Air Methods' CEO Discusses Q4 2013 Results - Earnings Call Transcript

Mar. 1.14 | About: Air Methods (AIRM)

Air Methods Corporation (NASDAQ:AIRM)

Q4 2013 Earnings Conference Call

February 27, 2014 16:15 ET

Executives

Christine Clarke - Investor Relations

Aaron Todd - Chief Executive Officer

Trent Carman - Chief Financial Officer

Analysts

Bob Labick - CJS Securities

Nick Hiller - William Blair

Matt Weight - Feltl

Dana Hambly - Stephens

Operator

Good afternoon. My name is Brittany and I will be your conference operator today. At this time, I would like to welcome everyone to the Air Methods Report Fourth Quarter and Fiscal Year 2013 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. Ms. Christine Clarke, you may begin your conference.

Christine Clarke - Investor Relations

Good afternoon and thank you for joining us today to review Air Methods’ fourth quarter and fiscal year 2013 financial results. My name is Christine Clarke and I am with Air Methods Corporation. Also on the call today representing the company are Mr. Aaron Todd, Chief Executive Officer; and Mr. Trent Carman, Chief Financial Officer. At the conclusion of today’s prepared remarks, we will open the call for a question-and-answer session.

I would like to remind everyone this conference call includes statements that constitute forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995. This conference call 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 size, structure and growth of the company’s Air Medical Services and United Rotorcraft Division and Tourism Division, the collection rates for patient transports, the continuation, expansion, conversion and/or renewal of Air Medical Service contracts, the acquisition of profitable United Rotorcraft Division contracts and other flight service operations, the final results of January and February 2014 flight volume as well as January net revenue per patient transport, weather conditions across the United States, development and changes in laws and regulations, including without limitation, the impact of the Patient Protection and Affordable Care Act, increased regulation of the healthcare and aviation industry through legislative action and revised rules and standards and other matters set forth in the company’s public filings.

With that having been said, I would like to turn the call over to Mr. Aaron Todd, Chief Executive Officer of Air Methods Corporation.

Aaron Todd - Chief Executive Officer

Thank you, Christine and thanks to all of you for participating today. In review of 2013, I wanted to opt to the following additional observations beyond those contained in our press release. As mentioned in the press release, fully diluted earnings per share were decreased by $0.05 due to an equity put option that one of our minority parties have. This amounted to approximately $2 million, which reduced the numerator used to calculate EPS, but was a reduction to retained earnings instead of net income in the net income statement.

Obviously, we do not expect a similar adjustment to EPS in future periods associated with this put option. Now keep this adjustment, fully diluted earnings per share would have been $0.34 for the quarter in line with our previously announced expectations. And again, that adjustment do not affect the net income number, only the earnings per share calculation. Despite a 33% decrease in net income for 2013, cash flows generated from operating activities were relatively unchanged at approximately $150 million compared with the prior year.

Days sales outstanding based on annualized most recent six-month revenue decreased from 106 days as of December 31, 2012 to 97 days as of December 31, 2013. With the buying out activity associated with leased aircraft, we were successful in reducing our cash income taxes paid from 28% in pre-tax income to 17%. This represents an $11 million tax savings for 2013 alone. Excluding the new debt associated with the Blue Hawaiian Helicopter acquisition, we were able to reduce our exposure to variable rate debt by $80 million during 2013. We were also successful in acquiring the fuel hedge to protect the company from upward movements in fuel prices greater than 20% for all expected 2014 fuel purchases, excluding tour operations. This hedge cost less than $1,000 to acquire.

For the entire year, Air Methods opened 17 new Greenfield bases of operation while closing 10 underperforming community bases. In addition, we realized conversion of six operating bases from the HBS service delivery model to the community based model. I will provide you an update on this conversion activity in a moment. Our investment in safety technology and safety management systems have continued to yield safety dividends. In 2013 we reduced uninsured losses associated with damaged aircraft by over $2 million. In addition, we completed the year with no serious injuries to crew or passengers. We will continue to make key investments to ensure you again our leadership position within the industry.

