AIRM Air Methods Corp.

Air Methods Corporation (Nasdaq:AIRM), the global leader in air medical transportation, today reported financial results for the quarter ended September 30, 2016.

Third Quarter 2016 Results:

• Revenue of $311.0 million was flat compared to $311.3 million for the third quarter of 2015.
• Diluted earnings per share from continuing operations of $0.82, compared to $1.16 for the third quarter of 2015, a decrease of 29.3%.
• EBITDA from continuing operations of $81.8 million, compared to $105.2 million for the third quarter of 2015, a decrease of 22.2%.
• The company repurchased 1,694,500 shares in the third quarter.

Aaron Todd, CEO of Air Methods, stated, “Patient transports were below expectations in the quarter which impacted earnings. The Company has worked to improve its base transport utilization and to optimize its cost structure by closing and consolidating bases and adding sales resources. These changes have had the desired effect in October as preliminary same-base transports increased approximately 1.2%. We will consider other measures as appropriate.”

“Despite the challenging environment, there were a number of encouraging results to highlight in the quarter. In the Air Medical Services division, Tri-State’s performance improved sequentially, and another hospital base converted to the community base model. Additionally, the recovery in the Tourism division continued with passenger volumes growing 2.6% and segment EBITDA increasing 7.9%.”

Peter Csapo, CFO of Air Methods, added, “In the third quarter, we made significant progress on one of our highest priorities, achieving a sequential reduction in days sales outstanding of 14 days, which led to record quarterly operating cash flow of $81.0 million compared to $17.8 million in the prior year quarter.”

Third Quarter Performance by Segment

For the third quarter, Air Medical Services (AMS) revenue increased 0.4% to $267.7 million compared to $266.8 million in the prior-year quarter. The acquisition of Tri-State Care Flight (TSCF) added $14.0 million in revenues. Excluding TSCF, revenues declined 4.9%. Key operating statistics include:

	3Q16			3Q15			YOY Change (%)
Transports		18,478			17,330			6.6	%
Transports + Weather Cancellations		25,085			22,794			10.1	%
Same-Base Transports (SBTs)		15,352			16,764			(8.4	%)
SBT + Weather Cancellations		21,084			22,101			(4.6	%)
Net Revenue per Transport	$	12,421		$	12,839			(3.3	%)

Flight center and aircraft operations expenses increased 15.7% to $154.5 million in the current quarter compared to $133.5 million in the prior year quarter. TSCF added $9.4 million in flight center and aircraft operations expenses. Excluding TSCF, these expenses increased 8.6% despite revenues declining 4.9% for the corresponding AMS operations. AMS segment EBITDA decreased 22.5% to $83.9 million compared to $108.2 million for the third quarter of 2015. On a stand-alone basis, TSCF lost $0.2 million (pre-tax) in the quarter. This does not include the positive contribution from transports retained at consolidated bases. Including retained transports, the Company estimates TSCF added $0.01 in diluted EPS in the quarter and $0.06 in diluted EPS year-to-date.

Tourism revenues increased 7.1% to $38.8 million in the current quarter compared to $36.2 million in the prior-year quarter. Total passengers increased 2.6% to 137,595 during the current quarter compared to 134,157 in the prior-year quarter. Total revenue per passenger increased 4.4% to $282 in the current quarter compared to $270 in the prior-year quarter. Tourism operating expenses increased 9.7% to $24.7 million in the current quarter compared to $22.5 million in the prior-year quarter. Tourism segment EBITDA increased 7.9% to $9.8 million in the current quarter compared to EBITDA of $9.1 million in the prior-year quarter. 

United Rotorcraft’s external revenue declined by 45.9% to $4.5 million in the current quarter compared to $8.4 million in the prior-year quarter. Its segment EBITDA declined to just above breakeven from $2.1 million in the prior year period.

Basic and diluted earnings per share from continuing operations for the nine-month period ended September 30, 2016 and the three- and nine-month periods ended September 30, 2015 decreased by $0.02 for an adjustment to the value of equity put options related to both of our redeemable non-controlling interests in consolidated subsidiaries. While net income on the consolidated statement of comprehensive income is not decreased for the valuation adjustment, earnings per share are required to be calculated after decreasing net income for the change in valuation. Basic and diluted earnings per share in the quarter ended September 30, 2016 were not impacted by the adjustment.

