0000932384-95-000082.txt : 19950811
0000932384-95-000082.hdr.sgml : 19950811
ACCESSION NUMBER: 0000932384-95-000082
CONFORMED SUBMISSION TYPE: 10-KT/A
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 19941231
FILED AS OF DATE: 19950810
SROS: NASD
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AIR METHODS CORP
CENTRAL INDEX KEY: 0000816159
STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, NONSCHEDULED [4522]
IRS NUMBER: 840915893
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-KT/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-16079
FILM NUMBER: 95560582
BUSINESS ADDRESS:
STREET 1: 7301 S PEORIA
STREET 2: P O BOX 4114
CITY: ENGLEWOOD
STATE: CO
ZIP: 80112
BUSINESS PHONE: 3037927400
MAIL ADDRESS:
STREET 1: 7301 S PEORIA
CITY: ENGLEWOOD
STATE: CO
ZIP: 80112
FORMER COMPANY:
FORMER CONFORMED NAME: CELL TECHNOLOGY INC /DE/
DATE OF NAME CHANGE: 19911128
10-KT/A
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 10-K/A-2
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended
--------------------------------------
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from July 1, 1994 to December 31, 1994
--------------- ------------------
COMMISSION FILE NUMBER 0-16079
-----------
AIR METHODS CORPORATION
----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-0915893
----------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
7301 SOUTH PEORIA, ENGLEWOOD, COLORADO 80112
----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (303) 792-7400
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Not Applicable
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.06 PAR VALUE PER SHARE (the "Common Stock")
-----------------------------------------------------------------
(Title of Class)
NASDAQ STOCK MARKET
-----------------------------------------------------------------
(Name of each exchange on which registered)
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of June 15, 1995 was approximately
$15,106,680/1/. The number of outstanding shares of Common Stock as
of June 15, 1995, was 8,075,023.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
--------------------
/1/ Excludes 1,360,943 shares of Common Stock held by directors,
officers, and shareholders whose ownership exceeds five percent
of the shares outstanding at June 15, 1995. Exclusion of shares
held by any person should not be construed to indicate that such
person possesses the power, direct or indirect, to direct or
cause the direction of the management of policies of the
Registrant, or that such person is controlled by or under common
control with the Registrant.
TABLE OF CONTENTS
-----------------
To Form 10-K/A-2
Page
----
PART I
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . 1
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . 2
Results of Operations. . . . . . . . . . . . . . . . . . . 2
Liquidity and Capital Resources. . . . . . . . . . . . . . 7
Outlook for 1995 . . . . . . . . . . . . . . . . . . . . . 7
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . 8
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
i
ITEM 6. SELECTED FINANCIAL DATA
The following tables present selected financial information
of the Company which has been derived from the Company's audited
financial statements. Prior to June 30, 1992, the statements
reflected the Company's operations as a development stage
biotechnology company. This selected financial data should be read in
conjunction with the financial statements of the Company and notes
thereto appearing in Item 8 of this report.
SELECTED FINANCIAL DATA OF THE COMPANY
(Amounts in thousands except share and per share amounts)
Two Months
Six Months Ended Year Ended
Ended Year Ended June 30, June 30, April 30,
December 31, -------------------------------- ----------- ------------------
1994 1994 1993 1992 1991 1991 1990
------------ ------- -------- -------- ----------- ------ ------
STATEMENT OF OPERATIONS DATA:
Revenue . . . . . . . . . . . . . $13,871 27,898 25,340 12,747 -- -- --
Operating expenses:
Operating . . . . . . . . . . . 12,678 25,314 20,319 12,066 -- -- --
Research and development. . . . -- -- -- -- -- 2,315 3,605
General and administrative. . . 2,176 5,761 4,479 3,984 642 2,325 2,405
Restructuring and other
non-recurring . . . . . . . . -- 3,010 -- -- 338 1,915 --
Other income (expense), net . . . (872) (888) (976) 704 87 857 1,269
Extraordinary gain (loss) . . . . -- (182) 173 -- -- -- --
-------- -------- -------- -------- ------- -------- --------
Net loss. . . . . . . . . . . . . $(1,855) (7,257) (261) (2,599) (893) (5,698) (4,741)
======== ======== ======== ======== ======= ======== ========
Loss per common share . . . . . . $ (.23) (1.03) (.08) (1.42) (.63) (4.03) (3.36)
======== ======== ======== ======== ======= ======== ========
Weighted average number of shares
of Common Stock outstanding . . 8,023,225 7,056,445 3,453,111 1,829,456 1,420,148 1,413,775 1,409,504
========= ========= ========= ========= ========= ========= =========
As of As of June 30, As of April 30,
December 31, ------------------------------ ------------------
1994 1994 1993 1992 1991 1990
------------ ------ ------ ------ ------ ------
BALANCE SHEET DATA:
Total assets. . . . . . . . . . $48,134 51,900 43,312 27,835 8,480 13,901
Long-term liabilities . . . . . 18,375 18,688 23,279 14,845 153 462
Stockholders' equity. . . . . . 18,031 19,818 14,181 5,893 6,605 12,840
____________________
Includes results of the aeromedical operations for only the eight-month period from the completion of the
acquisition, i.e., November 1, 1991, through June 30, 1992.
1
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Six months ended December 31, 1994 compared to 1993
In March, 1995, the Company announced a change in its fiscal year
end from June 30 to December 31. The following table presents
operating results for the six months ended December 31, 1993 to
facilitate Management's Discussion and Analysis. All references to
the six months ended December 31, 1993, in this section of
Management's Discussion and Analysis are to the balances shown in this
schedule.
(Amounts in thousands)
Revenue:
Flight revenue. . . . . . . . . . . . . . . . . $12,320
Sales of medical interiors and products . . . . 2,078
Gain on disposition of assets . . . . . . . . . 922
Operating Expenses:
Flight centers. . . . . . . . . . . . . . . . . 4,050
Aircraft operations . . . . . . . . . . . . . . 4,025
Aircraft rental . . . . . . . . . . . . . . . . 1,373
Cost of medical interiors and products sold . . 1,546
Depreciation and amortization . . . . . . . . . 982
General and administrative. . . . . . . . . . . 2,846
Other income (expense):
Interest expense. . . . . . . . . . . . . . . . (608)
Interest income . . . . . . . . . . . . . . . . 46
Other, net. . . . . . . . . . . . . . . . . . . 163
Net loss. . . . . . . . . . . . . . . . . . . . . (82)
The Company reported a net loss of $1,855,000 for the six months
ended December 31, 1994, compared to a net loss of $82,000 for the six
months ended December 31, 1993. The six months ended December 31,
1994 included a loss of $1,023,000 incurred by the Company's Product
Division, which manufactures and installs interiors and equipment for
medical aircraft, and merger termination expenses of $305,000 related
to the Company's proposed acquisition of Rocky Mountain Helicopters,
Inc. ("RMHI"), as discussed below.
Flight revenue increased $761,000 or 6.2% from $12,320,000 for
the six months ended December 31, 1993, to $13,081,000 for the six
months ended December 31, 1994. The increase was primarily
attributable to revenues of $1,246,000 from contracts added in
November 1993 and July 1994 and to annual increases in established
contracts based on changes in the consumer price index. Flight hours
were 6,500 and 6,800 for the six months ended December 31, 1994 and
1993, respectively. The decrease in flight hours is due mainly to the
discontinuation of the Company's air charter operations and three
fixed wing contracts during the six months ended December 31, 1994.
Flight revenue is generally lower in the quarter ended December 31
than in other quarters of the same year due to the lower number of
flight hours flown during the winter months because of weather
restrictions at many bases. Flight center costs also increased 9.3%
for the six months ended December 31, 1994 and were affected by the
same factors as flight revenue.
Sales of medical interiors decreased by $1,288,000 or 62.0% from
$2,078,000 for the six months ended December 31, 1993, to $790,000 for
the six months ended December 31, 1994. In 1994 the Company
recognized revenue of $234,000 from the manufacture of a medical
interior for a South American customer and $450,000 from the sale of a
medical interior to one of the Company's client hospitals. In the
comparable six-month period in 1993 the Company recognized revenue
from the manufacture of five emergency medical interiors for Bell
Helicopters, Inc. for use outside the United States. The cost of
medical interiors also decreased by 15.7% for the six months ended
December 31, 1994 as compared to the previous year because of the
decrease in the number of interiors sold. The cost of medical
interiors exceeded the proceeds from the sales of interiors for the
period primarily because of a loss of approximately $380,000 on the
interior sold to the Company's
2
client hospital. The loss reflected significant engineering and
design work which accounted for 25% of the interior cost.
Aircraft operating expenses increased by 10.4% for the six months
ended December 31, 1994, in comparison to the same period in 1993.