Since our last conference call I also wanted to offer the following key updates. We have received verbal commitment from our hospital based customers or written which will involve the outsourcing of 12 bases during the first half of 2014. Remember that this compares with only six outsourced operating bases for all of 2013. We are in key discussions with every key customers as well concerning outsourcing options and expect to have several more to announce in the near-term. As recently announced the company entered into an operating agreement to provide two air medical helicopters and crew to support relief efforts in Haiti. The first ship is expected to begin operations very shortly.

In reference to our outlook for 2014 financial results, we are obviously anticipating a return to growth in net income based on the following key budget assumptions. Same base transports are expected to increase by approximately 1.5%. This is derived by presuming a 3.5% increase associated with prior year increases in weather cancellations reversing in 2014. Now, that 3.5% was offset by a 2% budget decrease in demand consistent with prior year expectations. Average net revenue per transport in excess of $12,000 for the year with above average net reimbursement in quarters three and four, this estimate reflects benefit of January price increase shift in payer mix with prior year levels and current contractual rates with governmental agencies and certain third parties. It does not reflect any improvement from the implementation of the Affordable Care Act. The 2013 average net reimbursement for transport was $10,990.

Our budget assumes relatively flat expense in fuel and maintenance expense per flight hour as well. We are obviously very optimistic for 2014 financial results based upon the following key factors. The first half and fourth quarter of 2013 were significantly impacted by severity in weather compared to previous years. The first two months of 2014 seemed to confirm our expectation for more normalized conditions in the current year. The first half of 2013 maintenance expenditures were very high and instable compared to the first half of 2014. We experienced unprecedented levels of outsourcing commitments from our hospital partners providing strong growth opportunities without having to increase capacity within the system, an anticipated benefit from our acquisition of Blue Hawaiian helicopters along with some (indiscernible) in 2014.

We anticipate continued flight volume benefits from our national hospital relationships associated with the transfer center and other value added services, while not yet measurable we anticipate added opportunities from Community Health’s recent closure and it acquisition of the HMA system beginning in 2014. Our United Rotorcraft division still enjoying the sound backlog and should see less costs in 2014 associated with warranty work and project development expenses. We are not relying on improved payer mix from the Affordable Care Act to drive 2014 financial objectives. While uncertainty associated with weather reimbursement and maintenance will continue to create (indiscernible) quarterly results we are optimistic for improving trends in the current year.

With that summary, I will turn the call over to Trent.

Trent Carman - Chief Financial Officer

Thank you, Aaron. I will start by providing some details on some of our experiences for the most recent quarter. Like center expenses for the fourth quarter of 2013 were $88.9 million, aircraft operating expenses were $37 million, cost of sales for United Rotorcraft were $9.1 million. Tourism operating expenses were $9.4 million. Costs for our dispatch and billing services were $2.2 million and general and administrative were $30.5 million. For the fourth quarter of 2012, the expenses were $83.4 million, $40.3 million, $5.1 million, 0, $1.2 million and $26.9 million respectively. General and administrative expenses in the fourth quarter of 2013 reflect $2.2 million of expenses associated with our tourism operations.

For our EMS operations, maintenance expense was up $25.3 million and $29 million for the fourth quarters of 2013 and ‘12 respectively and fuel was $6.5 million for the fourth quarters of 2013 and 2012. On a three-month lag basis, the company’s payer mix for the three months ended September 30, 2013 was 34% insurance, 32% Medicare, 21% Medicaid, and 13% uninsured. These are the same percentages as of three months ended June 30, 2013. For the 12 months ended September 30, 2013, the payer mix was 33% insurance, 33% Medicare, 21% Medicaid, and 13% uninsured. For the 12 months ended June 30, 2012, cash collections as a percentage of our gross charge for insured patients was 76%. Cash payments as a percentage of our gross charge for Medicare and Medicaid were 19% and 8% respectively for the same period.

