Air Methods Reports 3Q2008 Results and 4Q2008 Update

DENVER, Nov. 6 /PRNewswire-FirstCall/ -- Air Methods Corporation (NASDAQ: AIRM) reported results for the quarter ended September 30, 2008. Revenue increased 32% to $133.8 million from $101.5 million in the year-ago quarter. For the nine-month period, revenue increased 39% to $379.9 million, up from $273.7 million in the prior-year nine-month period.

For the quarter, net income decreased 25% to $8.4 million, or $0.67 per diluted share, as compared with prior-year quarter net income of $11.2 million, or $0.89 per diluted share. Net income for the nine-month period was $15.5 million, or $1.23 per diluted share, compared to $22.7 million, or $1.82 per diluted share, for the prior-year period. The current-year and prior-year quarters included a $1.1 million and $1.2 million pre-tax net gain on disposition of assets, respectively, while the prior-year quarter included a $0.8 million pre-tax loss on early extinguishment of debt.

The third quarter 2007 financial results do not reflect any operations of FSS Airholdings, Inc., the parent company of CJ Systems Aviation Group, Inc. (CJ), since the acquisition was not completed until October 1, 2007.

Third Quarter Highlights

Community-Based Services: Revenue from community-based services increased 19% to $82.6 million from $69.3 million, and segment net income decreased 15% to $17.5 million during the third quarter, as compared with segment net income of $20.5 million in the prior-year quarter. As previously reported, the decrease in segment net income was primarily attributed to decreases in patients transported for community bases in operation greater than one year and excluding bases acquired from CJ (Same-Base Transports). Same-Base Transports decreased 1,552 transports, or 16%, while weather cancellations for these same bases increased 422 transports compared with the prior-year quarter. The decrease in revenue from reduction in Same-Base Transports was partially offset by $7.3 million in revenue generated from hurricane response activities during the quarter, as well as from a 7% increase in net revenue per community-based transport to $7,047 from $6,560 in the prior year quarter. Segment net income also reflects a $0.7 million, or 12%, increase in maintenance expenditures over the prior-year quarter, excluding aircraft added since July 1, 2007. In addition, fuel expense increased 56% per hour flown as compared with the prior-year quarter, which increased fuel expense by $1.8 million. Revenue generated from bases added in the CJ acquisition was $10.8 million during the current-year quarter.

Hospital-Based Services: Revenue from hospital-based services increased by 65% to $48.6 million from $29.4 million, while segment net income decreased to $0.4 million in the current-year quarter from $2.0 million during the prior-year third quarter. The increase in revenue is primarily attributed to $15.9 million generated during the current-year quarter from the assumption of CJ hospital-based contracts. This increased revenue was partially offset by an 11% decrease in flight volume, excluding locations added or closed since July 1, 2007, which decreased flight revenues by approximately $1.2 million. The net decrease in segment earnings is primarily attributed to an increase in maintenance expense. Maintenance expense for the quarter increased by $2.1 million, or 24%, excluding aircraft added since July 1, 2007.

Products Division: Revenue, excluding revenue generated from internal projects, decreased slightly from $2.9 million to $2.7 million in the current-year quarter. Segment net income, excluding internal projects, was unchanged at $0.7 million.

The Company also provided an update on October 2008 flight volume. Total community-based transports during October 2008 were 3,495 compared with 3,796 during October 2007. Patient transports for community bases in operation greater than one year, including CJ bases added October 1, 2007, decreased 163 transports or 5%, while weather cancellations for these same bases decreased by 297 transports.

Aaron Todd, Chief Executive Officer, stated, "We are pleased with the strength of our earnings considering the weaker flight volume and higher maintenance and fuel expenses incurred during the quarter. We are also pleased that October volume was favorably impacted by more moderate weather cancellation levels. Recent significant decreases in fuel prices and expected lower weather cancellations compared to the severe weather in previous winter and spring periods should help to offset any continued softness in overall demand for air medical services. In addition, continued improvement in net revenue per transport supports our current plans for continued price increases to keep pace with inflation in cost per transport. Air Methods continues to enjoy strong positive cash flow having generated over $44.3 million in cash from operations during the first nine months of 2008. We have used this excess cash to reduce debt levels, increase the size of our unencumbered fleet, and engage in stock repurchase activities. While the current economic environment creates certain operational uncertainties, we continue to have a positive outlook for our future periods given recent trends in reduced fuel costs, moderating weather, improved reimbursement, and strong cash flows."