Share Repurchase Program

During the third quarter, the Company repurchased 1.7 million shares for $58.1 million bringing the total number and dollar amount of shares repurchased since the program was initiated to 3.1 million and $109.9 million, respectively. The company presently has $90.1 million remaining on its authorized program.

4Q16 Update

The Company also provided an update on preliminary October 2016 air medical and tourism flight volume.

Air Medical	Oct-16		Oct-15		YOY Change (%)
Transports	6,499		5,842			11.2	%
Transports + Weather Cancellations	8,013		7,527			6.5	%
Same-Base Transports (SBTs)	5,402		5,340			1.2	%
SBT + Weather Cancellations	6,728		6,915			-2.7	%
Tourism	Oct-16		Oct-15		YOY Change (%)
Passengers	41,293		40,832			1.1	%

2016 OutlookDue to the softness in air medical volumes, the Company believes EBITDA in the mid-$300 million range in 2016 is no longer achievable.

Other

The company identified an immaterial accounting error in its historical financial statements that had no impact on the income statement in 2016 but did result in minor adjustments to the balance sheet and income statement in prior periods. Additional details will be available in the 10-Q.

Third Quarter 2016 Conference Call

The Company will discuss these results in a conference call scheduled today at 4:30 p.m. Eastern. Interested parties can access the call by dialing (855) 601-0049 (domestic) or (720) 398-0100 (international) or by accessing the web cast at www.airmethods.com. A replay of the call will be available at (855) 859-2056 (domestic) or (404) 537-3406 (international), access number 5511261, for 3 days following the call and the web cast can be accessed at www.airmethods.com for 30 days. Concurrently, the Company will post a financial supplement that contains final operating statistics on its website, www.airmethods.com.

Air Methods Corporation (www.airmethods.com) is the global leader in air medical transportation. The Air Medical Services Division is the largest provider of air medical transport services in the United States. The United Rotorcraft Division specializes in the design and manufacture of aeromedical and aerospace technology. The Tourism Division is comprised of Sundance Helicopters, Inc. and Blue Hawaiian Helicopters, which provide helicopter tours and charter flights in the Las Vegas/Grand Canyon region and Hawaii, respectively. Air Methods’ fleet of owned, leased or maintained aircraft features approximately 500 helicopters and fixed wing aircraft. 

Forward Looking Statements: Forward-looking statements in this news release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements in this press release that are “forward-looking statements”, including statements we make with regard to (i) expected financial results for fiscal year 2016; and (ii) preliminary results of community-based transports, same-base transports and weather cancellations and tourism passengers for October 2016, are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors, including but not limited to, the Company’s completion of its fourth quarter closing and review procedures, the size, structure and growth of the Company's air medical services, United Rotorcraft Division and Tourism Division; the collection rates for patient transports; collection of future price increases for patient transports; requests for air medical services; shifts in payer mix resulting in a decrease of the number of privately insured transports, execution of the integration plan for Tri-State Care Flight; the continuation and/or renewal of air medical service contracts; general trends in the health care industry; weather conditions across the U.S.; development and changes in laws and regulations, including, without limitation, increased regulation of the health care and aviation industry through legislative action and revised rules and standards; and other matters set forth in the Company's filings with the SEC. The Company is under no obligation (and expressly disclaims any obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. 

CONTACTS: Peter P. Csapo, Chief Financial Officer, (peter.csapo@airmethods.com). Please contact Christina Brodsly at (christina.brodsly@airmethods.com) to be included on the Company’s e-mail distribution list.

