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

 
FORM 10-Q
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
 
For the quarterly period ended 
March 31, 2012
 
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE 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 x Accelerated Filer o
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.) Yeso  No  x
 
The number of shares of Common Stock, par value $.06 per share, outstanding as of April 27, 2012, was 12,831,224.
 


 
 

 
 
TABLE OF CONTENTS
 
Form 10-Q

PART I.
 
FINANCIAL INFORMATION
 
           
   
Item 1.
   
           
       
1
           
       
3
           
       
4
           
       
6
           
   
Item 2.
 
12
           
   
Item 3.
 
19
           
   
Item 4.
 
19
           
PART II.
 
OTHER INFORMATION
 
           
   
Item 1.
 
20
           
   
Item 1A.
 
20
           
   
Item 2.
 
20
           
   
Item 3.
 
20
           
   
Item 4.
 
20
           
   
Item 5.
 
20
           
   
Item 6.
 
20
           
       
21
 

PART I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Air Methods Corporation and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
(unaudited)

   
March 31,
2012
   
December 31,
2011
 
Assets
           
             
Current assets:
           
Cash and cash equivalents
  $ 1,640       3,562  
Current installments of notes receivable
    635       687  
Receivables:
               
Trade, net (note 4)
    192,038       187,056  
Refundable income taxes
    676       1,808  
Other
    1,505       1,924  
      194,219       190,788  
                 
Inventories
    33,329       33,089  
Work-in-process on medical interiors and products contracts
    1,376       1,369  
Assets held for sale
    2,800       2,807  
Costs and estimated earnings in excess of billings on uncompleted contracts
    1,078        1,854  
Refundable deposits
    5,496       14,146  
Prepaid expenses and other (note 6)
    8,762       7,417  
                 
Total current assets
    249,335       255,719  
                 
Property and equipment:
               
Land
    251       251  
Flight and ground support equipment
    343,199       343,069  
Aircraft under capital leases
    405,117       408,985  
Aircraft rotable spare parts
    47,487       44,020  
Buildings and other equipment
    42,215       41,824  
      838,269       838,149  
Less accumulated depreciation and amortization
    (272,111 )     (268,571 )
                 
Net property and equipment
    566,158       569,578  
                 
Goodwill (note 2)
    114,875       115,117  
Notes and other receivables, less current installments
    116       117  
Intangible assets, net of accumulated amortization of $5,660 and $4,374 at March 31, 2012 and December 31, 2011, respectively
    64,011        64,752  
Other assets
    22,813       23,188  
                 
Total assets
  $ 1,017,308       1,028,471  
 
(Continued)
 
 
Air Methods Corporation and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS, Continued
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
   
March 31,
2012
   
December 31,
2011
 
Liabilities and Stockholders' Equity
           
             
Current liabilities:
           
Notes payable
  $ 1,511       27,940  
Current installments of long-term debt
    18,920       18,889  
Current installments of obligations under capital leases
    47,546       49,100  
Accounts payable
    16,035       15,890  
Deferred revenue
    6,075       4,493  
Billings in excess of costs and estimated earnings on uncompleted contracts
     2,210        2,726  
Accrued wages and compensated absences
    11,869       20,267  
Due to third party payers
    5,834       5,604  
Deferred income taxes
    8,999       7,654  
Other accrued liabilities
    14,288       18,145  
                 
Total current liabilities
    133,287       170,708  
                 
Long-term debt, less current installments
    251,858       243,678  
Obligations under capital leases, less current installments
    238,575       240,208  
Deferred income taxes
    54,335       49,966  
Other liabilities
    35,143       36,009  
                 
Total liabilities
    713,198       740,569  
                 
Stockholders' equity (note 3):
               
Preferred stock, $1 par value.  Authorized 5,000,000 shares, none issued
     --        --  
Common stock, $.06 par value. Authorized 23,500,000 shares; issued 12,879,551 and 12,799,560 shares at March 31, 2012 and December 31, 2011, respectively; outstanding 12,830,557 and 12,739,560 shares at March 31, 2012 and December 31, 2011, respectively
     768        764  
Additional paid-in capital
    99,690       95,960  
Retained earnings
    203,652       191,178  
                 
Total stockholders' equity
    304,110       287,902  
                 
Total liabilities and stockholders’ equity
  $ 1,017,308       1,028,471  

See accompanying notes to condensed consolidated financial statements.
 
