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Shares of Air Methods Corp. (AIRM) haven't been flying high lately. The air medical-transportation company's acquisition of Tri-State Care Flight took a toll in the second quarter. Air Methods announced its third-quarter results after the market closed on Thursday. Here are the highlights.
Air Methods results: The raw numbers
| Metric |
Q3 2016 Actuals |
Q3 2015 Actuals |
Change (YOY) |
|---|---|---|---|
|
Sales |
$311.0 million |
$311.3 million |
--- |
|
Net income (loss) |
$30.6 million |
$46.7 million |
(34.5%) |
|
Net income (loss) per share |
$0.82 |
$1.16 |
(29.3%) |
Data source: Air Methods. YOY = year over year.
What happened this quarter?
The primary problem for Air Methods in the third quarter stemmed from a drop-off in same-base transports. The company reported 15,352 same-base transports in the third quarter, a decline of 8.4% compared to the prior-year period. Fewer weather cancellations helped somewhat, but not enough to offset the decline in transports.
Another issue was that flight center and aircraft operations expenses climbed 15.7% year over year to $154.5 million. This contributed to a 3.3% decrease in net revenue per transport compared to the prior year period.
Air Methods' aeromedical and aerospace-technology segment, United Rotorcraft, also faced headwinds. External revenue in the third quarter plunged 45.9% year over year to $4.5 million.
There was at least one bright spot for the company. The tourism business segment rebounded from a slump in the second quarter. Air Methods reported tourism revenue of $38.8 million, up 7.1% from the prior-year period. That growth stemmed from a 2.6% increase in passengers and a 4.4% bump in total revenue per passenger.
Air Methods also announced that it had "identified an immaterial accounting error" in prior financial statements. This error didn't impact 2016, but the company did make minor adjustments to the balance sheet and income statement for prior periods.
What management had to say
Air Methods CEO Aaron Todd acknowledged the third-quarter disappointment, stating:
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.
Todd also noted some improvement:
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%.
Looking forward
As Todd observed, preliminary October numbers show a small improvement in same-base transports. However, weather cancellations during the month offset those gains. The company's tourism segment increased passenger count by 1.1% compared to October 2015.
Those slight gains don't appear to be enough to make a significant impact. Air Methods had previously projected earnings before interest, taxes, depreciation, and amortization (EBITDA) in the mid-$300 million range for full-year 2016. The company now says that "due to the softness in air medical volume," that range isn't achievable.