– FINANCIAL STATEMENTS ATTACHED –

AIR METHODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(unaudited)
		September 30, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	7,417			5,808
Trade receivables, net		385,747			360,542
Other current assets		107,976			91,251
Total current assets		501,140			457,601
Net property and equipment		872,792			799,656
Other assets, net		428,989			278,693
Total assets	$	1,802,921			1,535,950
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable related to aircraft pending long-term financing	$	7,229			2,955
Current portion of indebtedness		72,963			58,304
Accounts payable, accrued expenses and other		102,119			87,211
Total current liabilities		182,311			148,470
Long-term indebtedness		855,464			635,615
Other non-current liabilities		214,179			179,129
Total liabilities		1,251,954			963,214
Redeemable non-controlling interests		-			8,550
Total stockholders' equity		550,967			564,186
Total liabilities and stockholders' equity	$	1,802,921			1,535,950

 

AIR METHODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share amounts)
(unaudited)
		Three Months Ended										Nine Months Ended
		September 30,										September 30,
			2016					2015					2016					2015
Revenue:
Patient transport revenue, net	$		229,906					222,842					643,048					561,670
Air medical services contract revenue			34,563					40,329					102,382					119,743
Tourism revenue			38,781					36,212					98,242					98,877
Product operations			4,536					8,379					18,899					16,966
Dispatch and billing service revenue			3,226					3,580					10,411					10,739
Total revenue			311,012					311,342					872,982					807,995
Expenses:
Operating expenses			189,094					168,830					532,859					485,663
General and administrative			41,079					39,351					120,463					108,698
Depreciation and amortization			23,587					20,884					69,652					62,082
			253,760					229,065					722,974					656,443
Operating income			57,252					82,277					150,008					151,552
Interest expense			(8,146	)				(4,893	)				(23,854	)				(15,041	)
Other, net			585					(266	)				1,359					1,270
Income from continuing operations before income taxes			49,691					77,118					127,513					137,781
Income tax expense			(19,077	)				(30,235	)				(49,494	)				(53,843	)
Income from continuing operations			30,614					46,883					78,019					83,938
Loss on discontinued operations, net of income taxes			-					(29	)				-					(378	)
Net income			30,614					46,854					78,019					83,560
Income attributable to redeemable non-controlling interests			-					202					(30	)				684
Net income attributable to Air Methods Corporation and subsidiaries	$		30,614					46,652					78,049					82,876
Income per common share:
Basic
Continuing operations	$		0.82					1.17					2.03					2.10
Discontinued operations			-					-					-					(0.01	)
Diluted
Continuing operations	$		0.82					1.16					2.02					2.09
Discontinued operations			-					-					-					(0.01	)
Weighted average common shares outstanding - basic			37,354,787					39,293,453					38,181,918					39,276,062
Weighted average common shares outstanding - diluted			37,413,828					39,420,354					38,260,743					39,408,239

 

AIR METHODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)
				Nine Months Ended
				September 30,
					2016					2015
Cash flows from operating activities:
	Net income		$		78,019					83,560
	Loss from discontinued operations, net of income taxes									378
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			69,652					62,082
		Deferred income tax expense			37,878					4,376
		Stock-based compensation			5,129					5,733
		Amortization of debt issuance costs			929					697
		Loss on disposition of assets			564					2,876
		Unrealized loss on derivative instrument			(531	)				369
		Loss from equity method investee			395					1,193
		Changes in assets and liabilities, net of effects of acquisitions			(18,732	)				(35,053	)
		Net cash provided by continuing operating activities			173,303					126,211
		Net cash used by discontinued operating activities			-					(100	)
		Net cash provided by operating activities			173,303					126,111
Cash flows from investing activities:
	Acquisition of subsidiaries				(225,519	)				-
	Acquisition of property and equipment				(74,025	)				(95,494	)
	Payments for hospital contract conversions				-					(43,481	)
	Buy-out of previously leased aircraft				(13,123	)				(9,519	)
	Proceeds from disposition of equipment				6,209					3,642
	Decrease (increase) in other assets				(3,194	)				(11,597	)
		Net cash used by continuing investing activities			(309,652	)				(156,449	)
		Net cash provided (used) by discontinued investing activities			-					25
		Net cash used by investing activities			(309,652	)				(156,424	)
Cash flows from financing activities:
	Proceeds from issuance of common stock, net				803					409
	Purchases of common stock				(96,424	)				-
	Net borrowings (payments) under line of credit				15,000					-
	Payments for financing costs				(73	)				(4,472	)
	Proceeds from long-term debt				276,000					105,525
	Payment of long-term debt and capital lease obligations				(57,348	)				(69,351	)
		Net cash provided (used) by continuing financing activities			137,958					32,111
		Net cash provided (used) by discontinued financing activities			-					-
		Net cash provided (used) by financing activities			137,958					32,111
Increase (decrease) in cash and cash equivalents					1,609					1,798
Cash and cash equivalents at beginning of period					5,808					13,165
Cash and cash equivalents at end of period			$		7,417					14,963