The increase is primarily attributable to an increase of approximately
17.3% in hull and liability insurance rates as well as the addition of
3 aircraft with insured hull values totaling $11.3 million to the
Company's fleet in May and June of 1994. This increase was partially
offset by the elimination of operating expenses for 4 airplanes which
were removed from the Company's fleet subsequent to December 31, 1993.
Aircraft operating expenses consist of fuel, insurance, and
maintenance costs and generally are a function of the size of the
fleet, the type of aircraft flown, and the number of hours flown.
Aircraft rental expense decreased by 27.6% for the six months
ended December 31, 1994, as compared to 1993. Subsequent to
December 31, 1993, the Company eliminated four leased aircraft from
its fleet, resulting in a decrease of $208,000 in lease costs.
Depreciation and amortization expense fluctuates with the size
and value of the Company's fleet, as reflected by an increase of 29.5%
for the six months ended December 31, 1994. The Company has increased
its depreciable asset base by $7.9 million since December 31, 1993, as
a result of the acquisition of additional aircraft and the manufacture
and installation of medical interiors to service hospital contracts.
The 23.5% decrease in general and administrative expenses for the
six-month period ended December 31, 1994, reflects the effects of the
Company's restructuring plan which was implemented in the quarters
ended March 31 and June 30, 1994. The restructuring plan included a
reduction in the administrative work force and a decreased reliance on
outside contractors and other professional services, resulting in a
decline in administrative expense of approximately $130,000 and
$160,000, respectively, in the six months ended December 31, 1994.
The Company also realized a reduction of $50,000 in telephone and
communications expense due to a change in long-distance carriers.
The increase of 17.9% in interest expense for the six months
ended December 31, 1994 is due to interest incurred on a note to
finance the acquisition of an aircraft which was placed into service
late in May 1994. This increase was partially offset by the
elimination of interest on notes which were retired when the two
airplanes which were financed under these notes were sold in September
and December 1994.
Net losses on the disposition of assets for the six months ended
December 31, 1994 included a reduction of $340,000 in the basis of one
of the aircraft held for sale by the Company. Due to significant
design and engineering costs incurred in the completion of this
aircraft, the Company determined that an additional valuation
allowance was necessary to properly reflect the net realizable value
of the aircraft as of December 31, 1994. This valuation allowance was
partially offset by a gain of approximately $57,000 on the sale of one
of the Company's aircraft and a gain of $131,000 on the sale of Golden
Eagle Charters, Inc. ("Golden Eagle"), the Company's air charter
subsidiary. The Company completed the sale of all of the outstanding
shares of common stock of Golden Eagle to a company on September 21,
1994, in exchange for $10,000 and the assumption of certain
liabilities. The Company's decision to discontinue air charter
operations was part of the restructuring plan approved in 1994 and was
due to the significant losses incurred by this line of business. In
the six months ended December 31, 1993, the Company recognized a
$922,000 gain on the sale of two aircraft. The loss on early
extinguishment of debt in the six months ended December 31, 1993,
resulted from the retirement of a note secured by one of the aircraft
sold; no comparable prepayment penalties were incurred in the six
months ended December 31, 1994.
Interest and dividend income increased 254.3% in the six-month
period ended December 31, 1994 compared to the same period in the
prior year due to interest earned on two promissory notes received as
a portion of the proceeds from the sale of certain Company-owned
aircraft in December 1993.
Other income for the six months ended December 31, 1993, included
revenue recognized on the outlicensing of a biologic response
modifier, a naturally occurring substance designed to alter the body's
immune system and its reaction to cancer and other diseases, developed
by the Company when doing business as Cell Technology, Inc., a
research and development company. The Company recognized no
comparable revenue in 1994.
3
During the quarter ended September 30, 1994, the Company
discussed the feasibility of a business combination of the emergency
air medical transport business of the Company and RMHI. The Company
ultimately declined to submit a final bid for the assets of RMHI. The
expenses incurred as part of the due diligence process consist
primarily of legal and professional fees and comprise the balance of
the merger termination expense recognized in the six months ended
December 31, 1994.
1994 compared to 1993
The Company reported a loss of $7,257,000 for the year ended
June 30, 1994, as compared to a loss of $261,000 for the year ended
June 30, 1993. The operating results for fiscal 1994 included a loss
on the disposition of assets of $790,000, restructuring charges of
$3,010,000, and other non-recurring charges and a loss on the early
retirement of debt of $1,061,000. The net loss for the year,
excluding the effect of these transactions, was $2,396,000.
In the fourth quarter of 1994 the Company completed a
restructuring plan for the Company's continuing air medical flight and
manufacturing operations designed to reduce costs and improve
operating efficiencies. The restructuring plan included the
discontinuation of substantially all of the airplane charter
operations of Golden Eagle, an 18% overall reduction in personnel, a
reduction in officers' salaries, and the disposal of selected under-
utilized aircraft. In addition, the Company canceled a proposed debt
refinancing and public preferred stock offering. The reductions in
personnel were primarily in the manufacturing and administrative
functions and did not significantly affect the Company's maintenance
and air medical flight capabilities. Restructuring charges totaled
$3,010,000 for the year ended June 30, 1994 and, with the exception of
approximately $614,000 in severance pay and $149,000 for certain
placement fees for the proposed preferred stock offering, consisted of
the write-off of previously recorded assets and other non-cash
charges.
Flight revenue increased $3,878,000 or 18.1% from $21,468,000 for
the year ended June 30, 1993, to $25,346,000 for the year ended June
30, 1994, primarily as a result of the addition of three new hospital
contracts which contributed revenues of $1,517,000 in fiscal 1994. In
addition, revenue increased by $883,000 in fiscal 1994 under three
contracts which had been added during the year ended June 30, 1993.
Flight revenue under established hospital contracts was not
significantly affected by changes in either pricing or volume of
flight hours. The majority of the Company's contracts with its
hospital customers is also subject to an annual increase based on the
consumer price index. Flight center expenses, which include pilot and
mechanic salaries, benefits, and training, also increased by 22.9% in
1994, and were affected by the same factors as flight revenue. These
expenses generally vary with the number of customer bases and, to a
lesser degree, with the number of aircraft operated by the Company.
Aircraft operating expenses increased by 49.3% from 1993 to 1994
primarily because of the addition of 4 helicopters and 6 airplanes to
the Company's fleet since the end of fiscal 1993 and the operation of
2 airplanes in the executive air charter service from September 1993
to April 1994, as well as an approximately 30% increase in hull and
liability insurance rates. The increase in insurance rates is related
to overall increases experienced by the aviation industry as a whole.
Aircraft operating expenses consist of fuel, insurance, and
maintenance costs and generally are a function of the size of the
fleet, the type of aircraft flown, and the number of hours flown by
the fleet.
Depreciation and amortization expense also fluctuates with the
size of the Company's fleet, as reflected by the 52.7% increase in
1994. The Company placed aircraft and related medical interiors
totaling $10 million into service in the current fiscal year.
Historically, the Company's flight operations have been seasonal.
In the winter months the company's hospital customers have customarily
experienced reduced acute and trauma in-patient hospital populations
requiring emergency aeromedical transport. To a lesser extent, poorer
weather reduces the level of flight operations from the hospitals
served by the Company.
4
Sales of medical interiors decreased by $1,320,000 or 34.1% from
$3,872,000 in fiscal year 1993 to $2,552,000 in fiscal 1994. In 1994
the Company sold five medical interiors to Bell Helicopter Textron,
Inc. ("Bell") for aircraft for use outside the United States. In 1993
sales consisted of three medical interiors for Bell and one for the
U.S. Army. The decrease in the cost of medical interiors over the
same period mirrored the decrease in sales. The cost of medical
interiors for fiscal year 1994 also included $653,000 of payments for
work on a medical interior that the Company subcontracted to an
outside vendor. The medical interior was for the Company's internal
use, and therefore no corresponding revenue was recognized. The work
done by the subcontractor was subsequently determined to be
unsatisfactory and was reperformed by the Company.
Operating expenses in the year ended June 30, 1994, also included
net losses of $790,000 on the disposition of assets. Gains of
$1,851,000 recognized on the disposition of four of the Company's
aircraft were offset by valuation allowances of $2,641,000 established
for seven aircraft designated for disposal as part of the Company's
restructuring plan. There were no comparable gains or losses in
fiscal 1993.
The 28.6% increase in general and administrative expenses in 1994
reflected the additional support necessary for the Company's expanded
operations as well as increased legal and professional fees incurred
as the Company aggressively pursued new business opportunities
including the acquisition of Golden Eagle Aviation and the proposed
joint venture with Medica Movil, S.A. de C.V.
In the first quarter of 1993, the Company began negotiations with
Medica Movil, S.A. de C.V., the largest ground ambulance provider in
Mexico, to form a joint venture to provide air medical services in
Mexico under a membership capitation program. In the third quarter of
1994, concurrent with the previously mentioned restructuring plan, the
Company initiated discussions concerning alternative financing
arrangements for the joint venture. Though continued involvement in
the joint venture is not assured, the Company does not expect any
impact on its operations related to restructuring or termination of
the joint venture.
