Stormy Weather Dampens Air Methods Corp.'s Q4 Results

Image source: Air Methods.

Air Methods (AIRM) scored on all fronts with its third-quarter results. Expectations, therefore, were high for the air medical transport company as it ended 2015. Air Methods reported its fourth-quarter and full-year results after the market closed on Thursday. Here are the highlights.

Air Methods results: The raw numbers

Data source: Air Methods. 

What happened with Air Methods this quarter?
The big story for Air Methods in the fourth quarter was the weather. Weather-related cancellations jumped by 852 year over year. Same-base transports fell by 223 during the quarter, largely because of inclement weather.

Air Methods also incurred several one-time charges in the fourth quarter. The company recorded a $1.8 million loss related to workers compensation claims from accidents. Acquisition-related costs totaled $1 million. Air Methods also paid out $1 million in severance during the quarter. On top of these items, the company reported a $0.4 million loss related to the disposition of assets and $0.4 million in other non-operational costs

There was some relatively positive news from the fourth quarter, though, including:

• Community-based patient transports in the company's air medical services segment increased 11.3% year over year to 15,817.
• Net revenue per patient transport increased 2.2% from $12,238 in the fourth quarter of 2014 to $12,508 in the fourth quarter of 2015.
• Fuel expense per flight hour dropped 19.6% compared to the prior year period.
• Tourism revenues rose by 9.8% year over year to $28.9 million.
• Total tourism segment passengers increased 10.2% to 104,751.
• External revenue for United Rotorcraft, Air Methods' business segment that provides services to other air operators, increased 119.7% to $7.4 million. 

What management had to say
CEO Aaron Todd acknowledged the challenges resulting from bad weather during the fourth quarter but remained positive. Todd said: "We are pleased with our fourth quarter results given the severe weather experienced in the quarter." He noted that "both revenue and earnings growth would have exceeded 10% in the quarter" adjusted for the weather woes and one-time costs.

Todd also remained confident about Air Methods' fundamental strengths. He said:

Demand for both our air medical services and our tourism business remains strong, our pipeline of potential hospital base conversions is full, and we have a solid balance sheet that can be used either for additional acquisitions and/or to repurchase shares as we did in December and January.

Looking forward
How is first quarter looking so far? Air Methods estimated that total community-based transports increased 14.6% during January, although same-base transports were basically flat compared to the prior-year period. Preliminary net revenue per patient transport in January fell 15%, adjusting for any impact of the Tri-State acquisition. Flight volume for February, though, is on track to grow around 27% year over year. 

While Air Methods has encountered some bumpy weather, the company looks to be in much better position than fellow publicly traded air transport providers Bristow Group (BRS) and PHI (NASDAQ: PHIIK). Bristow's shares are down nearly 50% in the past 12 months, while PHI's stock has plunged over 75%.

The problem for Bristow and PHI is that both companies focus heavily on serving offshore oil and gas rigs. Major declines in oil prices have resulted in oil companies cutting back. Those cutbacks in turn have led to air transport provider to the industry feeling the pain as well.

Air Methods, on the other hand, makes most of its revenue from medical transport, supplemented by tourism (helicopter tours) and providing services to other companies via United Rotorcraft. The company's acquisitions make it the leader in the medical transport market. That leadership role should position Air Methods well for the future. After the disappointing fourth-quarter results, perhaps the best news for Air Methods is this: The weather does change eventually.