During 2013, the company entered into 50 promissory notes totaling approximately $134 million. Seven of their promissory notes related to new EMS aircraft that totaled approximately $22 million and two of the promissory notes related to new tourism aircraft that totaled approximately $4 million. Through 2013, the company bought out 54 aircraft leases totaling approximately $117 million, four of these leases were accounted for as operating leases not capital leases. During 2013, the company made capital expenditures of $66 million. Of this amount, $39 million was subsequently financed with new promissory notes or leases for the underlying aircraft related to that amount, was subsequently sold to third-parties.

During 2013, the company received $20.5 million of proceeds mostly from the sale of 12 aircraft. The company currently intends to exercise the early lease buyout options on 18 aircraft during 2014. The total cost of these buyouts will be approximately $35 million. We expect to finance the majority of these buyouts with free cash flow from operations. We are expecting to take delivery and finance 21 new aircraft in 2014 totaling approximately $73 million. 10 of these aircrafts totaling approximately $33 million are intended to be used in our tourism operations. We currently anticipate that the new aircraft will be financed via new 10-year promissory notes that are fixed rate.

In December 2013, we acquired 90% of Blue Hawaiian Helicopters in Hawaii for approximately $67 million. The proceeds to acquire Blue Hawaiian came primarily from $60 million of additional term loan borrowings under the company’s existing bank credit facility. Upon closing, all the Blue Hawaiian’s 24 aircraft were unencumbered. At December 31, the backlog at our United Rotorcraft division was almost $50 million. This revenue was expected to be earned throughout the next few years through 2017. At December 31, the company operated approximately 387 aircraft in our air medical operations and 49 aircraft in our tourism operations. The company operated 179 bases that generated patient transport revenue, or CBS bases. And 109 bases that generated air medical services contract revenue or HBS bases at the same time.

With that, I will turn it over to Aaron for his closing remarks and then we will go to questions.

Aaron Todd - Chief Executive Officer

I think we are ready, Trent. Let’s go ahead and open it up to questions. Operator, could you open the questions?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Bob Labick with CJS Securities.

Bob Labick - CJS Securities

Good afternoon.

Aaron Todd

Hi Bob.

Bob Labick - CJS Securities

Hi. I wanted to start with some of the information from the release that you provided you have talked about the net revenue per transport in January of $11.2 million or so. Is there any true up in there or maybe give us a little information on the mix there or I guess I would have contemplated it being a little higher just based on the price increase from Jan 1?

Aaron Todd

Yes. We knew January was going to be the tougher 12-month just merely, because we are truing up October that had based on the July actual percentage rate and as I recall that number was the highest at around 36%. 36%, I believe, it came in at 34% as I recall on in an apples-to-apples basis. And so we took a negative true up there, but with the August-September, which were used to estimate November and December, those came down to 34%, 32% range. So we have got easier true up months in February and March. And so this is pretty much in line with what we thought January would come in at and we would expect to see more significant net revenue per transport in February and March as compared to January.

Bob Labick - CJS Securities

Okay, great. And then so in your opening remarks, you mentioned net revenue per transport expectations for the year north of $12,000, is that assuming essentially flat mix year over year or how are you looking at the true ups?

Aaron Todd

Basically, the actual number is $12,300 and it basically takes the prior year payer mix as it came in and then we apply our price increase to it and then we adjust it for any changes in contractual rates associated with Medicare and Medicaid, any of the private insurance companies that we have got a discount relationship with and updated for those factors. And basically that therein gives us the seasonality factor embedded in the number, because we are doing that by month and that’s what it produces out to be with it being several hundred below that in the first half and then several hundred dollars to transport above that in the second half of the year.

Bob Labick - CJS Securities

Okay, that’s great. That’s really close to our estimate as well. So that’s comforting. And then just quickly on to the transports, they continue to be strong. January was remarkable, February shrunk, I mean, where we sit, weather has been horrible. Has there been other factors that have been driving the improvement in the transports that or?