 
Air Methods Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share amounts)
(unaudited)

   
Three Months Ended March 31,
 
   
2012
   
2011
 
Revenue:
           
Flight revenue, net of provision for contractual discounts (note 4)
  $ 251,016       156,460  
Provision for uncompensated care (note 4)
    (68,872 )     (31,939 )
Flight revenue, net
    182,144       124,521  
Sales of medical interiors and products
    7,232       5,801  
Other
    1,438       1,583  
      190,814       131,905  
Operating expenses:
               
Flight centers
    78,982       55,654  
Aircraft operations
    36,884       25,113  
Cost of medical interiors and products sold
    4,397       3,978  
Depreciation and amortization
    20,879       16,492  
Gain on disposition of assets, net
    (241 )     (361 )
General and administrative
    24,875       18,307  
      165,776       119,183  
                 
Operating income
    25,038       12,722  
                 
Other income (expense):
               
Interest expense
    (5,593 )     (4,510 )
Other, net
    930       1,217  
                 
Income before income taxes
    20,375       9,429  
                 
Income tax expense
    (7,901 )     (3,717 )
                 
Net income
  $ 12,474       5,712  
                 
Basic income per common share (note 5)
  $ .98       .45  
                 
Diluted income per common share (note 5)
  $ .97       .45  
                 
Weighted average number of common shares outstanding – basic
    12,793,640       12,607,522  
                 
Weighted average number of common shares outstanding – diluted
    12,915,816       12,758,669  

See accompanying notes to condensed consolidated financial statements.
 
Air Methods Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)

   
Three Months Ended March 31,
 
   
2012
   
2011
 
             
Cash flows from operating activities:
           
Net income
  $ 12,474       5,712  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization expense
    20,879       16,492  
Deferred income tax expense
    5,527       2,634  
Stock-based compensation
    612       691  
Tax expense from exercise of stock options
    (1,070 )     (375 )
Gain on disposition of assets, net
    (241 )     (361 )
Unrealized gain on derivative instrument
    (27 )     (1,043 )
Changes in assets and liabilities, net of effects of acquisitions:
               
Decrease (increase) in prepaid expenses and other current assets
    7,334       (3,349 )
Decrease (increase) in receivables
    (3,431 )     6,871  
Decrease (increase) in inventories
    (247 )     1,179  
Decrease (increase) in costs in excess of billings
    776       (296 )
Decrease in accounts payable, other accrued liabilities, and other liabilities
    (8,039 )     (3,588 )
Increase in deferred revenue and billings in excess of costs
    1,066       38  
Net cash provided by operating activities
    35,613       24,605  
                 
Cash flows from investing activities:
               
Acquisition of OF Air Holdings Corporation (note 2)
    (3,176 )     --  
Acquisition of membership interest of United Rotorcraft Solutions, LLC
    --       (1,554 )
Acquisition of equipment and leasehold improvements
    (24,248 )     (12,645 )
Proceeds from disposition and sale of equipment and assets held for sale
    3,457       2,343  
Increase in notes receivable and other assets, net
    (137 )     (400 )
Net cash used by investing activities
    (24,104 )     (12,256 )

(Continued)
 

Air Methods Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
(Amounts in thousands)
(unaudited)

   
Three Months Ended March 31,
 
   
2012
   
2011
 
             
Cash flows from financing activities:
           
Proceeds from issuance of common stock, net
  $ 2,052       1,117  
Borrowings under line of credit
    28,738       --  
Payments under line of credit
    (16,271 )     --  
Payments for financing costs
    (7 )     (36 )
Payments of long-term debt and notes payable
    (4,256 )     (4,224 )
Payments of capital lease obligations
    (24,757 )     (13,879 )
Tax benefit from exercise of stock options
    1,070       375  
Net cash used by financing activities
    (13,431 )     (16,647 )
                 
Decrease in cash and cash equivalents
    (1,922 )     (4,298 )
                 
Cash and cash equivalents at beginning of period
    3,562       60,710  
                 
Cash and cash equivalents at end of period
  $ 1,640       56,412  
                 
Interest paid in cash during the period
  $ 5,493       4,456  
                 
Income taxes paid in cash during the period
  $  274        566  

Non-cash investing and financing activities:

In the quarter ended March 31, 2012, the Company entered into notes payable of $1,511 to finance the purchase of aircraft which were held in property and equipment pending permanent lease financing as of March 31, 2012, and into capital leases of $21,570 to finance the purchase of aircraft. The Company also settled notes payable of $27,940 in exchange for the aircraft securing the debt.