1993 compared to 1992
Prior to the acquisition of Air Methods-Colorado by the Company
in November 1991, the Company operated as a development-stage
biotechnology research and development company engaged primarily in
the development of anti-cancer products. Since the acquisition, the
Company's operations have consisted predominantly of providing
aeromedical emergency services and systems to hospitals throughout the
United States and the related manufacture and sale of aircraft medical
interiors and equipment to third parties. Due to this fundamental
change in the Company's business, the Company does not believe that
comparison of its operating results for the year ended June 30, 1993
with the year ended June 30, 1992, is meaningful. Accordingly, the
following discussion compares the Company's results of operations for
the year ended June 30, 1993 with the results of Air Methods -
Colorado for the four months ended October 31, 1991, plus the results
of the Company for the eight months ended June 30, 1992.
The following table combines the various revenue, operating
expenses and other income (expense) categories of the Company for the
8 months ended June 30, 1992 with that of Air Methods-Colorado for the
4 months ended October 31, 1991, which will facilitate management's
discussion and analysis. All references to the year ended June 30,
1992, in this section of Management's Discussion & Analysis are to the
combined balances shown on this schedule.
5
Company Air Methods-Colorado
------------------ --------------------
Eight Months Ended Four Months Ended
June 30, 1992 October 31, 1991 Combined
------------------ -------------------- ------------
Revenue $12,747 $6,446 $19,193
Operating Expenses:
Flight center. . . . . . . . . . . 3,819 1,958 5,777
Aircraft operations. . . . . . . . 4,520 1,520 6,040
Aircraft rental. . . . . . . . . . 1,978 797 2,775
Depreciation and amortization. . . 908 291 1,199
General and administrative . . . . 3,406 1,145 4,551
Cost of medical interiors and
products sold. . . . . . . . . . 841 643 1,484
Other income (expense):
Interest expense . . . . . . . . . (588) (378) (966)
Interest income. . . . . . . . . . 169 -- 169
Other, net . . . . . . . . . . . . 962 -- 962
Operating revenues increased 32.0% for the year ended June 30,
1993 compared to the year ended June 30, 1992. The increase was
primarily attributable to revenues of $2,672,000 generated from the
initiation of three new hospital contracts correspondingly utilizing
three new aircraft which were added in fiscal 1993. In addition, the
Company realized an increase of $2,980,000 in revenues from the sale
of medical interiors in 1993, principally due to the sale of three
interiors to Bell Helicopter, Inc. and the sale of one interior to a
subsidiary of E-Systems, Inc. pursuant to a proof of principle
retrofit agreement on behalf of the U.S. Army regarding the UH-60Q
Blackhawk helicopter.
Flight center expenses increased 21.5% for the year ended
June 30, 1993, compared to the year ended June 30, 1992. The increase
was virtually the same as the revenue increase between the two years,
and was primarily due to start-up and on-going expenses related to the
initiation of the three new aeromedical programs discussed above.
Aircraft operating expenses decreased 9.2% from 1992 to 1993.
This decrease was primarily due to the comparatively high overhaul and
replacement parts costs in the prior 1992 twelve month period.
The cost of medical interiors and parts sold increased 117.5%
from 1992 to 1993. These increases were primarily due to an increase
in the number of airborne emergency medical interiors sold to third
parties and to the sale of a correspondingly greater amount of medical
interior parts and components to such parties.
General and administrative expenses decreased 1.6% in 1993 as
compared to 1992. The lack of increase even given the increase in
revenues and overall operations, was primarily attributable to
reductions in services and related costs resulting from utilization of
services provided by third parties as well as other administrative
cost cutting measures implemented by the Company during the fiscal
year.
Interest expense increased 12.0% in 1993 primarily because of new
debt incurred to finance additional aircraft. The increase was
mitigated substantially by the reduction in interest rates on the
Company's long term debt to Textron Financial Services, Inc., an
affiliate of the Company's principal aircraft supplier, Bell
Helicopter ("Textron"), for the remaining life of the notes.
6
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $696,000 and a
working capital deficit of $1,892,000 as of December 31, 1994, as
compared to cash and cash equivalents of $3,421,000 and a working
capital deficit of $1,753,000 at June 30, 1994. The decrease in cash
and cash equivalents in the six months ended December 31, 1994, is
primarily due to the funding of regularly scheduled debt and lease
payments as well as the retirement of two notes secured by the
Company's two aircraft which were sold in September and December of
1994. In addition, the Company invested approximately $400,000 during
the six months ended December 31, 1994, in the completion and
installation of a medical interior for a helicopter placed in service
in January 1995.
In the year ended June 30, 1993, the Company used cash of
$1,551,000 to fund its operations, while in fiscal year 1994,
operations generated a positive cash flow of $1,039,000. During the
six months ended December 31, 1994 the Company used $629,000 to fund
its operations, including $177,000 to pay placement fees and severance
pay accrued as part of the restructuring.
In addition to cash flow from operations, the Company realized
$6,825,000 from the issuance of common stock upon the exercise of
warrants and options and $5,730,000 from a private placement of stock
with institutions outside the United States during fiscal 1994.
The Company's usual arrangements with its hospital clients have
involved substantial capital commitments by the Company for the
aircraft and related equipment required to furnish the emergency air
medical transport services to the hospitals. The Company believes,
however, that it may be advantageous to both its client hospitals and
the Company from time to time for aircraft to be purchased by the
hospitals, thus permitting reduced capital and long-term borrowing
commitments by the Company. The Company has pursued and intends to
continue to pursue this type of contracting arrangement whenever it
appears beneficial to the parties to the arrangement.
As of December 31, 1994, the Company had a note payable of
$3,819,000 which was collateralized by a helicopter listed for sale
and for which the maturity date had been extended in the past. In
March 1995 the Company sold the underlying helicopter and paid off the
note balance in full.
In 1995 American Eurocopter Corporation cancelled purchase
commitments which had previously obligated the Company to acquire four
helicopters before December 1996.
As of December 31, 1994, the Company holds unencumbered notes
receivable of $2,521,000 and aircraft valued at $7.4 million. The
Company believes that it could utilize a portion of these unencumbered
assets as collateral for borrowing funds as an additional source of
working capital if necessary. The Company also expects continued
improvement in cash flows from operations in calendar 1995 as a result
of new Products Division contracts and improvements in the air medical
flight operations discussed below. The Company believes that these
borrowing resources coupled with the expected improvement in
operations will allow the Company to meet its obligations in the
coming year without additional external financing.
OUTLOOK FOR 1995
In December 1994, the Company was awarded the following
contracts: the manufacture and installation of a medical interior and
avionics system for a South American customer; the refurbishment of a
medical interior for an existing hospital client; and the development
and installation of a passenger oxygen system for a regional airline.
In addition, as of December 1994, the Company had executed a Letter of
Intent with a non-profit organization to manufacture and install a
medical interior for a jet transport aircraft. Revenue from these
four projects is expected to total approximately $3.2 million and to
be recognized throughout 1995 and 1996. The Company continues to
pursue an aggressive marketing strategy for its medical interiors and
other products.
When aeromedical contracts with certain hospitals have come due
for renewal, the Company has successfully negotiated improved
operating margins and expects to continue these efforts in 1995 as
additional
7
contracts are renewed. As a result of the negotiations conducted in
late 1994, the Company expects additional revenue of approximately
$271,000 in calendar 1995 from these specific aeromedical contracts.
With the new business announced for the Products Division, improved
margins on certain hospital contracts and continued minimization of
cost of administrative overhead, the Company expects increases in both
cash flow and operating income in 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Consolidated Financial Statements attached hereto.
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Amendment No. 2 to Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized.
AIR METHODS CORPORATION
Date: August 9, 1995 By: Aaron D. Todd
--------------------------------
Aaron D. Todd
Principal Financial and
Accounting Officer
9
AIR METHODS CORPORATION
AND SUBSIDIARY
TABLE OF CONTENTS
-----------------------------------------------------------------
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . F-1
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
CONSOLIDATED BALANCE SHEETS,
December 31, 1994 and June 30, 1994 . . . . . . . . . . . . . F-2
CONSOLIDATED STATEMENTS OF OPERATIONS,
Six Months Ended December 31, 1994 and Years Ended
June 30, 1994, 1993, and 1992 . . . . . . . . . . . . . F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY,
Six Months Ended December 31, 1994 and Years Ended
June 30, 1994, 1993, and 1992 . . . . . . . . . . . . . F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS,
Six Months Ended December 31, 1994 and Years Ended
June 30, 1994, 1993, and 1992 . . . . . . . . . . . . . F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
December 31, 1994 and June 30, 1994 . . . . . . . . . . . . . F-8
All supporting schedules are omitted because they are inapplicable,
not required, or the information is presented in the consolidated
financial statements or notes thereto.
