Air Methods Reports Third Quarter 2016 Results

DENVER, Nov. 03, 2016 (GLOBE NEWSWIRE) -- 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  
         

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