010. Depreciation related to Omniflight’s fixed assets, including aircraft under capital leases, was approximately $1,740,000 from the acquisition date through September 30, 2011. Amortization of Omniflight’s intangible assets totaled $657,000 for the quarter and nine months ended September 30, 2011, and was allocated entirely to the CBS division. In addition, since the second quarter of 2010, we have added seventeen aircraft and six medical interiors, totaling approximately $15.0 million, to our depreciable assets.

General and administrative (G&A) expenses increased $6,112,000, or 35.5%, and $10,163,000, or 20.3%, for the quarter and nine months ended September 30, 2011, respectively, compared to 2010. G&A expenses include executive management, accounting and finance, billing and collections, information services, human resources, aviation management, pilot training, dispatch and communications, and CBS and HBS program administration. G&A expenses were 12.6% and 12.9% of revenue for the quarter and nine months ended September 30, 2011, compared to 11.2% and 12.2% of revenue for the quarter and nine months ended September 30, 2010. Expenses for the quarter and nine months ended September 30, 2011, included approximately $1,509,000 and $1,759,000 in transaction costs and employee severance related to the acquisition of Omniflight. We also incurred approximately $877,000 in expenses related to transitioning Omniflight’s G&A functions into existing Air Methods departments. The increase in expense also reflects additional headcount in our safety department to support the ongoing implementation of our Safety Management System (SMS) and in our billing department to support the increase in third party patient billing contracts, as well as accruals for amounts earned under the Economic Value Added Bonus Plan.

Interest expense increased $676,000, or 14.4%, and decreased $354,000, or 2.4%, for the quarter and nine months ended September 30, 2011. The increase in the third quarter is primarily due to interest of $295,000 recorded on capital lease obligations assumed in the Omniflight acquisition and to interest incurred on the $200 million term loan originated to fund the acquisition of Omniflight. The term loan bears interest at a variable rate which averaged 2.4% for the quarter ended September 30, 2011. The decrease in expense for the nine-month period is related primarily to the reduction in principal balances on long-term debt and capital lease obligations as a result of regularly scheduled payments.

Income tax expense was $12,616,000 and $22,783,000 in the quarter and nine months ended September 30, 2011, respectively, and $9,579,000 and $17,456,000 in the quarter and nine months ended September 30, 2010, respectively. The effective tax rate was approximately 40% for 2011 and 37% for 2010. The rate in 2010 was affected by apportionment factor adjustments which reduced our expected blended state income tax rate and adjustments to previously filed state income tax returns which also reduced state income tax expense by approximately $625,000. Changes in our effective tax rate are affected by the apportionment of revenue and income before taxes for the various jurisdictions in which we operate and by changing tax laws and regulations in those jurisdictions.
 
Liquidity and Capital Resources

Our working capital position as of September 30, 2011, was $85,975,000, compared to $122,599,000 at December 31, 2010. Cash generated by operations was $54,304,000 in 2011, compared to $71,631,000 in 2010. In 2011, we paid approximately $5.4 million for amounts previously accrued under the Economic Value Added Bonus Plan and other incentive compensation plans for executive and employee performance in 2010 and approximately $9,740,000 for deposits on new aircraft purchases. Days’ sales outstanding for CBS operations, measured by comparing net revenue for the annualized previous 6-month period to outstanding open net accounts receivable, increased from 94 days at December 31, 2010, to 104 days at September 30, 2011, primarily because of administrative changes in the methods required to submit reimbursement claims to certain insurance providers.
 
 
Cash used by investing activities totaled $229,364,000 in 2011 compared to $19,955,000 in 2010. In addition to the purchases of Omniflight and URS, equipment acquisitions in 2011 included the buy-out of sixteen previously leased aircraft for approximately $17.4 million. We sold five aircraft for $5.9 million during 2011. Equipment acquisitions in 2010 included eighteen aircraft for approximately $12.3 million, as well as medical interiors and avionics upgrades. We sold four aircraft for $5.9 million during 2010.

Financing activities provided $116,865,000 in 2011 compared to using $44,152,000 in 2010. The primary use of cash in both 2011 and 2010 was regularly scheduled payments of long-term debt and capital lease obligations. In 2011 we used cash reserves to retire our previous term loan and proceeds from the $200 million term loan under our Amended Credit Facility to fund the acquisition of Omniflight. We began making scheduled quarterly principal payments on the term loan beginning with the quarter ended September 30, 2011. In 2010 we used proceeds of $6.2 million from notes payable to finance the purchase of four aircraft.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