Independent Auditors' Report
----------------------------
BOARD OF DIRECTORS AND STOCKHOLDERS
AIR METHODS CORPORATION
We have audited the accompanying consolidated financial statements of
Air Methods Corporation and subsidiary as listed in the accompanying
table of contents. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Air Methods Corporation and subsidiary as of December 31, 1994 and
June 30, 1994, and the results of their operations and their cash
flows for the six months ended December 31, 1994 and each of the years
in the three-year period ended June 30, 1994, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Denver, Colorado
June 8, 1995
F-1
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND JUNE 30, 1994
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
----------------------------------------------------------------------
December 31, June 30,
Assets 1994 1994
------ ------------ -------
(As Restated)
(See Note 15)
Current assets:
Cash and cash equivalents $ 696 3,421
Short-term investments -- 20
Current installments of notes receivable 324 309
Receivables (note 5):
Trade 900 978
Insurance proceeds 49 --
Employees and other 65 72
------ ------
1,014 1,050
Inventories (note 5) 1,522 1,329
Work-in-process on medical interior contracts 240 174
Assets held for sale (notes 4 and 5) 4,529 5,065
Prepaid insurance 1,221 --
Other prepaid expenses 290 273
------ ------
Total current assets 9,836 11,641
------ ------
Equipment and leasehold improvements (notes 2, 5, and 6):
Flight and ground support equipment 36,221 36,232
Furniture and office equipment 1,161 1,145
------ ------
37,382 37,377
Less accumulated depreciation and amortization (4,667) (3,484)
------ ------
Net property and equipment 32,715 33,893
------ ------
Excess of cost over the fair value of net assets acquired, net of
accumulated amortization of $308 and $259 at December 31,
1994 and June 30, 1994, respectively (notes 2, 3, and 4) 2,119 2,168
Notes receivable, less current installments 2,197 2,361
Patent application costs and other assets, net of accumulated
amortization of $424 and $383 at December 31, 1994 and June 30,
1994, respectively (note 5) 1,267 1,837
------ ------
Total assets $48,134 $51,900
====== ======
(Continued)
F-2
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, CONTINUED
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
----------------------------------------------------------------------
December 31, June 30,
1994 1994
------------ -------
(As Restated)
(See Note 15)
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Notes payable (note 5) $ 2,278 1,054
Current installments of long-term debt (note 5) 4,870 5,921
Current installments of obligations under capital leases (note 6) 722 706
Accounts payable 746 915
Accrued overhaul and parts replacement costs 804 809
Deferred revenue 10 1,011
Accrued restructuring expenses (note 4) 114 291
Other accrued liabilities 2,184 2,687
-------- --------
Total current liabilities 11,728 13,394
-------- --------
Long-term debt, less current installments (note 5) 7,569 8,110
Obligations under capital leases, less current installments (note 6) 5,302 5,672
Accrued overhaul and parts replacement costs 4,559 3,961
Other liabilities 945 945
-------- --------
Total liabilities 30,103 32,082
-------- --------
Stockholders' equity (notes 2, 3, and 7):
Preferred stock, $1 par value. Authorized 5,000,000 shares,
none issued and outstanding -- --
Common stock, $.06 par value. Authorized 16,000,000 shares;
issued 8,051,765 and 8,041,518 shares at December 31, 1994
and June 30, 1994, respectively 482 482
Additional paid-in capital 49,572 49,504
Accumulated deficit (32,022) (30,167)
-------- --------
18,032 19,819
Treasury stock, 25,606 shares at December 31, 1994 and
June 30, 1994 (1) (1)
-------- --------
Total stockholders' equity 18,031 19,818
-------- --------
Commitments and contingencies (notes 6 and 13)
Total liabilities and stockholders' equity $48,134 $51,900
======= =======
See accompanying notes to consolidated financial statements.
F-3
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
----------------------------------------------------------------------
Six Months
Ended Year Ended June 30,
December 31, ---------------------------------------------
1994 1994 1993 1992
------------ ------ ------ ------
(As Restated)
(See Note 15)
Revenue:
Flight revenue (note 8) $13,081 $25,346 21,468 11,855
Sales of medical interiors and products 790 2,552 3,872 892
-------- ------- ------- -------
13,871 27,898 25,340 12,747
Operating expenses:
Flight centers 4,427 8,626 7,017 3,819
Aircraft operations 4,445 8,188 5,483 4,520
Aircraft rental (note 6) 994 2,915 3,153 1,978
Cost of medical interiors and products sold 1,303 2,599 3,228 841
Depreciation and amortization 1,272 2,196 1,438 908
General and administrative 2,176 5,761 4,479 3,984
Loss on disposition of assets (note 3) 237 790 -- --
Restructuring and other non-recurring expenses
(note 4) -- 3,010 -- --
-------- ------- ------- -------
14,854 34,085 24,798 16,050
-------- ------- ------- -------
Operating income (loss) (983) (6,187) 542 (3,303)
Other income (expense):
Interest expense (717) (1,246) (1,082) (613)
Interest and dividend income 163 188 121 355
Merger termination expense (note 11) (305) -- (272) --
Other, net (note 11) (13) 170 257 962
-------- -------- -------- --------
Loss before extraordinary item (1,855) (7,075) (434) (2,599)
Extraordinary item -- gain (loss) on early
extinguishment of debt (notes 5 and 6) -- (182) 173 --
-------- -------- -------- --------
Net loss $(1,855) (7,257) (261) (2,599)
======== ======== ======== ========
Loss per common share before extraordinary item $(.23) (1.00) (.13) (1.42)
Gain (loss) on early extinguishment of debt per
common share -- (.03) .05 --
-------- -------- -------- --------
Loss per common share $(.23) (1.03) (.08) (1.42)
====== ====== ====== ======
Weighted average number of common shares outstanding 8,023,225 7,056,445 3,453,111 1,829,456
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
F-4
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (As Restated, see
Note 15)
SIX MONTHS ENDED DECEMBER 31, 1994 AND YEARS ENDED JUNE 30, 1994, 1993
AND 1992
(AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
----------------------------------------------------------------------
Common Stock Treasury Stock Additional Total stock-
----------------- ----------------- paid-in Accumulated holders'
Shares Amount Shares Amount capital deficit equity
------ ------ ------ ------ ---------- ----------- ------------
BALANCES AT JULY 1, 1991 1,420,149 $ 85 -- $ -- 26,570 (20,050) 6,605
Issuance of common shares for options
exercised and services rendered 20,937 1 -- -- 124 -- 125
Amortization of deferred compensation
expense (note 7) -- -- -- -- 26 -- 26
Payment for fractional shares resulting
from reverse stock split (840) -- -- -- (2) -- (2)
Issuance of common shares in business
combination (note 2) 692,730 42 93,843 (6) 1,702 -- 1,738
Net loss -- -- -- -- -- (2,599) (2,599)
---------- ----- ------- ----- ------- -------- -------
BALANCES AT JUNE 30, 1992 2,132,976 128 93,843 (6) 28,420 (22,649) 5,893
Issuance of common shares for options
exercised and services rendered 5,030 -- -- -- 53 -- 53
Issuance of common shares in private
offering, net of syndication costs of
$1,470 (note 7) 2,386,839 144 -- -- 5,547 -- 5,691
Issuance of common shares under the
Restricted Stock Plan (note 7) 102,907 6 -- -- (6) -- --
Amortization of deferred compensation
expense (note 7) -- -- -- -- 191 -- 191
Retirement of unvested shares and
options forfeited under the Restricted
Stock Plan (note 7) (1,770) -- -- -- (1) -- (1)
Issuance of common shares for
warrants exercised, net of solicitation
costs of $250 (note 7) 636,148 38 -- -- 2,577 -- 2,615
Net loss -- -- -- -- -- (261) (261)
---------- ----- -------- ----- ------- -------- -------
BALANCES AT JUNE 30, 1993 5,262,130 316 93,843 (6) 36,781 (22,910) 14,181
Issuance of common shares for options
exercised and services rendered 533,798 18 -- -- 1,306 -- 1,324
Issuance of common shares for
warrants exercised, net of solicitation
costs of $429 (note 7) 1,272,626 90 -- -- 5,411 -- 5,501
Issuance of common shares in private
offering (note 7) 1,011,190 61 -- -- 5,669 -- 5,730
Issuance of common shares in
acquisition (note 3) 55,617 3 -- -- 437 -- 440
Amortization of deferred compensation
expense (note 7) -- -- -- -- 218 -- 218
Retirement of unvested shares and
options forfeited under the Restricted
Stock Plan (note 7) -- -- -- -- (8) -- (8)
In-kind tax withholding elected by
employees under the Restricted Stock
Plan (note 7) -- -- 25,606 (1) (310) -- (311)
Cancellation of treasury shares (93,843) (6) (93,843) 6 -- -- --
Net loss -- -- -- -- -- (7,257) (7,257)
---------- ----- -------- ----- ------- -------- -------
BALANCES AT JUNE 30, 1994 8,041,518 482 25,606 (1) 49,504 (30,167) 19,818
Issuance of common shares for options
exercised and services rendered 10,247 -- -- -- 60 -- 60
Amortization of deferred compensation
expense (note 7) -- -- -- -- 10 -- 10
Retirement of unvested shares and
options forfeited under the Restricted
Stock Plan (note 7) -- -- -- -- (2) -- (2)
Net loss -- -- -- -- -- (1,855) (1,855)
---------- ----- -------- ----- ------- -------- -------
BALANCES AT DECEMBER 31, 1994 8,051,765 $482 25,606 $ (1) 49,572 (32,022) 18,031
========== ===== ======== ===== ======= ======== =======
See accompanying notes to consolidated financial statements.