In the quarter ended March 31, 2011, the Company entered into notes payable of $6,714 to finance the purchase of aircraft which were held in property and equipment pending permanent lease financing as of March 31, 2011, and entered into capital leases of $1,318 to finance the purchase of aircraft.
 
 
See accompanying notes to condensed consolidated financial statements.
 

Air Methods Corporation and Subsidiaries
(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 the 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, 2011.

 
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)
Acquisition of OF Airholdings 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 $201.9 million, subject to final determination of working capital, as defined in the merger agreement, as of the closing date. As of December 31, 2011, the Company had recorded a liability of $3,119,000 for the estimated increase to the purchase price for the change in working capital. Based upon final agreed upon adjustments to the working capital measurement, the Company paid the sellers $3,176,000 during the first quarter of 2012, and no further amounts are due the sellers. The purchase price was financed primarily through a term loan under the Company’s Amended and Restated Revolving Credit, Term Loan and Security Agreement.
 
 
Air Methods Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements, continued
(unaudited)

(2)
Acquisition of OF Airholdings Corporation, continued

The allocation of the purchase price was as follows (amounts in thousands):

   
Allocation
December 31, 2011
   
Adjustments
   
Revised Allocation
 
Assets purchased:
                 
Receivables
  $ 28,622       --       28,622  
Aircraft
    33,500       --       33,500  
Goodwill
    89,116       (242 )     88,874  
Amortizable intangible assets
    63,100       --       63,100  
Aircraft under capital leases
    29,405       --       29,405  
Equipment and other property
    5,986       --       5,986  
Spare parts inventories
    4,525       --       4,525  
Other
    14,521       (1 )     14,520  
Total assets
    268,775       (243 )     268,532  
                         
Capital lease obligations assumed
    (38,034 )     --       (38,034 )
Net deferred tax liabilities
    (5,961 )     (188 )     (6,149 )
Other liabilities assumed
    (19,765 )     488       (19,277 )
Total liabilities assumed
    (63,760 )     300       (63,460 )
Purchase price
  $ 205,015       57       205,072  

Adjustments to the purchase price allocation during the first quarter of 2012 included the working capital adjustment to the purchase price, as described above, and revised estimates of liabilities related to aircraft repair costs based upon verification of open repair orders with aircraft parts vendors. The Company is still in the process of reviewing airworthiness documentation related to Omniflight’s aircraft spare parts inventory. Therefore, the allocation of the purchase price is still subject to refinement.

(3)
Stockholders’ Equity
 
Changes in stockholders’ equity for the three months ended March 31, 2012, consisted of the following (amounts in thousands except share amounts):

   
Shares Outstanding
   
Amount
 
             
Balances at January 1, 2012
    12,739,560     $ 287,902  
                 
Issuance of common shares for options exercised
    64,491       2,052  
Stock-based compensation
    26,506       612  
Tax benefit from exercise of stock options
    --       1,070  
Net income
    --       12,474  
                 
Balances at March 31, 2012
    12,830,557     $ 304,110  
 
 
Air Methods Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements, continued
(unaudited)

(4)
Revenue Recognition

In the first quarter of 2012, the Company adopted 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. Trade receivables are presented net of allowances for contractual discounts and uncompensated care. The Company determines its allowances for contractual discounts and uncompensated care based on estimated payer mix, payer reimbursement schedules, and historical collection experience. The allowances are reviewed monthly and adjusted periodically based on actual collections. Billings are charged off against the uncompensated care allowance when it is probable that the receivable will not be recovered. The allowance for contractual discounts is related primarily to Medicare and Medicaid patients. The allowance for uncompensated care is related primarily to receivables recorded for self-pay patients.
 
