10-Nov-2011 Source: Air Methods
Air Methods Corporation (Nasdaq:AIRM) reported results for the quarter ended September 30, 2011. Revenue increased 20% to $185.2 million from $153.9 million in the year-ago quarter. For the nine-month period, revenue increased 14% to $467.2 million, up from $411.6 million in the prior-year nine-month period. For the quarter, net income decreased slightly to $18.5 million, or $1.44 per diluted share, as compared with 2010 third quarter net income of $18.6 million, or $1.48 per diluted share. Net income for the nine-month period increased 10% to $34.5 million, or $2.70 per diluted share, compared to $31.5 million, or $2.51 per diluted share, for the prior-year period.
On August 1, 2011, the Company acquired 100% of the outstanding common stock of OF Air Holdings Corporation and its subsidiaries, including Omniflight Helicopters, Inc. (together, Omniflight). The results of operations for the three and nine months ended September 30, 2011 include the consolidated operations of Omniflight since the date of the acquisition. Net revenue from Omniflight’s operations for the two months ended September 30, 2011 was $26.7 million. Pre-tax earnings were reduced by approximately $1.5 million and $1.8 million for the 2011 three- and nine-month periods, respectively, for transaction costs and employee severance expenses related to the acquisition of Omniflight. Pre-tax earnings for both periods were further reduced by approximately $0.9 million in total related to incremental, non-recurring costs of transitioning Omniflight’s general and administrative functions into existing Air Methods departments. Amortization expense of intangible assets acquired in the acquisition equaled $0.7 million for the two months ended September 30, 2011.
As previously disclosed, the Company is awaiting a response from the Securities and Exchange Commission (SEC) regarding an interpretation under Generally Accepted Accounting Principles that may impact the Company’s presentation for aircraft leases, as further described in the Company’s 10-Q for the third quarter 2011 filed with the SEC today. With guidance from the SEC, the Company will be able to complete a final version of its financial statements contained in the 10-Q and the Company’s independent public accounting firm will be able complete its review of such financial statements. On today’s conference call (referenced below), management will provide preliminary estimates of financial impact should potential reclassification be required.
Third Quarter Highlights
Revenue from Community-Based Services increased 28% to $123.4 million from $96.1 million, while segment net income increased 19% to $32.3 million during the third quarter, as compared with segment net income of $27.0 million in the prior-year quarter. Net community-based services revenue generated from Omniflight patient transports during the two months ended September 30, 2011 was $21.3 million. Net revenue per community-based transport increased 6% to $9,229 compared with $8,720 in the prior-year quarter. Increase in net revenue per community-based transport was partially offset by a lower percentage (3%) of Omniflight patients with private insurance, as compared with Air Methods’ insured patient percentages. Total community-based patient transports increased 21% to 13,173 in the current-year quarter from 10,876 in the prior-year quarter. Community-based patient transports for bases open greater than one year (Same-Base Transports) and excluding Omniflight transports decreased 9%, or 908 transports, as compared with the prior-year quarter. The great majority of this decrease was realized during the month of September. Weather cancellations for these same-base locations decreased by 55 transports compared with the prior-year quarter.
Revenue from Hospital-Based Services increased by 5% to $53.1 million from $50.6 million, while segment net income increased by 14% to $5.1 million in the current-year quarter from $4.5 million during the prior-year third quarter. Hospital-based services revenue generated from Omniflight hospital contracts during the two months ended September 30, 2011 was $5.4 million. This revenue increase was partially offset by conversion of hospital-based services to community-based services which decreased divisional revenue by $2.8 million.
Consolidated maintenance expense for the current-year quarter decreased by 17%, or $4.1 million, despite an increase in flight volume of 27%. This decrease was partially attributed to a $1.6 million credit related to a negotiated revision in an agreement covering main rotor blade replacement costs for a particular aircraft model. The six-month period ended June 30, 2011 included $1.3 million of maintenance expense related to this same agreement. Fuel costs increased $2.8 million during the current-year quarter as compared to the prior-year quarter, representing a 47% increase per hour flown.
Revenue from our Products Division, excluding revenue generated from internal projects, increased to $8.7 million from $7.3 million in the prior-year quarter, a 20% increase. Segment net income, excluding internal projects, decreased slightly to $1.9 million from $2.3 million in the prior-year quarter.
The Company also provided an update on preliminary October 2011 flight volume. Total community-based transports during October 2011 were 4,815 compared with 3,855 during October 2010, reflecting a 25% increase. The increase is entirely attributed to the acquisition of Omniflight. Total October 2011 volume compares with 5,074 and 4,314 community-based patient transports in August and September 2011, respectively, the first two months of combined operations with Omniflight. Same-Base Transports (excluding Omniflight transports) for October decreased 581 transports, or 15%, while weather cancellations for these same bases increased by 165 transports.
Aaron Todd, Chief Executive Officer, stated, “We are on-target with our original expectations for financial performance since our acquisition of Omniflight. Although severe weather in September dramatically affected our overall flight volume, strong reimbursement and reduced maintenance expenditures provided positive offsets. We are encouraged by the rebound in flight volume during the month of October as compared with September, since September is typically a stronger flight volume month. The decrease in October Same-Base Transports is primarily attributed to the strength of the prior-year month. October 2010 community-based patient transports were 16% higher than the monthly average for the entire year and 26% higher than October 2009.”
The Company will discuss these results in a conference call scheduled today at 4:15 p.m. Eastern. Interested parties can access the call by dialing (877) 883-0656 (domestic) or (706) 643-8826 (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 25671728, for 3 days following the call and the web cast can be accessed at www.airmethods.com for 30 days.
Air Methods Corporation (www.airmethods.com) is a leader in emergency aeromedical transportation and medical services. The Hospital Based Services Division is the largest provider of air medical transport services for hospitals. The Community Based Services Division is one of the largest community-based providers of air medical services. Products Division specializes in the design and manufacture of aeromedical and aerospace technology. Air Methods’ fleet of owned, leased or maintained aircraft features over 400 helicopters and fixed wing aircraft.