F-5
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
----------------------------------------------------------------------
Six Months
Ended Year Ended June 30,
December 31, -------------------------------
1994 1994 1993 1992
------------- ------ ------ ------
(As Restated)
(See Note 15)
Cash flows from operating activities:
Net loss $(1,855) (7,257) (261) (2,599)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Provision for restructuring and other non-recurring
expenses -- 2,218 -- --
Depreciation and amortization expense 1,272 2,196 1,438 908
Common stock and options issued for services and
in connection with employee stock compensation
agreements, net of forfeitures 69 (94) 243 149
Loss (gain) on retirement and sale of equipment 237 790 (12) (321)
Loss (gain) on early extinguishment of debt -- 182 (173) --
Changes in operating assets and liabilities, net of
acquisitions:
Decrease (increase) in receivables 36 2,043 (1,121) (678)
Increase in inventories (193) (53) (1,166) (182)
Decrease (increase) in prepaid expenses and other
current assets 844 (180) 295 (360)
Increase in work-in-process on medical interior
contracts 274 (153) (81) (87)
Decrease in accounts payable, other accrued
liabilities, and accrued restructuring expenses (716) (189) (376) (2,069)
Increase (decrease) in accrued overhaul and parts
replacement costs 404 860 (432) 237
Increase (decrease) in deferred revenue and other
liabilities (1,001) 676 95 414
-------- -------- ------- -------
Net cash provided (used) by operating activities (629) 1,039 (1,551) (4,588)
-------- -------- ------- -------
Cash flows from investing activities:
Net cash used in acquisition of Golden Eagle
Aviation, Inc. -- (451) -- --
Acquisition of equipment and leasehold improvements (981) (16,101) (6,561) (3,104)
Proceeds from retirement and sale of equipment 790 618 2,093 725
Decrease (increase) in notes receivable, patent
application costs, and other assets 425 (307) (654) (190)
Proceeds from sale or maturity of short-term
investments 21 504 1,378 4,129
Purchase of short-term investments -- -- (472) (3,991)
Payments for acquisition costs -- -- -- (482)
-------- -------- ------- -------
Net cash provided (used) by investing activities 255 (15,737) (4,216) (2,913)
-------- -------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 12,898 10,026 591
Payments for syndication and solicitation costs -- (1,252) (1,720) --
Net borrowings (repayments) under short-term notes
payable (856) (117) (268) 486
Proceeds from long-term debt -- 7,851 4,049 1,876
Payments of long-term debt (1,141) (4,007) (2,318) (357)
Payments of capital lease obligations (354) (1,882) (473) (488)
-------- -------- ------- -------
Net cash provided (used) by financing activities (2,351) 13,491 9,296 2,108
-------- -------- ------- -------
Increase (decrease) in cash and cash equivalents (2,725) (1,207) 3,529 (5,393)
Cash and cash equivalents at beginning of period $ 3,421 4,628 1,099 6,492
-------- -------- ------- -------
Cash and cash equivalents at end of period $ 696 3,421 4,628 1,099
======== ======== ======= =======
Interest paid in cash during the period $ 718 1,243 1,158 645
======== ======== ======= =======
(Continued)
F-6
AIR METHODS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
----------------------------------------------------------------------
Noncash investing and financing transactions:
On November 12, 1991, the Company issued 598,887 restricted shares of
its common stock for all the outstanding common shares of Air Methods
Corporation, a Colorado corporation. The transaction consisted of the
following:
Year ended
June 30, 1992
-------------
(Amounts in
thousands)
Issuance of stock in exchange for net assets of
Air Methods $ 2,220
========
Net assets acquired:
Equipment and leasehold improvements $15,762
Receivables 648
Inventories 446
Goodwill 2,422
Accounts payable and accrued liabilities (3,173)
Accrued overhaul and parts replacement costs (4,459)
Debt (9,600)
Other, net 174
--------
Net assets acquired $ 2,220
========
On September 10, 1993, the Company issued 25,908 restricted shares of
its common stock for all the outstanding common shares of Golden Eagle
Charters, Inc. ("Golden Eagle"). On the same date, in a related
transaction, the Company issued 29,709 restricted shares of its common
stock for the transfer to the Company of an interest in a jet
airplane. The transaction consisted of the following:
Year ended
June 30, 1994
-------------
(Amounts in
thousands)
Issuance of stock in exchange for net assets of
Golden Eagle $ 440
=======
Net assets acquired:
Equipment and leasehold improvements $1,923
Receivables 105
Goodwill 1,193
Accounts payable and other liabilities (2,781)
-------
Net assets acquired $ 440
=======
Capital lease obligations of $19,000, $7,085,000, and $1,479,000 were
assumed to acquire equipment during the years ended June 30, 1994,
1993 and 1992, respectively.
Notes receivable of $2,790,000 were received as partial consideration
for the sale of two aircraft during the year ended June 30, 1994.
Short-term notes payable of $2,347,000 were assumed to finance the
Company's annual hull and liability, workers' compensation, and
directors' and officers' insurance policies during the six months
ended December 31, 1994.
See accompanying notes to consolidated financial statements.
F-7
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND JUNE 30, 1994
----------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation
The accompanying consolidated financial statements consist of the
accounts of Air Methods Corporation, a Delaware corporation ("Air
Methods" or "the Company"). As discussed more fully in note 3,
in September 1994 the Company sold all of the outstanding shares
of common stock of Golden Eagle Charters, Inc. ("Golden Eagle"),
formerly a wholly owned subsidiary of the Company. During fiscal
year 1993, Cell Technology Biosciences, Inc., another wholly
owned subsidiary, was dissolved. All significant intercompany
balances and transactions have been eliminated in consolidation.
As discussed more fully in note 2, on November 12, 1991, Cell
Technology, Inc. acquired all of the outstanding common shares of
Air Methods Corporation, a Colorado corporation (AMC). On
November 13, 1991, AMC was merged into the Company and the
Company changed its name to Air Methods Corporation.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the
Company considers all highly liquid instruments with original
maturities of three months or less to be cash equivalents. Cash
equivalents of $565,000 and $2,427,000 at December 31, 1994 and
June 30, 1994, respectively, consist of short-term money market
funds.
Short-Term Investments
Short-term investments, which consisted of certificates of
deposit, had maturities of greater than 90 days but less than one
year and were recorded at cost, which approximated market value.
Inventories
Inventories are comprised primarily of expendable aircraft parts
which are recorded at the lower of cost (average cost) or market.
Work-in-Process on Medical Interior Contracts
Work-in-process on medical interior contracts represents costs of
the installation of medical equipment and modification of
aircraft for third parties. Revenue relating to fixed fee
contracts is recognized using the completed contract method of
accounting.
F-8
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
A contract is considered complete when all costs except
insignificant items have been incurred and the installation is
operating according to specification. If the modified aircraft
is leased by the Company in its operations, the revenue is
deferred and recognized over the term of the lease.
Certain medical interior contracts provide for reimbursement of
all costs plus an incremental amount. Revenue on these contracts
is recorded as costs are incurred. In addition, when the total
cost to complete a medical interior under a fixed fee contract
can be reasonably estimated, revenue is recorded as costs are
incurred.
Assets Held for Sale
Assets held for sale consist primarily of aircraft designated for
disposal within one year and are valued at the lower of cost or
estimated net realizable value. Net realizable value is
determined primarily by individual market studies; estimated
carrying costs of the assets prior to disposal are included in
the calculation of net realizable value. Depreciation is
discontinued when an asset is designated for disposal. Debt
collateralized by assets held for sale is classified in the
financial statements as current.
