Emergency Medical Services Corporation (NYSE: EMS) (EMSC or the
Company) today announces results for the second quarter ended June
30, 2010.
William A. Sanger, Chairman and Chief Executive Officer, said,
“EMSC delivered another quarter of revenue and earnings growth. We
are especially pleased with the improvement in performance at AMR
and continued growth at EmCare. Our recently completed acquisitions
strengthen our footprint and, coupled with our successful debt
refinancing, further position us to execute on our strategic
initiatives.”
Results of Operations for the Second Quarter 2010
For the quarter ended June 30, 2010, EMSC generated net revenue
of $708.8 million, an increase of 11.2% compared to the same
period last year.
During the quarter, EMSC incurred charges related to two
non-recurring events. In April the Company recorded a $19 million
expense for early debt extinguishment in connection with our credit
refinancing. The Company also accrued $3.1 million for a tentative
settlement regarding a previously disclosed investigation into
billing matters during 2001-2005 for certain AMR affiliates in the
state of New York (“NY Accrual”). Excluding these items, EMSC
generated $0.84 per diluted share compared to $0.67 per diluted
share in the second quarter of 2009, an increase of 25.6%.
Including these items, the Company generated net income of $24.0
million, or $0.54 per diluted share, for the second quarter of
2010. Net income was positively impacted by a reduction in interest
expense due to entering into our new credit facility in April
2010.
Adjusted EBITDA was $81.5 million in the second quarter ($78.4
million including the NY Accrual), an increase of 11.7% compared to
the same quarter last year. This increase is attributable primarily
to the impact of increased volume from net new contracts and
acquisitions, increased revenue from existing contracts, and a
decrease in operating and insurance expenses as a percentage of
revenue, offset in part by increased compensation and general and
administrative expenses. Both segments’ results include unfavorable
prior year insurance development totaling $1.5 million in the
quarter, compared to a $4.4 million unfavorable prior year
insurance development in the same period in 2009.
Cash provided by operating activities was $40.2 million in the
second quarter of 2010, compared to $99.0 million for the same
quarter last year. Cash tax payments increased $16.4 million as the
Company utilized most of its net operating loss carry-forwards in
2009. Accounts receivable increased $21.8 million during the second
quarter 2010, primarily as a result of revenue growth. Days Sales
Outstanding (DSO) increased one day sequentially to 62 days due to
temporary Medicare payment delays and a system conversion at AMR in
one region. Changes in insurance accruals and other assets and
liabilities were related to changes in the timing of payments.
Net cash used in investing activities was $53.2 million for the
quarter ended June 30, 2010, compared to $28.2 million for the same
period in 2009. Acquisition related funding increased by $47.5
million compared to the second quarter 2009. Insurance collateral
funding decreased by $7.6 million compared to the second quarter
2009 due to timing differences in insurance funding. Cash provided
by other investing activities increased $10.6 million primarily due
to a reduction in performance bond collateral.
For the quarter ended June 30, 2010, net cash used in financing
activities was $54.9 million compared to net cash provided by
financing activities of $2.2 million for the second quarter of
2009. The changes were related primarily to our debt refinancing
during the quarter. At June 30, 2010, there were no amounts
outstanding under our revolving credit facility.
Free Cash Flow was $34.6 million in the second quarter of 2010
compared to $70.9 million in the second quarter of 2009. The
difference is primarily attributable to the aforementioned changes
in operating and non-acquisition related investing activities.
A description of the non-GAAP measures, Adjusted EBITDA and Free
Cash Flow, and a reconciliation of non-GAAP to GAAP financial
measures are included in this news release.
Results of Operations for the Six Months Ended June 30,
2010
EMSC’s net revenue was $1.39 billion for the six months ended
June 30, 2010, an increase of 11.0% compared to the same period
last year.
EMSC generated $1.54 per diluted share (excluding the loss on
early debt extinguishment and NY Accrual), for an increase of 25.2%
over the same period last year. Including the loss on early debt
extinguishment and NY Accrual, EMSC’s net income for the six months
ended June 30, 2010 was $55.0 million, or $1.23 per diluted
share.