Aaron Todd

Yes Bob. Yes, I mean one I think that we have got our associations with the national relationship is keeping us stronger, but I think one of the big things Bob to remember is that last year when we said that our weather cancellations were somewhat understated based upon the severity of the winter in reducing the actual need for call volume, we are just not seeing that this year. I mean, the weather maybe more severe in the eastern half of the nation, but we are for whatever reason does not affecting the call volume and we are certainly showing strong improvement even adjusted for weather here in February. So, I agree with you. I think we are very pleasantly surprised that despite the weather, we are showing very significant growth in the same base transport measures in the first two months and really haven’t been as affected by the weather as people might think, because last year’s winter was truly a once every 13 to 15 year kind of winter. And while we have had quite a bit of activity this year in severe up in the Northeast, it has not been an impactful across the nation.

Bob Labick - CJS Securities

Okay, that’s great color. And my last one I will get back in queue. So you finished the year with tourism and obviously you like it enough to go expand that division. I think the profit – the accretion of certainly accretive was lower than initially anticipated what is your learn and what do you expect in terms of contribution from the bigger division now?

Aaron Todd

Well, maybe just slightly lower and I think with – from an EBITDA perspective it was almost right on target and part of the reasons were the same factors weather and other issues that we experienced. But we still have a net of fully allocated purchase costs and interest carried. We have got an entity that’s driving healthy return. Certainly in line with our expectations and we are very comfortable with having equal or better performance out of the Blue Hawaiian company’s operations so we are very happy with its – with these opportunities. And I think it will continue to contribute to accretive results.

Trent Carman

Hey Bob, this is Trent. Just to let you know in the segment footnote that you will see in the 10-K contribution, pretax contribution from the division was $6.3 million that’s pretax, so if you tax effect that it’s about $0.10 a share, which is in line with what we had originally talked to the shareholders about. So as Aaron said we pretty much hit the EBITDA number, we hit the expectation at least internally for that operation for 2013.

Bob Labick - CJS Securities

Okay that’s sounds fantastic.

Aaron Todd

Yes, I mean we are right on I mean we are right on target I mean we are off a couple of hundred thousand dollars, but we essentially hit the number. And interestingly we hit the number despite not everything is going in our favor during the year. So these have been very resilient businesses. And I think we are very happy with the continuation of this but obviously the main advantage is going to be the air medical services sector. And we have got a lot of tailwind, so going into 2014 and certainly emerging out of February was relative to the flight volume.

Bob Labick - CJS Securities

Okay that sounds great. Thanks so much.

Operator

Your next question comes from the line of Ryan Daniels with William Blair.

Nick Hiller - William Blair

Hi.

Aaron Todd

Hi Ryan.

Nick Hiller - William Blair

Hi this is in for Nick Hiller in for Ryan. Thanks for taking my questions. It’s probably way too early to tell but just curious if you have any read on what could happen with payer mix in 2014 given the ACA rollout?

Aaron Todd

Based on the way our accounting works, we are going to have our first kind of initial read in April when we true up the January month. After we would audited and qualified all those accounts to the proper payer class we will have an initial sense for what’s going to take place. My initial assumption is that we will see some shift from uninsured in the Medicaid with maybe slight shift from uninsured to into the exchanges. But we will have to see that – that’s when we will start to see the initial play on that.

Nick Hiller - William Blair

Okay, and it seems like you have been winning some novel international contracts with United Rotorcraft, have you been making more of a international push there or is it just a coincidence that a few of them are hitting now?

Aaron Todd

No I think that’s insightful, I think we have kind of reinvigorated the leadership in marketing and focusing on some of these international opportunities and right now represents about a little over 10% of our backlog it certainly is a growing component.

Nick Hiller - William Blair

Okay. And one last question do you have any thoughts on base expansion goals for CBS in particular for 2014?