The Company has not changed its discount policies related to self-pay patients or deductible and copayment balances for insured patients during either 2012 or 2011. The allowance for uncompensated care was 37.4% of receivables from non-governmental payers as of March 31, 2012, compared to 38.8% at December 31, 2011, and 34.4% at March 31, 2011. The increase in the first quarter of 2012 compared to the first quarter of 2011 is due primarily to the impact of the acquisition of Omniflight in August 2011 and to regularly scheduled price increases. Omniflight had a higher gross charge structure and, therefore, a higher percentage of uncollectible accounts, than the Company’s historical operations prior to the acquisition. The decrease in the allowance percentage from December 31, 2011, to March 31, 2012, reflects an improvement in the payer mix. Receivables from self-pay patients represented approximately 34% of total receivables from non-governmental payers at March 31, 2012, compared to approximately 41% at March 31 and December 31, 2011.
 
The Company recognizes flight revenue at its standard rates for services provided, regardless of expected payer. In the period that services are provided and based upon historical experience, the Company records a significant provision for uncompensated care related to uninsured patients who will be unable or unwilling to pay for the services provided. The Company does not maintain an allowance or provision for uncompensated care for receivables from Hospital-Based Services payers. Flight revenue, net of provision for contractual discounts but before provision for uncompensated care, by major payer class, was as follows for the quarters ended March 31 (amounts in thousands):

   
2012
   
2011
 
             
Hospital-Based Services payers
  $ 51,637       46,146  
Third-party payers
    150,755       88,686  
Self-pay
    48,624       21,628  
Total
  $ 251,016       156,460  

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

(5)
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 outstanding and dilutive potential common shares during the period.
 
The reconciliation of basic to diluted weighted average common shares outstanding is as follows for the quarters ended March 31:

   
2012
   
2011
 
Weighted average number of common shares outstanding – basic
    12,793,640       12,607,522  
Dilutive effect of:
               
Common stock options
    117,924       150,129  
Unvested restricted stock
    4,252       1,018  
Weighted average number of common shares outstanding – diluted
    12,915,816       12,758,669  

Common stock options totaling 4,000 were not included in the diluted shares outstanding for the quarter ended March 31, 2012, because their effect would have been anti-dilutive.

 (6)
Fair Value of Financial Instruments

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosures about how fair value is determined for assets and liabilities and establishes a hierarchy by which these assets and liabilities must be grouped based on the type of inputs used in measuring fair value as follows:

 
Level 1:
quoted prices in active markets for identical assets or liabilities;
 
Level 2:
quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or
 
Level 3:
unobservable inputs, such as discounted cash flow models or valuations.
 
In the first quarter of 2012, the Company adopted Accounting Standards Update (ASU) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. 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.
 
 
Air Methods Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements, continued
(unaudited)

(6)
Fair Value of Financial Instruments, continued

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 and is classified as Level 2 in the fair value hierarchy. The fair value of all fuel derivative instruments included in prepaid expenses and other current assets was $283,000 at March 31, 2012 and $256,000 at December 31, 2011. 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 a non-cash mark to market derivative gain of $27,000 for the first quarter of 2012, compared to a non-cash mark to market gain of $1,043,000 for the first quarter of 2011. There were no cash settlements under the terms of the agreements in the first quarter of 2012, compared to $179,000 in the first quarter of 2011.
 
Long-term debt:

The fair value of long-term debt is classified as Level 3 in the fair value hierarchy because it 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 March 31, 2012, is estimated to be $274,393,000, compared to carrying value of $270,778,000. The fair value of long-term debt as of December 31, 2011, was estimated to be $266,213,000, compared to a carrying value of $262,567,000.

(7)
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. 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 under exclusive operating agreements. Services include aircraft operation and maintenance.
 
