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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:

3Q163Q15YOY 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 MedicalOct-16 Oct-15 YOY Change (%)
Transports6,499 5,842 11.2%
Transports + Weather Cancellations8,013 7,527 6.5%
Same-Base Transports (SBTs)5,402 5,340 1.2%
SBT + Weather Cancellations6,728 6,915 -2.7%
TourismOct-16 Oct-15 YOY Change (%)
Passengers41,293 40,832 1.1%

2016 Outlook
Due 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


Source:Air Methods Corporation