Air Methods on the Acquisition Prowl--Again

 - August 17, 2015, 3:33 PM

Helicopter EMS and air-tour company Air Methods is on the acquisition prowl again. During a recently quarterly call with stock analysts, company CEO Aaron Todd revealed that the company is raising its credit line by $400 million with an eye to making an as yet undisclosed acquisition or acquisitions.

“We have been pretty open here recently that we’re in active pursuit for companies that we believe are available for purchase,” Todd said. “You never know until you actually see a transaction occur. But we’ve also indicated that we’re active both within the air medical sector as well as within the tourism sector. And I think the question that was previously asked, are these deals that could get done within the next six months to 12 months, the answer was yes and that’s probably about all I could offer at this point.”

However, the size of the potential war chest suggests Air Methods has its eyes on something far more substantial than its recent acquisitions of heli-tour operators such as Las Vegas-based Sundance, which it acquired for $44 million in 2012, or Blue Hawaiian, purchased for $66 million in 2013.

While weather cancellations and high helicopter maintenance expenses cut into Air Methods’ bottom line during the first half of the year, the company remains on strong financial footing as the largest helicopter EMS provider in the U.S.

“Flights missed because of weather, less favorable payer mix and collection rates, and higher maintenance expense have been headwinds for financial results year-to-date, as well as in the second quarter,” Todd said. “Despite this, we remain optimistic because of the continued growth in requests and same-base transports adjusted for weather cancellations, continued interest in hospital-based conversions, opportunities for future acquisitions, a strong balance sheet and solid cash flow as evidenced by the 7-percent growth in cash receipts per transport over the last 12 months and 45-percent growth in year-to-date cash flow from continuing operations.”

First Half Results

For the quarter ended June 30, revenue was up 2 percent, to $263.6 million, from $257.6 million in the prior-year quarter. For the six-month period, revenue rose 5 percent, to $501.9 million, compared with $478.7 million in the prior-year six-month period. Also for the quarter, net income from continuing operations was down, to $27.4 million compared with $29.8 million in last year’s second quarter. For the six-month period, net income from continuing operations was also down, to $40.3 million from $41.4 million in the prior-year six-month period.

Community-based patient transports numbered 16,105 during the current-year quarter, compared with 14,994 in the prior-year quarter, a 7-percent increase. Patients transported for community bases in operation longer than one year (same-base transports) declined by 2 percent, or 318 transports, while weather cancellations for these same bases were up by 1,250 transports compared with the prior-year quarter. Requests for community-based service climbed 4 percent for bases open longer than one year. Net revenue per community-based transport fell less than 1 percent, to $11,298 in the current-year quarter from $11,353 in the same period last year, attributable to deterioration in payer mix and collection rate net of the benefit of price increases.

Helicopter tourism revenue gained 10 percent for the quarter and 12 percent for the half.

Maintenance expense, excluding tourism operations, was up $2.1 million, or 10 percent, compared with the prior-year quarter, even though total flight volume fell 1 percent. Excluding tourism operations, fuel expense retreated $1.9 million compared with the prior-year quarter, while fuel expense per flight hour was down by 32 percent.

Concurrent with the release of its most recent financial results, Air Methods said it is promoting CFO Trent Carman to “other roles within the organization” as part of its “long-range succession plan” and authorizing a $200 million stock buy-back plan.