·
United Rotorcraft (UR) 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 Condensed Consolidated Financial Statements, continued
(unaudited)

(7)
Business Segment Information, continued

 
For quarter ended March 31:
 
CBS
   
HBS
   
UR
   
Corporate
Activities
   
Intersegment
Eliminations
   
Consolidated
 
2012
                                   
External revenue
  $ 131,956       51,637       7,221       --       --       190,814  
Intersegment revenue
    --       --       9,766       --       (9,766 )     --  
Total revenue
    131,956       51,637       16,987       --       (9,766 )     190,814  
Operating expenses, excluding depreciation & amortization
    (91,808 )     (40,949 )     (11,542 )     (7,688 )      7,090       (144,897 )
Depreciation & amortization
    (12,468 )     (7,785 )     (309 )     (317 )     --       (20,879 )
Interest expense
    (2,932 )     (2,468 )     (1 )     (192 )     --       (5,593 )
Other income, net
    507       383       --       40       --       930  
Income tax expense
    --       --       --       (7,901 )     --       (7,901 )
Segment net income (loss)
  $ 25,255       818       5,135       (16,058 )     (2,676 )     12,474  
                                                 
2011
                                               
External revenue
  $ 79,968       46,146       5,791       --       --       131,905  
Intersegment revenue
    57       --       5,668       --       (5,725 )     --  
Total revenue
    80,025       46,146       11,459       --       (5,725 )     131,905  
Operating expenses, excluding depreciation & amortization
    (59,822 )     (32,892 )     (8,279 )     (5,847 )      4,149       (102,691 )
Depreciation & amortization
    (8,292 )     (7,704 )     (223 )     (273 )     --       (16,492 )
Interest expense
    (2,143 )     (2,228 )     (5 )     (134 )     --       (4,510 )
Other income, net
    556       497       --       164       --       1,217  
Income tax expense
    --       --       --       (3,717 )     --       (3,717 )
Segment net income (loss)
  $ 10,324       3,819       2,952       (9,807 )     (1,576 )     5,712  



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

The following discussion of the results of operations and financial condition should be read in conjunction with our condensed 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; 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 UR 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 section 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. 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 first quarter of 2012 the CBS Division generated 69% of our total revenue, compared to 61% in the first quarter of 2011.
·
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 80% of total contract revenue) and hourly flight fees (approximately 20% of total contract revenue) billed to hospital customers. In the first quarter of 2012 the HBS Division generated 27% of our total revenue, compared to 35% in 2011.
·
United Rotorcraft (UR) Division - designs, manufactures, and installs aircraft medical interiors and other aerospace and medical transport products for domestic and international customers. In the first quarter of both 2012 and 2011 the UR Division generated 4% of our total revenue.

See Note 7 to the condensed 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 20% 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 quarter ended March 31, 2012, are 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 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 12,700 for the first quarter of 2012 compared to approximately 8,900 for the first quarter of 2011. Patient transports for CBS bases open longer than one year and excluding transports for Omniflight bases in the first quarter of 2012 (Same-Base Transports) were approximately 8,500 in the first quarter of 2012, compared to 8,700 in the first quarter of 2011. Cancellations due to unfavorable weather conditions for CBS bases open longer than one year were 935 lower in the first quarter of 2012, compared to the first quarter of 2011. Requests for community-based services decreased by 7.4% 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. Most of the significant provisions of the Patient Protection and Affordable Care Act have yet to take effect and portions of the act have been challenged in the Supreme Court. Net reimbursement per transport increased 16.6% in the quarter ended March 31, 2012, compared to the quarter ended March 31, 2011, attributed to recent price increases. Provisions for contractual discounts and estimated uncompensated care for CBS operations were as follows:
 
   
For quarters ended March 31,
 
   
2012
   
2011
 
Gross billings
    100 %     100 %
Provision for contractual discounts
    44 %     44 %
Provision for uncompensated care
    19 %     16 %

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. Payer mix has remained relatively constant in the first quarter of 2012 compared to the first quarter of 2011. 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.

·
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 19% 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, 2011, we have taken delivery of 32 new aircraft and expect to take delivery of five additional aircraft during 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 aircraft maintenance expense increased 38.5% from the first quarter of 2011 to the first quarter of 2012, while total flight hours for CBS and HBS operations increased 29.7% over the same period, reflecting the impact of the Omniflight acquisition.

·
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. Our pilots are represented by a collective bargaining unit and are covered under a collective bargaining agreement (CBA) which is effective for 2012 and 2013. Other employee groups may also elect to be represented by unions in the future.