Equipment and Leasehold Improvements
Hangar, equipment, and leasehold improvements are recorded at
cost. Maintenance and repairs are expensed when incurred. Major
modifications and costs incurred to place aircraft in service are
capitalized. Improvements to helicopters and airplanes leased
under operating leases are included in flight and ground support
equipment in the accompanying financial statements. Depreciation
is computed using the straight-line method over the following
useful lives:
Residual
Description Lives value
---------------------------------------- ----------- --------
Hangar 40 years 10%
Helicopters, including medical equipment 8-25 years 25%
Airplanes, including medical equipment 8-20 years 0-10%
Ground support equipment 5-10 years 0-10%
Furniture and office equipment 3-10 years --
Leasehold improvements to hangar and office space are amortized
using the straight-line method over the terms of the leases.
F-9
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
Excess of Costs Over the Fair Value of Net Assets Acquired
Excess of cost over the fair value of net assets acquired, or
goodwill, is being amortized using the straight-line method over
25 years. Periodically the Company evaluates the recoverability
of goodwill based upon undiscounted earnings projections. Events
that may indicate a need to assess recoverability include
significant changes in business conditions, continuing losses, or
a forecasted inability to achieve at least break-even results
over an extended period. Should an impairment in value be
indicated, the carrying value of goodwill will be adjusted
accordingly.
Fleet Integration Costs
Costs related to the integration of new types of aircraft into
the Company's fleet are deferred and amortized over a period of
five years. Such costs are included in other assets in the
accompanying financial statements.
Patent Application Costs
The Company capitalizes legal costs associated with patent
applications. At such time as patents are granted, these costs
will be amortized over the estimated useful economic life of the
patents. Costs relating to unsuccessful patent applications are
charged to operations.
Engine and Airframe Overhaul Costs
The Company uses the accrual method of accounting for major
engine and airframe overhauls whereby the cost of the next
overhaul is estimated and accrued based on usage of the aircraft
over the period between overhauls.
Revenue Recognition and Uncollectible Receivables
Fixed fee revenue under the Company's operating agreements with
hospitals is recognized monthly over the term of the agreements.
Revenue relating to emergency flights is recognized upon
completion of the services.
Uncollectible trade receivables are charged to operations using
the allowance method. The allowance for uncollectible
receivables was not significant at December 31, 1994 and June 30,
1994.
F-10
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
Income Taxes
The Company accounts for income taxes using the asset and
liability method of Statement of Financial Accounting Standard
No. 109, Accounting for Income Taxes (Statement 109). Deferred
tax assets and liabilities are recognized for the future income
tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred income tax assets and liabilities of a change in
rates is recognized in income in the period that includes the
enactment date.
Loss Per Share
Loss per common share is calculated using the weighted average
number of common shares outstanding for each period. Outstanding
common stock options and common stock purchase warrants have not
been included in the calculations since the effect would be
antidilutive. Share and per share amounts for all periods
presented reflect a one-for-six reverse stock split completed in
fiscal 1992.
(2) BUSINESS COMBINATION
On November 12, 1991, the Company issued 598,887 restricted
shares of its common stock in exchange for all of the outstanding
common shares of AMC. The combination was accounted for using
the purchase method of accounting. The restricted shares of the
Company's common stock were valued at $2,220,000 by the Company's
Board of Directors, and such amount was allocated to the assets
acquired net of liabilities assumed based on their respective
estimated fair values. Such amount was based on the market value
of the shares, as determined by an independent appraisal, which
was discounted to reflect the restricted nature of the stock.
The application of the purchase price was as follows (amounts in
thousands):
Composition of purchase price:
Stockholders' deficit of AMC at date of
acquisition $(5,492)
Adjustments to record the net assets of AMC
at fair value:
Flight equipment 5,290
Excess of cost over the fair value of net
assets acquired 2,422
-------
7,712
-------
Total purchase price $ 2,220
=======
F-11
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
(3) ACQUISITION AND SALE OF SUBSIDIARY
On September 10, 1993, the Company entered into an Exchange
Agreement (the "Agreement") with Golden Eagle and Golden Eagle's
shareholders (the "Shareholders") whereby the Company issued an
aggregate of 25,908 shares of its Common Stock valued at
approximately $188,000 to the Shareholders in exchange for all of
the issued and outstanding shares of Golden Eagle. On the same
date, in a related transaction contemplated by the Agreement, the
Company issued an aggregate of 29,709 shares of its restricted
common stock, valued at approximately $252,000 to shareholders
and related parties of Golden Eagle, in exchange for the transfer
to the Company of an interest in a jet airplane. In connection
with the agreement, the Company assumed approximately $2,781,000
in debt and other liabilities of Golden Eagle and the
Shareholders for an aggregate consideration of $3,221,000.
The application of the purchase price was as follows (amounts in
thousands):
Composition of purchase price:
Stockholders' deficit of Golden Eagle at
date of acquisition $ (753)
Excess of cost over the fair value of
net assets acquired 1,193
-------
Total purchase price $ 440
=======
The transaction was accounted for using the purchase method of
accounting. Accordingly, the results of operations of Golden
Eagle have been included with those of the Company since the
effective date of the Agreement.
As discussed more fully in note 4, in the third quarter of fiscal
1994, the Company discontinued substantially all of the
unprofitable airplane charter operations of Golden Eagle and
wrote off the balance of goodwill related to the purchase of
Golden Eagle as part of the restructuring. Losses from Golden
Eagle's charter operations from the date of acquisition through
June 30, 1994 totaled $677,000. On September 21, 1994, the
Company sold all of the outstanding shares of common stock of
Golden Eagle to a company in exchange for $10,000 and the
assumption of certain liabilities of Golden Eagle. The Company
recorded a gain of $126,000 on the sale.
(4) BUSINESS RESTRUCTURING
During the third and fourth quarters of fiscal 1994, the Company
implemented a restructuring plan for the Company's continuing air
medical flight and manufacturing operations designed to reduce
costs and improve operating efficiencies. The restructuring plan
included the discontinuation of substantially all of the airplane
charter operations of Golden Eagle, a reduction in the Company's
work force, and the disposal of selected assets. Also included
in the restructuring was the cancellation of
F-12
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
a proposed debt refinancing and public preferred stock offering
in the third quarter of 1994. With the exception of severance
pay related to the reduction in the work force and certain
placement fees for the proposed preferred stock offering, the
restructuring expenses consisted of non-cash charges including
the write-off of previously recorded assets. Valuation
allowances established for assets designated for disposal are
classified with other gains and losses on the disposition of
assets in the accompanying financial statements.
The restructuring and other non-recurring charges for the year
ended June 30, 1994, consist of the following (amounts in
thousands):
Write-off of costs associated with proposed debt
refinancing $ 335
Write-off of costs associated with proposed public
preferred stock offering 571
Write-off of goodwill related to the acquisition of
Golden Eagle 1,459
Severance pay 614
Other 31
------
$3,010
======
Accrued restructuring expenses as of December 31, 1994, consist
of severance pay.
(5) NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consist of the following at December 31, 1994 and
June 30, 1994 (amounts in thousands):
December 30, June 30,
1994 1994
------------ --------
Borrowings under a note with a company with interest
at prime rate (6% at December 31, 1994), due upon
delivery of two helicopters. Subsequent to
December 31, 1994, the note was cancelled. See
further discussion in Note 13. $ 267 534
Borrowings under a $2 million line of credit with
interest at prime rate (8.5% at December 31, 1994),
collateralized by certain receivables and inventories 500 505
Borrowings under an unsecured note with a company
with interest at 5.73%, due in monthly installments
of principal and interest through June 1, 1995 1,249 --
Borrowings under an unsecured note with a company
with interest at 7.25%, due in monthly installments
of principal and interest through July 1, 1995 128 --
Other 134 15
----- -----
$2,278 1,054
===== =====
F-13
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
Long-term debt consists of the following at December 31, 1994 and
June 30, 1994 (amounts in thousands):
1994 1993
------ ------
Notes payable to one lender with interest at 9.94%,
due in monthly payments of principal and interest
through August 2001, collateralized by equipment,
receivables, inventories, and other intangible assets $ 4,893 5,145
Notes payable to one lender with interest at 8.5%, due
in monthly payments of principal and interest through
September 2000, collateralized by flight equipment 2,505 3,770
Note payable to a company with interest at 9.25%, due
in monthly payments of principal and interest through
December 2001, collateralized by a hangar 253 266
Note payable to a company with monthly interest
payments at prime rate plus 1% (9.5% at December 31,
1994). Paid in full on March 16, 1995 3,819 3,819
Note payable to a company with interest at 11%, due in
monthly payments of principal and interest through
February 29, 2002, collateralized by equipment,
receivables and inventories 594 620
Note payable to a company with interest at 10%, due in
monthly payments of principal and interest through
May 2000, collateralized by flight equipment 334 357
Unsecured 13% note payable to a stockholder, due in
monthly payments of principal and interest through
December 1996 15 17
Other 26 37
-------- -------
12,439 14,031
Less current installments (4,870) (5,921)
-------- -------
$ 7,569 $ 8,110
======= =======
All debt collateralized by assets held for sale is classified as
current.
