Air Methods Corporation (AIRM)

Q1 2010 Earnings Conference Call

May 6, 2010 4:15 PM ET

Executives

Christine Clarke – IR

Aaron Todd – CEO

Trent Carman – CFO, Treasurer, and Secretary

Analysts

Bob Labick – CJS Securities

Kevin Campbell – Avondale Partners

Ryan Daniels – William Blair

Presentation

Operator

Good afternoon. My name is Miranda and I will be your conference operator today. At this time, I would like to welcome everyone to the Air Methods reports First Quarter 2010 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session.

(Operator Instructions)

I will now like to turn the call over to Christine Clarke. Ma’am you may begin.

Christine Clarke

Thank you. Good afternoon. Thank you for joining us today to review Air Methods first quarter financial results ended March 31, 2010. As the Operator indicated, my name is Christine Clarke and I am with Air Methods Corporation. Also on the today representing the Company are Mr. Aaron Todd, Chief Executive Officer and Mr. Trent Carman, Chief Financial Officer.

At the conclusion of today’s prepared remarks, we will open the call for a question-and-answer session. I would like to remind everyone this conference call includes statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This conference call includes certain forward-looking statements, which are subject to various risks and uncertainties.

Actual results could differ materially from those currently anticipated due to a number of factors including, but not limited to the size, structure and growth of the Company’s air medical services and products markets, the collection rates for patient transport, the continuation and/or renewal of air medical service contracts, the acquisition of profitable product division contracts and other flight service operations, the successful expansion of the community-based operations and other matters set forth in the Company’s public filings.

With that having been said, I would like to turn the call over to Mr. Aaron Todd, Chief Executive Officer of Air Methods Corporation.

Aaron Todd

Thanks Christine and thanks to all of you for joining us especially after just another normal trading day in the market. We hope that you’ve weathered it okay. I will offer some insights into our first quarter results and an update of key events which have occurred since our last conference call. Trent will then be able to provide you with some added details on the financial results.

Since December 2009 through April 2010, we have seen a decline in Same-Base Transports, even after adjusting for affects of weather – changes in weather cancellations. During the five months previous to December 2009, we experienced an increase in the Same-Base Transports, adjusted for variation of weather cancellations.

As a result it is difficult to predict what the near-term trend in demand will be going forward. December through February was certainly very extreme weather months and the decline in demand was attributed to the effects of weather. March and April declined in Same-Base Transports may have more to do with the strength of their prior year months. Average flight volume in March and April of 2009 were as strong as average volume in May and June of 2009. Typically May and June are stronger due to less weather cancellations and due to commencement of more spring and summer activities.

As a result, we remained hopeful that growth in Same-Base Transports may return in the near-term as we have easier comps in the coming two months. It is interesting to know that fluctuations in patient flight volumes within our community-based operations have essentially neared fluctuations within our hospital -based programs which we serve.

We are pleased that recent community-based price increases have been holding with our privately insured patients. As you know we have implemented a supplemental price increase to further offset recent and possible future shifts in payer mix away from private insurance.

We anticipate achievement of our beginning of the year objective of better than 6% growth in net revenue per patient transport despite these shifts in payer mix. Our Days Sales Outstanding easing a trailing three month annualized revenue method reflects a decrease from a 107 days as of December 31, 2009 to 100 days as of March 31, 2010.

Maintenance expense per flight hour during our first quarter represented a significant spike over previous quarters. Only the third quarter of 2008 had a higher per flight hour results over the past several years. Accordingly, we would describe this quarter as unusually high. Whenever we experienced a reduction in flight volume, the reducing effect on maintenance expenditures associated with the fewer hours flown typically lags into future quarters.

The continuation of fleet replacement and twin to single conversion should continue to have a beneficial effect on the longer term outlook. While our products division first quarter results reflected significant decreases in external revenue in net divisional income, the revenue backlog has increased significantly as compared with the end of the prior year first quarter and as of the end of 2009.

Some of the governmental contracts were finalized slightly little bit later than anticipated, thus shifting a significant amount of work into the second half of 2010, as a result we anticipate significant increases in revenue generation moving forward especially in quarters three and four.

Since the beginning of 2010, the Company has used approximately $21 million of its treasury position in free cash flow to buyout leased aircraft. The annual aircraft rental savings specific to these aircraft is $3.8 million, while annual depreciation of these now on balance sheet aircraft will be approximately $2.7 million.

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

Dow Gets Swept Into Nasty Reversal Even as Nasdaq Posts New Record

Dow Gets Swept Into Nasty Reversal Even as Nasdaq Posts New Record

REPLAY: Jim Cramer on Fed Rate Hikes, Oil Prices and Starbucks Worries

REPLAY: Jim Cramer on Fed Rate Hikes, Oil Prices and Starbucks Worries

What Will GM Do With Cruise -- and Is Its Stock Worth $55?

What Will GM Do With Cruise -- and Is Its Stock Worth $55?

3 Must Reads on the Market From TheStreet's Top Columnists

3 Must Reads on the Market From TheStreet's Top Columnists

This Should Be Your Retirement Savings Plan When the Stock Market Crashes

This Should Be Your Retirement Savings Plan When the Stock Market Crashes