Results of Operations

We reported net income of $12,474,000 for the three months ended March 31, 2012, compared to $5,712,000 for the three months ended March 31, 2011. The results for 2012 include the impact of the Omniflight acquisition which closed in August 2011. Same-Base Transports for CBS operations were 3.0% lower in the first quarter of 2012 compared to the first quarter of 2011, while net reimbursement per transport for CBS operations increased 16.6%.

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

Net flight revenue increased $57,623,000, or 46.3%, from $124,521,000 to $182,144,000 for the three months ended March 31, 2012, compared to 2011. 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 $52,132,000, or 66.5%, to $130,507,000 in the three months ended March 31, 2012, compared to 2011, for the following reasons:
 
·
Net revenue of $31,309,000 from Omniflight’s CBS operations for the first quarter of 2012.
 
·
Increase of 16.6% in net reimbursement per transport for the first quarter of 2012, compared to 2011, due to the benefit of recent price increases.
 
·
Decrease in Same-Base Transports of 258, or 3.0%, in the first quarter of 2012 compared to 2011. Cancellations due to unfavorable weather conditions for CBS bases open longer than one year were 935 lower in the first quarter of 2012, compared to the first quarter of 2011. Requests for community-based services decreased by 7.4% for bases open greater than one year.
 
·
Incremental net revenue of $7,809,000 generated from the addition of eleven new CBS bases either during or subsequent to the first quarter of 2011.
 
·
Closure of one base due to insufficient flight volume and the conversion of one base back to HBS operations during the fourth quarter of 2011, resulting in a decrease in net revenue of approximately $1,036,000.

·
HBS – Net flight revenue increased $5,491,000, or 11.9%, to $51,637,000 for the quarter ended March 31, 2012, compared to 2011, for the following reasons:
 
·
Net revenue of $4,837,000 from Omniflight’s HBS operations for the first quarter of 2012.
 
·
Cessation of service under two contracts and the conversion of two contracts to CBS operations, as well as the closure of certain satellite locations at the option of two current customers, during or subsequent to the first quarter of 2011, resulting in a decrease in net revenue of approximately $4,654,000.
 
·
Incremental net revenue of $2,377,000 generated from expansion under five contracts to additional bases of operation and the conversion of one CBS base back to HBS operations subsequent to the first quarter of 2011.
 
·
Increase of 5.1% in flight volume for all contracts excluding new contracts, contract expansions, closed contracts, and Omniflight operations for the first quarter of 2012.
 
·
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, and the renewal of contracts at higher rates.

 
Flight center costs (consisting primarily of pilot, mechanic, and medical staff salaries and benefits) increased $23,328,000, or 41.9%, to $78,982,000 for the quarter ended March 31, 2012, compared to 2011. Changes by business segment are as follows:

·
CBS – Flight center costs increased $19,915,000, or 54.2%, to $56,682,000 for the following reasons:
 
·
Flight center costs of approximately $15,544,000 related to Omniflight’s CBS operations during the first quarter of 2012.
 
·
Increase of approximately $3,643,000 for the addition of personnel to staff new base locations described above.
 
·
Decrease of $517,000 due to the closure of base locations described above.
 
·
Increase in salaries for merit pay raises.

·
HBS – Flight center costs increased $3,413,000, or 18.1%, to $22,300,000 primarily due to the following:
 
·
Flight center costs of approximately $2,249,000 related to Omniflight’s HBS operations during the first quarter of 2012.
 
·
Decrease of $1,567,000 due to the closure of base locations described above.
 
·
Increase of approximately $806,000 for the addition of personnel to staff new base locations described above.
 
·
Increase in salaries for merit pay raises.