F-14
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
Aggregate maturities of long-term debt are as follows (amounts in
thousands):
Year ending December 31:
1995 $ 4,870
1996 1,154
1997 1,292
1998 1,389
1999 1,528
Thereafter 2,206
$12,439
In the six months ended December 31, 1994 and the year ended June
30, 1994, the Company retired debt totaling $1,048,000 and
$2,056,000 respectively, prior to the scheduled maturities. In
1993, the Company retired debt totaling $642,000 prior to the
scheduled maturities and recognized gains of $173,000 on the
early extinguishment of the debt.
Total interest expense incurred by the Company on notes, long-
term debt, and capital leases during the six months ended
December 31, 1994 was $930,000, of which $213,000 was
capitalized.
(6) LEASES
The Company leases hangar and office space under noncancelable
operating leases and leases certain equipment and aircraft under
operating and capital leases. As of December 31, 1994, future
minimum lease payments under capital and operating leases are as
follows (amounts in thousands):
Capital Operating
leases leases
------- ---------
Year ending December 31:
1995 $ 1,154 2,387
1996 1,119 2,203
1997 1,119 2,201
1998 1,119 1,775
1999 714 1,517
Thereafter 2,628 4,382
------- -------
Total minimum lease payments 7,853 $14,465
=======
Less amounts representing interest (1,829)
-------
Present value of minimum capital
lease payments 6,024
-------
Less current installments (722)
-------
$5,302
=======
F-15
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
Rent expense relating to operating leases totaled $1,234,000,
$3,434,000, $3,462,000, and $2,195,000 for the six months ended
December 31, 1994 and years ended June 30, 1994, 1993 and 1992,
respectively.
On July 25, 1992, the Company entered into two equipment leases
with Ventana Leasing, Inc. ("Ventana") for the lease of two
helicopters. A former director of the Company is a 50% owner of
Ventana. In December 1993 the Company retired one of the Ventana
capital lease obligations for a total of $1,167,000 and recorded
a loss of $182,000 on the early extinguishment of this
obligation.
The remaining capital lease with Ventana is for a term of seven
years at an annual cost to the Company of approximately $301,000.
Lease payments are fixed for the first five years of the lease
term, after which Ventana may increase the lease payments within
certain limits to account for any increases in Ventana's debt
servicing costs on the leased aircraft. The lease provides that
the Company will pay Ventana $337,500 upon termination of the
lease to purchase the aircraft. In September 1992, the Company
entered into an additional equipment lease with Ventana covering
certain telephone and computer equipment. The lease has a three-
year term at an annual cost to the Company of approximately
$50,000, and provides that the Company will purchase the leased
equipment at the end of the lease term.
At December 31, 1994 and June 30, 1994, leased property held
under capital leases included in equipment, net of accumulated
depreciation, totaled $10,359,000 and $10,598,000, respectively.
(7) STOCKHOLDERS' EQUITY
(a) Warrants
In connection with various offerings of common stock and
other transactions by the Company, the following warrants to
purchase the Company's common stock were issued and are
outstanding as of December 31, 1994:
F-16
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
Number of Exercise price
warrants per share Expiration Date
--------- -------------- -------------------
6,250 $ 10.50 March 13, 1995
30,000 4.00 March 12, 1996
67,938 5.10 Various, 1997
4,000 3.00 February 2, 1998
126,592 4.00 February 2, 1998
20,000 4.13 March 12, 1998
75,000 4.50 April 6, 1998
50,000 6.00 December 29, 1998
150,000 6.88 February 14, 1999
150,000 6.00 February 21, 1999
-------
679,780
=======
In June 1993, 840,368 warrants were exercised at $3.41 per
warrant to purchase 636,148 common shares for total proceeds
of $2,865,000.
(b) Stock Option Plans
The Company has a Stock Option Plan (the Plan) which, as
amended in October 1993 and February 1995, provides for the
granting of incentive stock options (ISOs) and nonincentive
stock options (non-ISOs), stock appreciation rights, and
supplemental stock bonuses. Under the Plan, 1,500,000
shares of common stock are reserved for options. The
Company also grants non-ISOs outside of the Plan.
Generally, the options granted under the Plan have an
exercise price equal to the fair market value on the date of
grant, become exercisable in three equal installments
beginning one year from the date of grant, and expire five
years from the date of grant.
The Nonemployee Director Stock Option Plan was adopted by
the Board of Directors in May 1991 and approved by the
shareholders in October 1991. The Plan authorizes the grant
of nonstatutory stock options to purchase an aggregate of
300,000 shares of common stock to nonemployee directors of
the Company. Each nonemployee director completing one
fiscal year of service will receive a five-year option to
purchase 5,000 shares, exercisable at the then current fair
market value of the Company's common stock.
At December 31, 1994, options issued to a consulting group
to purchase 6,667 shares of common stock at an exercise
price of $6.25 per share were
F-17
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
outstanding. A director of the Company is the chief
executive officer and a 50% owner of the consulting group.
The following is a summary of option activity, including
options granted and outstanding outside of the Plan, during
the six months ended December 31, 1994 and the years ended
June 30, 1994, 1993 and 1992:
ISOs Non-ISOs Total
-------- ---------- ---------
Outstanding at June 30, 1991 120,885 153,751 274,636
Granted 118,613 93,333 211,946
Canceled (35,864) -- (35,864)
Exercised (4,708) -- (4,708)
--------- --------- ---------
Outstanding at June 30, 1992 198,926 247,084 446,010
Granted 113,474 90,864 204,338
Canceled (11,702) (2,916) (14,618)
--------- --------- ---------
Outstanding at June 30, 1993 300,698 335,032 635,730
Granted 854,349 87,666 942,015
Canceled (445,064) (72,496) (517,560)
Exercised (62,141) (2,222) (64,363)
--------- --------- ---------
Outstanding at June 30, 1994 647,842 347,980 995,822
Granted 65,773 142,857 208,630
Canceled (275,691) -- (275,691)
Exercised (41) (4,348) (4,389)
--------- --------- ---------
Outstanding at December 31, 1994 437,883 486,489 924,372
========= ========= =========
Exercise prices $1.75 to 12.13 1.75 to 13.50
============= =============
(c) Restricted Stock Plan
Effective December 3, 1992, the Company established a
restricted stock plan authorizing the issuance of up to
300,000 shares of common stock to employees. Under this
plan, participating employees elected to reduce their
F-18
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
compensation by 2% to 20% for the period from January 9,
1993 to January 8, 1994. For each $3 by which employees
reduced their compensation, the Company issued one share of
stock and one option to purchase one share of stock for $3.
The Company issued 101,137 shares under this plan to
employees and recorded deferred compensation for the value
of the options issued and for the excess of the market value
of the shares issued on the effective date over the face
value of $3 per share. The shares issued under the plan
vested over one year; the associated options vest over three
years. The Company recorded $10,000, $218,000 and $191,000
of compensation expense under the plan for the six months
ended December 31, 1994 and the years ended June 30, 1994
and 1993, respectively. Remaining unamortized deferred
compensation was $8,000 and $21,000 as of December 31, 1994
and June 30, 1994, respectively.
In January 1994 employees who received shares under this
compensation plan were allowed to elect to have the Company
retain sufficient shares to provide for the payment of their
withholding taxes. The Company withheld a number of shares
equivalent in value to the taxes owed from the shares issued
to employees and placed these shares in treasury stock.
(d) Nonemployee Compensation Plan
In February 1993, the Board of Directors adopted the Air
Methods Corporation Equity Compensation Plan for Nonemployee
Directors which was subsequently approved by the Company's
stockholders on March 12, 1993. Under this compensation
plan, 150,000 shares of common stock are reserved for
issuance to non-employee directors.
(e) Private Placement
In February 1993, the Company completed a private placement
of 2,386,839 shares of common stock at $3 per share. In the
year ended June 30, 1994, 1,176,086 of the warrants issued
in tandem with the shares of common stock in this private
offering were exercised to purchase 1,272,626 shares of
common stock.
In February 1994, the Company completed a private placement
of 1,011,190 shares of common stock at $5.66 per share with
institutions outside of the United States.
F-19
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
(f) Stock Repurchase Plan
On August 5, 1994, the Board of Directors approved a stock
repurchase plan authorizing the repurchase of up to 10% of
the outstanding shares of the Company's common stock to be
used to meet the Company's common stock requirements for its
employee benefit plans and other purposes. Repurchases may
be made from time to time in the open market or in privately
negotiated transactions. The plan authorizes, but does not
require, the Company to repurchase shares. Actual
repurchases in any period are subject to approval by the
Finance Committee of the Board of Directors and will depend
on market conditions and other factors. As of December 31,
1994, no shares had been repurchased under this plan.