Adjusted EBITDA was $155.9 million ($152.8 million including the
NY Accrual), an increase of 12.6% compared to the same period last
year. This increase is attributable primarily to the impact of
increased volume from net new contracts and acquisitions, increased
revenue from existing contracts, and a decrease in operating and
insurance expenses as a percentage of revenue, offset in part by
increased compensation and general and administrative expenses.
Cash provided by operating activities was $84.7 million for the
six months ended June 30, 2010, compared to $140.9 million for the
same period last year. The change in operating cash flows was
affected primarily by cash paid for income taxes in 2010, increases
in accounts receivable in the second quarter 2010, timing
differences in prepaid expenses and the cash flow benefit related
to tax deductions from stock-based compensation.
Net cash used in investing activities was $60.4 million for the
six months ended June 30, 2010, compared to $22.7 million for the
same period in 2009. The increase in cash flows used in investing
activities is related primarily to an increase in acquisition
funding.
For the six months ended June 30, 2010, net cash used by
financing activities was $44.2 million compared to net cash
provided by financing activities of $2.8 million for the same
period in 2009. The increase in cash used by financing activities
is related primarily to our debt refinancing in the second quarter
of 2010.
Free Cash Flow was $75.4 million in the six months ended June
30, 2010 compared to $118.3 million for the same period in 2009.
The difference is primarily attributable to the aforementioned
changes in operating and non-acquisition related investing
activities. Free Cash Flow for the six months ended June 30, 2010
does not include a $13.5 million cash flow benefit related to tax
deductions for stock-based compensation.
Segment Results
EMSC operates two business segments: American Medical Response,
Inc. (AMR), the Company’s healthcare transportation services
segment, and EmCare Holdings Inc. (EmCare), the Company’s
facility-based physician services segment.
American Medical Response (AMR)
For the quarter ended June 30, 2010, AMR generated net revenue
of $344.2 million, an increase of 2.6% compared to the same quarter
last year. The increase in net revenue was from an improvement in
revenue per transport and growth in our managed transportation
business, offset by a decrease in interfacility transports.
AMR’s Adjusted EBITDA was $34.9 million ($31.8 million including
the NY Accrual), an increase of 7.5% compared to the same quarter
last year. The increase in Adjusted EBITDA is attributable
primarily to revenue per transport growth and a decrease in
compensation and benefits and insurance as a percentage of net
revenue, offset by higher fuel costs and general and administrative
expenses. Income from operations, including the NY Accrual, was
$20.3 million, an increase of 3.0% compared to the same quarter in
2009.
For the six months ended June 30, 2010, AMR’s net revenue was
$681.1 million, an increase of 1.4% compared to the same period
last year. Adjusted EBITDA was $67.3 million ($64.2 million
including the NY Accrual), an increase of 1.4% compared to the same
period last year. Income from operations, including the NY Accrual,
was $41.2 million, an increase of 2.0% compared to the same period
in 2009.
EmCare
For the quarter ended June 30, 2010, EmCare generated net
revenue of $364.6 million, an increase of 20.8% compared to the
same quarter last year. The increase in revenue is attributable
primarily to the addition of 54 net new contracts since March 31,
2009, and revenue increases at existing contracts. Revenue at
existing contracts grew 4.5% notwithstanding a 1.2% decline in same
store patient encounters. 2009 patient encounters were positively
impacted by increased visits related to the H1N1 virus.
Adjusted EBITDA was $46.6 million for the quarter compared to
$40.6 million in the same quarter last year, an increase of 15.0%.
The increase in Adjusted EBITDA was driven primarily by the net
impact of revenue and volume increases from new contracts in
addition to a decrease in insurance expense as a percentage of net
revenue. 2009 Adjusted EBITDA margins were positively impacted by
increased visits related to the H1N1 virus. Income from operations
was $41.5 million, an increase of 15.4% over the same period in
2009.
For the six months ended June 30, 2010, EmCare’s net revenue was
$707.0 million, an increase of 22.2% compared to the same period
last year. Adjusted EBITDA was $88.7 million, an increase of 22.8%
compared to the same period last year. Income from operations was
$78.1 million, an increase of 24.3% compared to the same period in
2009.
Guidance
Adjusted EBITDA guidance is increased from our previously
announced range of $313 million to $320 million to an expected
range of $321 million to $328 million (excluding the NY Accrual).