On an on-going basis, management evaluates our estimates and judgments, including those related to revenue recognition, deferred income taxes, and valuation of long-lived assets and goodwill. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Fixed flight fee revenue under our operating agreements with hospitals is recognized monthly over the terms of the agreements. Flight revenue relating to patient transports is recognized upon completion of the services and is recorded net of provisions for contractual discounts and estimated uncompensated care. Both provisions are estimated during the period the related services are performed based on historical collection experience and any known trends or changes in reimbursement rate schedules and payer mix. The provisions are adjusted as required based on actual collections in subsequent periods. We have from time to time experienced delays in reimbursement from third-party payers. In addition, third-party payers may disallow, in whole or in part, claims for reimbursement based on determinations that certain amounts are not reimbursable under plan coverage, determinations of medical necessity, or the need for additional information. Laws and regulations governing the Medicare and Medicaid programs are very complex and subject to interpretation. We also provide services to patients who have no insurance or other third-party payer coverage. There can be no guarantee that we will continue to experience the same collection rates that we have in the past. If actual future collections are more or less than those projected by management, adjustments to allowances for contractual discounts and uncompensated care may be required. Based on related flight revenue for the nine months ended September 30, 2011, a change of 100 basis points in the percentage of estimated contractual discounts and uncompensated care would have resulted in a change of approximately $7,758,000 in flight revenue.

Revenue related to fixed fee medical interior and products contracts is recorded as costs are incurred using the percentage of completion method of accounting. We estimate the percentage of completion based on costs incurred to date as a percentage of an estimate of the total costs to complete the project. Losses on contracts in process are recognized when determined. If total costs to complete a project are greater or less than estimated, the gross margin on the project may be greater or less than originally recorded under the percentage of completion method.
 
 
Deferred Income Taxes

In preparation of the consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as depreciable assets, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the consolidated balance sheets. We then assess the likelihood that deferred tax assets will be recoverable from future taxable income and record a valuation allowance for those amounts we believe are not likely to be realized. Establishing or increasing a valuation allowance in a period increases income tax expense. We consider estimated future taxable income, tax planning strategies, and the expected timing of reversals of existing temporary differences in assessing the need for a valuation allowance against deferred tax assets. In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the valuation allowance would be charged to income in the period such determination was made. Likewise, should we determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to the valuation allowance would increase income in the period such determination was made. The effect on deferred income tax assets and liabilities of a change in statutory tax rates applicable to the Company is also recognized in income in the period of the change.

Long-lived Assets Valuation

In accounting for long-lived assets, we make estimates about the expected useful lives, projected residual values and the potential for impairment. Estimates of useful lives and residual values of aircraft are based upon actual industry experience with the same or similar aircraft types and anticipated utilization of the aircraft. Changing market prices of new and used aircraft, government regulations and changes in our maintenance program or operations could  result in changes to these estimates. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. Our cash flow estimates are based on historical results adjusted for estimated current industry trends, the economy, and operating conditions.

Goodwill Valuation

The Company’s goodwill relates to five acquisitions and has been allocated to our operating segments. Annually, at December 31, the Company evaluates goodwill for potential impairment using a two-step test at the reporting unit level. The first step of the goodwill impairment test compares the book value of a reporting unit, including goodwill, with its fair value. If the book value of a reporting unit exceeds its fair value, we perform the second step of the impairment test to determine the amount of goodwill impairment loss to be recorded. In the second step, the implied fair value of the reporting unit’s goodwill is compared to the book value of the goodwill. The amount of impairment loss is equal to the excess of the book value of the goodwill over the implied fair value of that goodwill.
 
We determine the fair value of each reporting unit based upon the reporting unit’s historical operating profit and the Company’s current public trading value. Estimated future operating profit for each reporting unit is also taken into consideration when determining the reporting unit’s fair value. Considerable management judgment is necessary to evaluate the impact of economic changes and to estimate future operating profit for the reporting units. Assumptions used in our impairment evaluations, such as forecasted growth rates and patient receivable collection rates, are based on the best available market information and are consistent with our internal forecasts. Changes in these estimates or a continued decline in general economic conditions could change our conclusion regarding an impairment of goodwill and potentially result in a non-cash impairment loss in a future period.
 
The estimated fair values of the reporting units have historically exceeded the carrying values of the reporting units. We performed a sensitivity analysis on the Company’s public trading value and on each reporting unit’s historical and estimated future operating profits. Based on the amounts used in the evaluation of goodwill at December 31, 2010, either the Company’s current public trading value or any reporting unit’s operating profit would have to decrease by more than 65% before the carrying value of the reporting unit exceeded its fair value. The Company’s analysis of goodwill valuation has not yet included the goodwill associated with the Omniflight acquisition since the analysis is prepared as of December 31 annually.
 
 
Item 3.    Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in market risk at September 30, 2011, from that reported in our Annual Report on Form 10-K/A for the year ended December 31, 2010, except as follows:

We are subject to interest rate risk on our debt obligations and notes receivable, all of which have fixed interest rates except our line of credit (which has no balance outstanding at September 30, 2011) and $200,340,000 in notes payable. Based on the amounts outstanding at September 30, 2011, the annual impact of a change of 100 basis points in interest rates would be approximately $2,003,000. Interest rates on these instruments approximate current market rates as of September 30, 2011.