(8) REVENUE
The Company has operating agreements and leases with various
hospitals and hospital systems to provide services and aircraft
for periods ranging from 1 to 7 years. The agreements provide
for revenue from monthly fixed fees and flight fees based upon
the utilization of aircraft in providing emergency medical
services. The fixed-fee portion of the agreements and leases
provide for the following revenue for years subsequent to
December 31, 1994 (amounts in thousands):
Year ending December 31:
1995 $16,970
1996 12,689
1997 10,036
1998 6,854
1999 4,976
Thereafter 2,045
-------
$53,570
=======
(9) INCOME TAXES
For income tax purposes, the Company has net operating loss
carryforwards at December 31, 1994 of approximately $31,900,000
which will expire in varying amounts through the year 2008.
Alternative minimum tax (AMT) loss carryforwards available to
offset future AMT taxable income approximate net operating loss
carryforwards for regular federal income tax purposes.
F-20
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
As a result of the acquisition of AMC and other issuances of
stock, the utilization of a portion the aforementioned net
operating loss carryforwards will be limited annually by the
provisions of Section 382 of the Internal Revenue Code. Any
future tax benefits recognized through utilization of AMC's net
operating loss carryforwards as of the acquisition date will be
applied to reduce the excess of cost over the fair value of net
assets acquired.
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1994 are as follows (amounts in
thousands):
Deferred tax assets:
Overhaul and parts replacement cost,
principally due to the accrual method $ 1,877
Assets held for sale, principally due to
differences in bases 354
Accrued restructuring expenses and
valuation allowances 433
Net operating loss carryforwards 11,181
Other 246
-------
Total gross deferred tax assets 14,091
Less valuation allowance (9,894)
-------
Net deferred tax assets 4,197
-------
Deferred tax liabilities:
Equipment and leasehold improvements,
principally due to differences in
bases and depreciation methods (4,090)
Other (107)
-------
Total deferred tax liabilities (4,197)
-------
Net deferred tax liability $ --
=======
(10) RETIREMENT PLAN
The Company has a defined contribution retirement plan whereby
qualified employees may contribute up to 12% of their annual
salaries. The Company contributes an amount equal to 1% of the
employees' annual salary and will match 20% of the employees'
contributions up to 6% of their annual salaries. Company
contributions
F-21
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
totaled approximately $70,000, $156,000, $126,000, and $41,000
for the six months ended December 31, 1994 and for each of the
years in the three-year period ended June 30, 1994, respectively.
(11) PROPOSED BUSINESS COMBINATIONS
In January 1991, the Company entered into a definitive agreement
to purchase all of the outstanding stock of Pioneer
Pharmaceuticals, Inc. ("PPI") from Essex Chemical Corporation
("Essex"), a subsidiary of Dow Chemical. On July 1, 1991, the
Company notified Essex of its termination of the agreement to
purchase PPI. During the year ended June 30, 1992, the Company
received $576,000 from Essex as a settlement of certain disputes
arising out of the purchase agreement; this amount is included in
other income in the accompanying consolidated financial
statements.
In April 1992, the Company agreed in principle to acquire
American Air Ambulance, Inc. (AAA). In October 1992, the
agreement was allowed to expire. Costs totaling $272,000
relating to the proposed acquisition were charged to merger
termination expense in the third quarter of fiscal 1993.
During the six months ended December 31, 1994, the Company
discussed the feasibility of a business combination of the
emergency air medical transport business of the Company with
Rocky Mountain Helicopters, Inc. ("RMHI"), which was then
operating as a debtor-in-possession under Chapter 11 of the U.S.
Bankruptcy Code. In November 1994, the cash portion of the
Company's bid for the aeromedical assets of RMHI was exceeded in
a bid placed by another party and the Company declined to submit
a final bid. The expenses incurred as part of the due diligence
process consist primarily of legal and professional fees and
comprise the balance of the $305,000 merger termination expense
recognized in the six months ended December 31, 1994.
(12) RELATED PARTY TRANSACTIONS
During the year ended June 30, 1993, the Company contracted with
a placement agent, which is partially owned by one of the
Company's former directors, to provide services relating to the
solicitation for the exercise of public warrants. Fees paid to
this agent were $917,000 for the fiscal year ended June 30, 1993.
During the year ended June 30, 1994, the Company issued five-year
warrants to purchase 50,000 shares of common stock to Americas
Partners in connection with the guarantee of a $2,500,000 note.
The general partners of Americas Partners are directors of the
company. The note was paid in full in the third quarter of 1994.
F-22
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
In February 1994 warrants to purchase an additional 150,000
shares were issued to Americas Partners in connection with a
commitment from Americas Partners to contribute funds to cover
start-up costs for a Joint Venture in Mexico. The commitment was
paid to the Company in full subsequent to June 30, 1994. The
exercise price of all of the Americas Partners warrants is $3 per
share.
(13) COMMITMENTS AND CONTINGENCIES
In November 1992, a former employee brought a lawsuit against the
Company which is pending in the U.S. District Court for the
District of Minnesota. This suit alleges that the Company
wrongfully discharged the employee and seeks recovery of
unspecified monetary damages for lost compensation, emotional
distress and other losses, costs, attorneys' fees and related
penalties. The Company intends to vigorously defend this action
and believes that it has strong defenses. Management of the
Company believes the ultimate outcome of this action will not
have a material adverse impact on the Company's financial
position or results of operations.
Subsequent to December 31, 1994, one of the Company's suppliers
cancelled contracts which had required the Company to acquire
four helicopters prior to December 1996.
F-23
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
(14) PRIOR YEAR TRANSITION PERIOD (UNAUDITED)
In March, 1995 the Company announced a change in its fiscal year
end from June 30 to December 31. Unaudited operating results for
the six months ended December 31, 1993 are presented for
comparative purposes and are as follows (amounts in thousands
except share and per share amounts):
Revenue $15,320
Operating expenses 14,822
-------
Operating income 498
Other expense, net (399)
-------
Income before extraordinary item 99
Extraordinary item - loss on early
extinguishment of debt (181)
-------
Net loss $ (82)
=======
Income per common share before
extraordinary item $ .02
Loss on early extinguishment of debt
per common share (.03)
-------
Loss per common share $ (.01)
=======
Weighted average number of
common shares outstanding 6,116,271
=========
F-24
AIR METHODS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------------------------------------------------------------------
(15) RESTATEMENT OF FINANCIAL STATEMENTS
Subsequent to the preparation of the financial statements for the
period ended December 31, 1994, the Company identified a
misallocation of costs associated with the installation of two
medical interiors which resulted in an understatement in the cost
of medical interiors and products sold and in the loss on
disposition of assets for the six months ended December 31, 1994.
The accompanying financial statements and the Company's interim
quarterly financial statements have been adjusted for the
misallocation as follows (amounts in thousands except per share
amounts):
Six Months Ended
December 31, 1994
As
Previously As
Reported Restated
Cost of medical interiors and products sold 963 1,303
Gain (loss) on disposition of assets 102 (237)
Net loss (1,176) (1,855)
Loss per common share (.15) (.23)
Three Months Ended Three Months Ended
September 30, 1994 December 31, 1994
As As
Previously As Previously As
Reported Restated Reported Restated
Cost of medical interiors and
products sold 705 1,045 258 258
Gain (loss) on disposition of assets 65 65 37 (302)
Net loss (263) (603) (915) (1,254)
Loss per common share (.03) (.08) (.11) (.16)
The restatement also resulted in a decrease in net property and
equipment from $33,394,000 to $32,715,000 and an increase in the
accumulated deficit from $31,343,000 to $32,022,000 as of
December 31, 1994.
F-25
EX-23
2
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors
Air Methods Corporation:
We consent to incorporation by reference in the registration
statements on Form S-8 (No. 33-24980, No. 33-46691, No. 33-55750,
No. 33-65370 and No. 33-75742) and Form S-3 (No. 33-59690,
No. 33-75744 and No. 33-89796) of Air Methods Corporation of our
report dated June 8, 1995 relating to the consolidated balance sheets
of Air Methods Corporation and subsidiary as of December 31 and
June 30, 1994, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the six months ended
December 31, 1994 and each of the years in the three-year period ended
June 30, 1994, which report appears in the December 31, 1994
transition report on Form 10-K/A-2 of Air Methods Corporation.
KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
August 9, 1995
EX-27
3
RESTATED FDS 12/94
5
1000
6-MOS
DEC-31-1994
DEC-31-1994
696
0
1375
(37)
1762
9836
37382
(4667)
48134
11728
0
481
0
0
49572
48134
790
13871
1303
14854
(318)
0
554
(1855)
0
(1855)
0
0
0
(1855)
(.23)
0
Net non-operating income and merger termination expense
Net of interest income of 163