Aircraft operating expenses increased $11,771,000, or 46.9%, for the quarter ended March 31, 2012, in comparison to the quarter ended March 31, 2011. Aircraft operating expenses consist primarily of fuel, insurance, and maintenance costs and generally are a function of the size of the fleet, type of aircraft flown, and number of hours flown. The increase in costs is due to the following:
 
·
Increase of $7,323,000, or 38.5%, in aircraft maintenance expense to $26,326,000. Total flight volume for CBS and HBS operations increased 29.7% for the first quarter of 2012 compared to 2011. The increase in maintenance expense reflects normal fluctuations in the timing of overhaul and replacement cycles for aircraft parts.
·
Increase of approximately 45.5% in the cost of aircraft fuel per hour flown. Fuel cost increased by $2,970,000 to a total expense of $5,495,000 for 2012. During both 2012 and 2011 we had commodity call options to protect against aircraft fuel price increases greater than 20%, covering essentially all of our fuel consumption for both years. Fuel expense for the first quarter of 2012 included a non-cash mark to market derivative gain of $27,000 compared to a gain of $1,043,000 in the first quarter of 2011. There were no cash settlements under the terms of the agreement in the first quarter of 2012, compared to $179,000 in the first quarter of 2011. Excluding the impact of the fuel derivative agreements, the cost of aircraft fuel per hours flown decreased 1.3% in the first quarter of 2012 compared to the first quarter of 2011.
·
Decrease in hull insurance rates effective July 2011.
·
Total aircraft operating expenses related to the Omniflight fleet were approximately $7,863,000 for the first quarter of 2012.

Medical Interiors and Products

Sales of medical interiors and products increased $1,431,000, or 24.7%, from $5,801,000 for the first quarter of 2011 to $7,232,000 for the first quarter of 2012. Significant projects in process during the first quarter of 2012 included 50 multi-mission interiors for the U.S. Army’s HH-60M helicopter and six aircraft interior kits for commercial customers. Revenue by product line was as follows:
·
$3,033,000 – governmental entities
·
$4,199,000 – commercial customers

Significant projects in process during the first quarter of 2011 included 32 multi-mission interiors for the U.S. Army’s HH-60M helicopter, approximately 187 litter systems for the U.S. Army’s Medical Evacuation Vehicle, and two aircraft interior kits for commercial customers. Revenue by product line was as follows:
·
$4,803,000 – governmental entities
·
$998,000 – commercial customers


Cost of medical interiors and products increased $419,000, or 10.5%, for the first quarter of 2012, as compared to the previous year, due primarily to the change in sales volume. Cost of medical interiors and products also includes certain fixed costs, such as administrative salaries and facilities rent, which do not vary with volume of sales and which are absorbed by both projects for external customers and interdivisional projects.

General
 
Depreciation and amortization expense increased $4,387,000, or 26.6% for the first quarter of 2012, compared to 2011. Depreciation related to Omniflight’s fixed assets, including aircraft under capital leases, was approximately $2,548,000 and amortization of Omniflight’s intangible assets was $986,000 for the first quarter of 2012. In addition, during the fourth quarter of 2011 and first quarter of 2012, we added 27 aircraft subject to capital leases, totaling approximately $49.8 million, to our depreciable assets.
 
General and administrative (G&A) expenses increased $6,568,000, or 35.9%, for the first quarter of 2012, compared to the first quarter of 2011, reflecting additional headcount required to manage increased operations as a result of the Omniflight acquisition. 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 13.0% of revenue in 2012, compared to 13.9% of revenue in 2011. During the first quarter of 2012, we completed the consolidation of the Part 135 Air Carrier Certificate for Omniflight into the Air Methods certificate.

Interest expense increased $1,083,000, or 24.0%, for the first quarter of 2012, compared to the first quarter of 2011, primarily due to interest recorded on capital lease obligations, totaling approximately $28.5 million as of March 31, 2012, 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 2.5% for the quarter ended March 31, 2012. In addition, we carried an average balance of $20.0 million against our line of credit during the first quarter of 2012, compared to no borrowings against our line in the first quarter of 2011. These increases were partially offset by the effect of the reduction in principal balances for long-term debt and capital lease obligations as a result of regularly scheduled payments and lease buyouts and the payoff of our previous $50 million term loan in July 2011.