 

AIR METHODS CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO EBITDA
(Amounts in thousands)
(unaudited)
	Quarter Ended								Nine Months Ended
	September 30,								September 30,
		2016				2015				2016				2015
Net income attributable to Air Methods Corporation and subsidiaries	$	30,614				46,652			$	78,049				82,876
Loss on discontinued operations, net of income taxes		-				(29	)			-				(378	)
Net income from continuing operations attributable to Air Methods Corporation and subsidiaries		30,614				46,681				78,049				83,254
Interest expense *		8,146				4,857				23,854				14,920
Income tax expense *		19,077				30,235				49,494				53,843
Depreciation and amortization *		23,587				20,783				69,652				61,800
Loss on disposition of assets, net *		386				2,607				564				2,876
EBITDA from continuing operations	$	81,810				105,163			$	221,613				216,693
* Excludes amounts attributable to redeemable non-controlling interests

 

AIR METHODS CORPORATION AND SUBSIDIARIES
RECONCILIATION OF AIR MEDICAL SERVICES DIVISION NET INCOME TO EBITDA
(Amounts in thousands)
(unaudited)
	Quarter Ended								Nine Months Ended
	September 30,								September 30,
		2016				2015				2016				2015
Net income attributable to Air Methods Corporation and subsidiaries	$	57,333				85,909			$	159,771				164,507
Loss on discontinued operations, net of income taxes		-				(29	)			-				(378	)
Net income from continuing operations attributable to Air Methods Corporation and subsidiaries		57,333				85,938				159,771				164,885
Interest expense		6,488				3,747				19,090				11,169
Income tax expense		-				-				-				-
Depreciation and amortization		19,808				17,412				58,373				52,026
Loss (gain) on disposition of assets, net		252				1,085				(106	)			1,360
EBITDA from continuing operations	$	83,881				108,182			$	237,128				229,440

 

AIR METHODS CORPORATION AND SUBSIDIARIES
RECONCILIATION OF TOURISM DIVISION NET INCOME TO EBITDA
(Amounts in thousands)
(unaudited)
	Quarter Ended						Nine Months Ended
	September 30,						September 30,
		2016			2015			2016			2015
Net income from continuing operations attributable to Air Methods Corporation and subsidiaries	$	6,255			4,900		$	8,739			9,645
Interest expense *		1,070			747			3,185			2,318
Income tax expense *		-			-			-			-
Depreciation and amortization *		2,317			1,901			6,898			5,509
Loss on disposition of assets, net *		141			1,522			684			1,516
EBITDA from continuing operations	$	9,783			9,070		$	19,506			18,988
* Excludes amounts attributable to redeemable non-controlling interests

 

AIR METHODS CORPORATION AND SUBSIDIARIES
RECONCILIATION OF UNITED ROTORCRAFT DIVISION NET INCOME TO EBITDA
(Amounts in thousands)
(unaudited)
	Quarter Ended						Nine Months Ended
	September 30,						September 30,
		2016			2015			2016			2015
Net income (loss) from continuing operations attributable to Air Methods Corporation and subsidiaries	$	(824	)		1,182		$	281			2,095
Interest expense		-			-			-			-
Income tax expense		-			-			-			-
Depreciation and amortization		853			873			2,598			2,529
Loss on disposition of assets, net		-			-			-			-
EBITDA from continuing operations	$	29			2,055		$	2,879			4,624