Aaron Todd

Well as I mentioned we’ve already got 11 in the queue for the outsourcing from the Hospital-Based, the Community-Based service delivery model. I would say that, that number could be potentially probably double that number by the time we get to the end of the year or at least we’ll have commitments for as much of that based upon just the activity that I’m hearing now. And then certainly we will probably be in that 6 to 8 range for Greenfield expansion this year as well. I don’t think we’ll see as many base closures for underperformance this year as we took advantage of some weak bases that were clearly not going to get to where we needed them to be last year. So I don’t think we’ll have – I think we go into this year with fewer bases that are underperforming than we did last year.

Nick Hiller - William Blair

Okay, great. Thank you for taking my questions.

Operator

(Operator Instructions) Your next question comes from Matt Weight, Feltl.

Matt Weight - Feltl

Good afternoon guys.

Trent Carman

Hi, Matt.

Matt Weight - Feltl

Aaron, hi – Aaron I think last quarter on the conference call you mentioned eight base expansions to be completed by the end of the year. Did you guys actually complete that or it looks like you maybe came up a few short. Is that correct?

Aaron Todd

Yes, I think we hope to have modeled them. There is a couple I think that have slid over than the other part. So I try to give a fewer cut off. We get a total of six for the year and then with 11 that were in process of getting accomplished going into 2014 that is actively working towards conversion. So there may have been one or two that slipped over I know we had some that is added here more recently. So but no there is not been any that is been committed that has changed our minds or that we’re not still working through the paper work and the justice of getting it accomplished.

Matt Weight - Feltl

I guess to clarify that more of the Greenfield expansion there?

Aaron Todd

Well the Greenfield I think I mentioned we did 16 or 17 that were added in 2013. And so we did add a significant number. So..

Matt Weight - Feltl

Great. I think that was about six for the quarter, was that - did you do all that you were expecting or is there additional ones to rollover in the first quarter?

Aaron Todd

Hold on, I’ll pull that out for you.

Trent Carman

I have is that we started from October through the end of the year that were new.

Matt Weight - Feltl

Okay.

Aaron Todd

Yes. So I’m just adding those (two) right now so we added one in New Mexico in October, one in Oklahoma in October, one in Indiana in October, one in Arkansas in November, a Fixed Wing Operation in South Dakota in November and then we added another one in Tuscaloosa. So if we’re just looking at since October we started one, two, three, four, five, six, we added seven Greenfield’s in the fourth quarter or frankly in the last two months of – last three months of 2013.

Matt Weight - Feltl

Okay, very good. And then the January price increase, what was that percent increase?

Aaron Todd

It would be around that 12% range, I think it’s where we’re – we got a more active number than that.

Trent Carman

That’s pretty good, Aaron.

Matt Weight - Feltl

And anticipating to hold that unless something happens negatively in Mexico throughout the year?

Aaron Todd

I think we’re watching how the numbers are driving and ensuring that we’re getting good participation, we’re not seeing pushback on the private insureds. And more importantly is what that payer mix just going to look like as we start to experience some of the Affordable Care Act effect on those measures.

Matt Weight - Feltl

Okay. And then the February transports I think it sounds like they were up 4%. Do you have what that would have been on a same-store basis?

Aaron Todd

I don’t. I think our number of bases just to let you know going into the month we’ve got that last year. We had 176 bases going to February and 170 the year before. So you’re up probably 3.5% somewhere in that neighborhood.

Matt Weight - Feltl

Sure.

Aaron Todd

The number of bases. So if you’re up 4% overall than you’re probably on a same base transport base is probably just slightly above prior year level.

Matt Weight - Feltl

Very good. And then just last question here. Most of your acquisitions recently have been outside of I guess the EMS side. You haven’t done anything I think since Omniflight. Are there still opportunities out there or is this more of the tourism and potentially other areas that you could be focusing in on?

Aaron Todd

Well certainly tourism opportunities are presently more readily available, however we’re continuing to pursue opportunities as they come up for air medical – further air medical consolidation domestically. And sometimes it’s a matter of waiting for both flights to be ready to accomplish something together, but we continue to inquire and to pursue opportunities where they manifest. And those will likely be regional opportunities before there will be another national opportunity but we’re focusing both directions.