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 http://www.airmethods.com. A replay of the call will be available at (800) 642-1687 (domestic) or (706) 645-9291 (international), access number 70416153, for 3 days following the call and the web cast can be accessed at http://www.airmethods.com for 30 days.

Air Methods Corporation (http://www.airmethods.com) is a leader in emergency air medical 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. The Products Division specializes in the design and manufacture of aeromedical and aerospace technology. The Company's fleet of owned, leased or maintained aircraft features over 320 helicopters and fixed wing aircraft.

Forward Looking Statements: This news release includes certain forward-looking statements, which are subject to various risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors, including but not limited to the integration of CJ into our existing operations, the size, structure and growth of the Company's air medical services and products markets; the collection rates for patient transports; the continuation and/or renewal of air medical service contracts; the acquisition of profitable Products Division contracts and other flight service operations; the successful expansion of the community-based operations; and other matters set forth in the Company's public filings.

     CONTACTS:  Aaron D. Todd, Chief Executive Officer,(303) 792-7413.
     Please contact Christine Clarke at (303) 792-7579 to be included on the
     Company's fax and/or mailing list.

                     ---FINANCIAL STATEMENTS ATTACHED---



                   AIR METHODS CORPORATION AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEET
                            (Amounts in thousands)

                                                September 30,     December 31,
                                                    2008              2007

    ASSETS

    Current assets:
    Cash and cash equivalents                        $9,171             5,134
    Trade receivables, net                          140,584           135,633
    Other current assets                             61,422            74,090

    Total current assets                            211,177           214,857

    Net property and equipment                      129,924           114,746
    Other assets, net                                41,097            39,949

    Total assets                                   $382,198           369,552


    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
    Notes payable related to assets held
     for sale                                       $22,831            24,203
    Current portion of indebtedness                  18,356            18,350
    Accounts payable, accrued expenses
     and other                                       64,057            59,546

    Total current liabilities                       105,244           102,099

    Long-term indebtedness                           66,293            76,751
    Other non-current liabilities                    52,708            48,682

    Total liabilities                               224,245           227,532

    Total stockholders' equity                      157,953           142,020

    Total liabilities and stockholders'
     equity                                        $382,198           369,552



                   AIR METHODS CORPORATION AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          (Amounts in thousands, except share and per share amounts)

                                 Three Months Ended      Nine Months Ended
                                    September 30,           September 30,

                                  2008        2007        2008        2007

    Revenue:
    Flight operations            $131,079      98,587     370,298     267,443
    Product operations              2,753       2,962       9,592       6,297
    Total revenue                 133,832     101,549     379,890     273,740

    Expenses:
    Operating expenses            100,141      66,151     290,924     185,561
    General and administrative     15,947      12,861      50,671      37,579
    Gain on disposition of
     assets, net                   (1,130)     (1,201)     (2,568)     (1,546)
    Depreciation and
     amortization                   4,328       3,395      12,628      10,285
                                  119,286      81,206     351,655     231,879

    Operating income               14,546      20,343      28,235      41,861

    Interest expense               (1,270)     (1,169)     (3,943)     (3,909)
    Loss on early
     extinguishment of debt           -          (757)        -          (757)
    Other, net                        928         612       2,180       1,558

    Income before income taxes     14,204      19,029      26,472      38,753

    Income tax expense             (5,835)     (7,838)    (10,939)    (16,039)

    Net income                     $8,369      11,191      15,533      22,714

    Income per common share:
       Basic                        $0.69        0.94        1.28        1.91
       Diluted                      $0.67        0.89        1.23        1.82

    Weighted average common
     shares outstanding:
       Basic                   12,179,714  11,954,332  12,170,980  11,906,211
       Diluted                 12,522,932  12,542,816  12,590,252  12,448,801