Item 4.    Controls and Procedures

Restatement of Previously Issued Financial Statements
 
On November 18, 2011, the U.S. Securities and Exchange Commission (SEC) responded to the Company’s request for guidance concerning aircraft lease-related accounting issues and the appropriate interpretation of the maximum amount that the Company could be required to pay as described in ASC 840-10-25-14, in the event of a non-performance-related default. In light of this response, management initiated a review of the Company’s aircraft lease accounting and determined that its previous method of accounting for aircraft leases as operating leases was not in accordance with U.S. generally accepted accounting principles (GAAP). As a result, the Company has restated its consolidated balance sheets as of December 31, 2010 and 2009, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2010, included in the Company’s December 31, 2010, Annual Report on Form 10-K/A and the consolidated interim financial statements included in the Company’s Forms 10-Q/A as of and for the quarter and year-to-date periods ended March 31, 2011; June 30, 2011; and September 30, 2011; and related 2010 comparative prior quarter and year-to-date periods included in those Forms 10-Q/A.
 
Disclosure Controls and Procedures
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officers (referred to in this report as the Certifying Officers), as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(b) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply judgment in evaluating our controls and procedures.

Prior to the filing of our original Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 (our Original Filing), our management, under the supervision and with the participation of our Certifying Officers, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (the Evaluation) as of the last day of the period covered by our Original Filing.
 
Based upon that Evaluation, our Certifying Officers had concluded that our disclosure controls and procedures were effective at a reasonable level of assurance. Subsequently, during the fourth quarter of fiscal year 2011, we concluded that our previously established aircraft lease accounting practices were not in accordance with GAAP. Correspondingly, as described above, management has restated its consolidated financial statements as of December 31, 2010, and for the quarters ended March 31, 2011; June 30, 2011; and September 30, 2011, to reflect the correction of the error. As a result of the material weakness in internal control over financial reporting described in the following paragraph, our Certifying Officers have now concluded that our disclosure controls and procedures were not effective as of the last day of the period covered by this Report.
 
 
The Company’s control to evaluate leases for capital versus operating lease classification was not designed to consider all of the relevant lease accounting literature applicable to lease classification, including nonperformance related default provisions as discussed in ASC 840-10-25-14.  This material weakness resulted in a material error in our accounting for aircraft leases and a restatement of our previously issued financial statements more fully described in Note 2 to the condensed consolidated financial statements set forth herein.

Remediation of the Material Weakness
To remediate the material weakness in the Company’s internal control over financial reporting, the Company implemented additional review procedures over the lease default provisions affecting aircraft lease accounting practices.

The Company’s remediation plan has been implemented; however, the above material weakness will not be considered remediated until the additional review procedures over aircraft lease default provisions have been operating effectively for an adequate period of time. Management will consider the status of this remedial effort when assessing the effectiveness of the Company’s internal controls over financial reporting and other disclosure controls and procedures as of December 31, 2011. While management believes that the remedial efforts will resolve the identified material weakness, there is no assurance that management’s remedial efforts conducted to date will be sufficient or that additional remedial actions will not be necessary.

Changes in Internal Controls over Financial Reporting
 
In the third quarter of 2011, we implemented Ramco, a new enterprise resource planning (ERP) system which replaced our existing purchasing, materials management, and aircraft record systems. As with any significant change, we have identified certain control deficiencies resulting from business process, systems and user issues. Our implementation process is designed to identify and remediate issues of this nature, and we have monitoring controls in place to ensure the ongoing reliability of our financial reporting. We believe the controls, as implemented, are appropriate and functioning effectively.

Other than the change mentioned above, there were no significant changes in our internal control over financial reporting that occurred during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
PART II: OTHER INFORMATION

Item 1.    Legal Proceedings
 
Not Applicable

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in our annual report on Form 10-K/A for the year ended December 31, 2010, except as follows:

·
Omniflight acquisition – On August 1, 2011, we acquired 100% of the outstanding common stock of OF Air Holdings Corporation, parent company of Omniflight Helicopters, Inc. While Omniflight is engaged in the same lines of business as Air Methods, it has operated in different geographic areas and under different procedures and protocols. As with any large acquisition, a significant effort is required to assimilate the operations, financial and accounting practices, and information systems, and to integrate key personnel from the acquired business. This acquisition may cause disruptions in our operations and divert management's attention from day-to-day operations. We may not realize the anticipated benefits of this acquisition, profitability may suffer due to acquisition-related costs or unanticipated liabilities, and our stock price may decrease if the financial markets consider the acquisition to be inappropriately priced.
 
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

Not Applicable

Item 3.    Defaults upon Senior Securities

Not Applicable

Item 4.    Reserved

Item 5.    Other Information
 
Not Applicable

Item 6.
 
Chief Executive Officer Certification adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
Chief Financial Officer Certification adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
Certification adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
101.INS
XBRL Instance Document
   
101.SCH
XBRL Taxonomy Extension Schema Document
   
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
   
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
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:  December 22, 2011
By
/s/ Aaron D. Todd
 
   
Aaron D. Todd
 
   
Chief Executive Officer
 
       
       
Date:  December 22, 2011 
By
/s/ Trent J. Carman
 
   
Trent J. Carman
 
   
Chief Financial Officer
 
       
       
Date:  December 22, 2011 
By
/s/ Sharon J. Keck
 
   
Sharon J. Keck
 
   
Chief Accounting Officer
 
 
 
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