Income tax expense was $7,901,000 in the first quarter of 2012, compared to $3,717,000 in the first quarter of 2011, at effective tax rates of approximately 38.8% and 39.4%, respectively. The effective rate for 2012 decreased primarily because of a decrease in certain permanent book-tax differences. 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 March 31, 2012, was $116,048,000, compared to $85,011,000 at December 31, 2011. Cash generated by operations was $35,613,000 in the first quarter of 2012, compared to $24,605,000 in the first quarter of 2011, reflecting the improvement in operations described above. In the first quarter of 2012, we were refunded approximately $7.7 million of aircraft deposits upon taking delivery of the aircraft and arranging permanent financing for the purchase. In the first quarter of 2012, we paid approximately $4.5 million for amounts previously accrued under the Economic Value Added Bonus Plan and other incentive compensation plans for executive and employee performance in 2011 and $2.2 million for amounts previously accrued for retroactive adjustments in pay resulting from the new CBA negotiated with our pilots during the fourth quarter of 2011. Days’ sales outstanding for CBS operations, measured by comparing net revenue for the annualized previous 3-month period to outstanding open net accounts receivable, increased from 93 days at December 31, 2011, to 100 days at March 31, 2012. Days’ sales outstanding as of March 31, 2011, were 101 days.

 
Cash used by investing activities totaled $24,104,000 in 2012 compared to $12,256,000 in 2011. In addition to the working capital adjustment of $3.2 million to the purchase price for Omniflight, equipment acquisitions in the first quarter of 2012 included the buy-out of thirteen previously leased aircraft for approximately $22.3 million. Equipment acquisitions in the first quarter of 2011 included the buy-out of seven previously leased aircraft for approximately $8.8 million.
 
Financing activities used $13,431,000 in 2012 compared $16,647,000 in 2011. The primary uses of cash in both 2012 and 2011 were regularly scheduled payments of long-term debt and capital lease obligations and capital lease buyouts. Lease buyouts in 2012 were funded primarily through borrowings under our line of credit and cash from current operations.
 
We currently intend to exercise early lease buyout options on up to 43 aircraft totaling approximately $90.2 million prior to the end of 2012. We expect to finance approximately $45.7 million of the buyouts with aircraft financiers under capital lease arrangements and to fund the balance with internally generated cash flow or availability under the line of credit.

Critical Accounting Policies
 
Our condensed 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 quarter ended March 31, 2012, a change of 100 basis points in the percentage of estimated contractual discounts and uncompensated care would have resulted in a change of approximately $3,589,000 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. 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. Establishing or increasing a valuation allowance in a period increases income tax expense. 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. We evaluate the recognition and measurement of uncertain tax positions based on the facts and circumstances surrounding the tax position and applicable tax law and other tax pronouncements. Changes in our estimates of uncertain tax positions would be recognized as an adjustment to income tax expense 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 six acquisitions and has been allocated to our operating segments. During the first quarter of 2012, we adopted 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, when we perform our annual goodwill assessment at December 31, we will not be required to calculate the fair value of a reporting unit unless we determine, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount.
 
Because ASU No. 2011-08 had not been adopted as of December 31, 2011, we evaluated goodwill for potential impairment using the 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, 2011, either the Company’s current public trading value or any reporting unit’s operating profit would have to decrease by more than 61% before the carrying value of the reporting unit exceeded its fair value.
 
Item 3.    Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in market risk at March 31, 2012, from that reported in our Annual Report on Form 10-K for the year ended December 31, 2011.

Item 4.     Controls and Procedures

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 Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Commission’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. Management, under the supervision and with the participation of the Certifying Officers, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2012, pursuant to Rule 13a-15(b) under the Exchange Act. Based on that evaluation, the Certifying Officers have concluded that, as of March 31, 2012, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

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.

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 for the year ended December 31, 2011.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

Not Applicable.

Item 3.
Defaults Upon Senior Securities

Not Applicable.

Item 4.

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:  May 4, 2012
By 
      \s\   Aaron D. Todd 
    Aaron D. Todd 
   
Chief Executive Officer
   
(Principal Executive Officer)
 

Date:  May 4, 2012
By 
      \s\   Trent J. Carman
    Trent J. Carman
   
Chief Financial Officer
   
(Principal Financial Officer)
 
 
Date:  May 4, 2012
By 
     \s\   Sharon J. Keck
    Sharon J. Keck
   
Chief Accounting Officer
   
(Principal Accounting Officer)
 
 
 21