Matt Weight - Feltl

Okay. Thank you.

Operator

Our next question comes from Dana Hambly with Stephens.

Dana Hambly - Stephens

Hi, good afternoon. Just back to the January price, $11,235, was there a true-up in that number?

Aaron Todd

There was- it was in the neighborhood of about $1000 transport for – because we’re truing up the highest month of the quarter that ended up having a lesser payer mix but that payer mix came in almost identical to what the prior year October actual mix was. S it’s not a function of deterioration impairment, it’s not just it was again truing up the high summer quarter, private insurance, (indiscernible) collection that was – that ended up having a little payer mix. The reason why you’re not going to see that kind of true-up likely in February, March is that in July and August the payer mix had already started to come down to and didn’t stay up at that 36% level, they were down in 34%, 33% range. And therefore the – any true-up will be much more mild then you’d not expect to see that kind of an adjustment in February and March.

Dana Hambly - Stephens

Okay. So as you look into February and March assuming kind of a stable payer mix…

Aaron Todd

And we already somewhat announced that, that when we announced our fourth quarter results we said hey the bad news it that the net revenue came in a little weaker than we would have hoped for the fourth quarter. The good news is with the exception of January that the negative seasonality true-up that we experienced in the first quarter of 2013 is much less likely to occur in the first quarter of 2014 because we don’t – we’re not – we’re truing up against much more against percentage payer mix assumptions that were less significant than they were the year before and that reduces our exposure to negative true-up.

Dana Hambly - Stephens

Okay. That makes sense. And so as we look February and March then you should see that $11,235 kind of stable to up a little bit throughout the quarter?

Aaron Todd

I would expect for it to be up.

Dana Hambly - Stephens

Yes.

Aaron Todd

And let’s say that we get three quarters of that 1000 back into that, that puts you anywhere close to the higher 11. If you come – if we come out in the 11.5, 11.7 for the quarter that’s more than enough with the seasonality factor that starting to show up in the numbers to drive the 12.3 for the year?

Dana Hambly - Stephens

Okay. That makes sense. Thanks. And just, Aaron, the new conversion that you mentioned a dozen scheduled in the first half of the year maybe another dozen in the second half. I mean what has changed in the environment or is there something that has changed with the way you guys are approaching this now?

Aaron Todd

Yes, I think more on it’s – I don’t like to use the term but it’s a little bit – if there’s been so much of this that I think those who have maybe been sitting on the fence about whether they outsource their medical programs are now firmly driving the process, I mean we’re talking marquee institutions that are being affected by the consolidations of the hospital system. They are looking at trying to reduce their non-core services, investments and exposures wherever possible to then their internal cost curves in the air medical programs that have been hospital owned and controlled are being transitioned at almost unprecedented speed.

And more importantly the model that we provide where we are associating and continue to co-brand and co-staff and keep the affiliation going help us ensure that after they transition the program the retention of the flight volume activity and the brand identity are much more likely to stay strong than if we’re just going to do a full outsource (indiscernible) provider model by moving the aircraft, 10 miles down the street and calling at another program. So we’re really excited by these things and we believe that it’s going to be a very significant contributor to our success in 2014.

Dana Hambly - Stephens

Okay. That’s good. And then lastly Trent do you have the Community Health transport in the quarter?

Trent Carman

I do not have that handy, I’m sorry Dana.

Dana Hambly - Stephens

No, that’s no problem. It just – I know in the past when you signed up Community Health you kind of gave a guess of what the potential transports could be. Do you have anything like that on HMA at this point?

Trent Carman

I haven’t.

Aaron Todd

No, we haven’t, we have not – I do have a little update on this. We asked them the share there. We are yet to sit down and find out what their numbers are? What we do know is that the objective is, is to have them come umbrellaed under our transfer center services and preferred provider relationships. And so we do have that commitment then we don’t have access to all of the flight numbers in order to make a reasonable estimate on that.

Dana Hambly - Stephens

Okay. Thanks very much.

Aaron Todd

You bet.

Operator

And your next question comes from Bob Labick with CJS Securities.

Bob Labick - CJS Securities

Hi, thanks. Just wanted to clarify one thing and then ask a question, I actually misread that $6.3 million as EBITDA. So that actually was ahead of my expectation as well on the tourism, so that’s fantastic. And then my question I was wondering Aaron in the beginning of the call you mentioned flight volume expectations, you had talked – you said reasonably quickly. Maybe if you could go back over it and does that include…

Aaron Todd

Sure.

Bob Labick - CJS Securities

New base?

Aaron Todd

Yes. Let me tell you, this is what we did. We said what 2013 was a terrific year for weather. On a same base transport management we had 1,800 higher weather cancellations than we did the year before from those basis. And as you know from February to April we didn’t have an increase in higher weather cancellations, we just didn’t have any calls at all coming in. So we didn’t include that. We just said let’s assume we get the 1,800 back and we get a more normalized year and that would reflect the 3.5% growth in same-base transport.

And we’re driving our numbers off of that, maybe thought well maybe if we’re conservative as we say we ought to build in a 2% decline for changes in demand. Those kinds of things that we’ve always somewhat bet blood in 1% or 2% decline to factor in increased capacity in markets those kinds of things. That’s highly arbitrary and it’s not rooted in anything specific but you have to be conservative. So we essentially grew same base transports by the 1,800 flights plus the roughly 1,550 flights we’re going to shave the transports 2%. And that’s what we did to drive our numbers. If somebody wanted let’s say 1,800 and 1% of flat in all that certainly wouldn’t be inappropriate, you just wanted to be a little bit more conservative in our numbers.

Bob Labick - CJS Securities

Okay, great. That’s helpful. And then the HBS conversions and Greenfields and then netting out the closures you would expect more transports as well from a net higher number of bases through the year?

Aaron Todd

Yes. On the Greenfields in the first year on a Greenfield you don’t tend to generate a lot of contribution because your contribution by a Greenfield are oftentimes offset by the start-up cost to get them going. When they’re doing an outsourcing of a hospital based operation you don’t have the start-up cost because you already have the aircraft and the crew in place. And you also tend to have a much higher transport volume because these are mature programs. So the benefit from those conversions will occur almost coincidentally and simultaneously with the – as we outsource through the year. And we do not have that activity in there and unless they were already underwritten commitment to do so. So that most of the 11 that are still anticipated for 14 are not – those benefits are not reflecting in our budget.

Bob Labick - CJS Securities

Okay, great. Thank you.

Operator

And there are no further questions at this time.

Aaron Todd - Chief Executive Officer

Okay, well very good. Again sorry about the $0.05 per share accounting (snap) through it, never seen one where you don’t subtract the expense from your income statement but you do include it in your numerator for calculating EPS. So net income came in exactly as we had foreseen in the pre-announcement but the EPS nicked to $0.05 a share for this quirky provision in one of our joint venture pursuit. We’ll try to get that correct to make sure that doesn’t happen again.

But certainly again the fact net income it did not affect the EBITDA and would have had our EPS right at the $0.34. But I think more to the point we’re running with some good tailwinds nearly two-thirds of the way through first quarter and frankly with the way the weather has been intensifying parts of the country. I think it shows that we’ve got some really resiliency there. And thankful for the West Coast and some of these other markets that have avoided some of that, that severity to give us a balancing out and still have some easy comp quarters ahead and hope to finally show a more normalized EBITDA profile for the company which based upon our budget expectation should be at ranges that are reflective of some (indiscernible) estimates we’ve seen out there and with some cushion as well.

So I think the number we’re driving to in our budgets are going to be consistent with some of the expectations out there and based upon the assumptions that I provided. So we don’t give specific guidance, I think that hopefully gives you enough to run your models and make those decisions for yourselves. But we’re excited to be well into the New Year. And with that operator I think we will conclude the call.

Operator

And this does conclude today’s conference. You may now disconnect.

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