Diluted 2010 EPS guidance is updated from $3.10-$3.20 to an
expected range of $3.20-$3.30 (excluding $0.30 of non-recurring
charges related to our loss on early debt extinguishment and the NY
Accrual). Adjusted EBITDA and Diluted EPS, including the loss on
early debt extinguishment and the NY Accrual, are expected to be
between $318 million to $325 million and $2.90 - $3.00,
respectively.
Conference Call
EMSC management will host a conference call and live audio
webcast on Tuesday, August 3, 2010, at 11:00 a.m. EDT, to discuss
the Company’s financial results. A 30-day online replay will be
available approximately one hour following the conclusion of the
live broadcast. A link to the live broadcast and online replay is
available on the Investor Relations section of the Company’s
website at www.emsc.net.
About Emergency Medical Services Corporation
Emergency Medical Services Corporation (EMSC) is a leading
provider of emergency medical services in the United States. EMSC
operates two business segments: American Medical Response, Inc.
(AMR), the Company’s healthcare transportation services segment,
and EmCare Holdings Inc. (EmCare), the Company’s facility-based
physician services segment. AMR is the leading provider of
ambulance services in the United States. EmCare is a leading
provider of physician services to healthcare facilities. In 2009,
EMSC provided services in 13.0 million patient encounters in more
than 2,200 communities nationwide. EMSC is headquartered in
Greenwood Village, Colorado. For additional information, visit
www.emsc.net.
Forward-Looking Statements
Certain statements and information herein may be deemed to be
"forward-looking statements" within the meaning of the Federal
Private Securities Litigation Reform Act of 1995. Forward-looking
statements may include, but are not limited to, statements relating
to our objectives, plans and strategies, and all statements (other
than statements of historical facts) that address activities,
events or developments that we intend, expect, project, believe or
anticipate will or may occur in the future. Any forward-looking
statements herein are made as of the date of this press release,
and EMSC undertakes no duty to update or revise any such
statements. Forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties. Important
factors that could cause actual results, developments and business
decisions to differ materially from forward-looking statements are
described in EMSC's filings with the SEC from time to time,
including in the section entitled “Risk Factors” in the Company’s
most recent Annual Report on Form 10-K and subsequent periodic
reports. Among the factors that could cause future results to
differ materially from those provided in this press release are:
the impact on our revenue of changes in transport volume, mix of
insured and uninsured patients, and third party reimbursement rates
and methods; the adequacy of our insurance coverage and insurance
reserves; potential penalties or changes to our operations if we
fail to comply with extensive and complex government regulation of
our industry; the impact of potential changes in the healthcare
industry generally resulting from legislation currently under
consideration; our ability to recruit and retain qualified
physicians and other healthcare professionals, and enforce our
non-compete agreements with our physicians; our ability to generate
cash flow to service our debt obligations; the cost of capital
expenditures to maintain and upgrade our vehicle fleet and medical
equipment; the loss of one or more members of our senior
management team; the outcome of government investigations of
certain of our business practices; our ability to successfully
restructure our operations to comply with future changes in
government regulation; the loss of existing contracts and the
accuracy of our assessment of costs under new contracts; the high
level of competition in our industry; our ability to maintain or
implement complex information systems; our ability to implement our
business strategy; our ability to successfully integrate strategic
acquisitions; and our ability to comply with the terms of our
settlement agreements with the government.
Non-GAAP Financial Measures Description and
Reconciliation
This press release includes presentations of Adjusted EBITDA,
which is defined as net income before equity in earnings of
unconsolidated subsidiary, income tax expense, interest and other
income, realized gain on investments, interest expense, and
depreciation and amortization. It also includes presentations of
free cash flow, which is defined as cash flow from operations
adjusted for cash used in non-acquisition related investment
activities. Adjusted EBITDA and free cash flow are commonly used by
management and investors as performance measures and liquidity
indicators. Adjusted EBITDA and free cash flow are not considered
measures of financial performance under U.S. generally accepted
accounting principles (GAAP), and the items excluded therefrom are
significant components in understanding and assessing our financial
performance. Adjusted EBITDA and free cash flow should not be
considered in isolation or as an alternative to GAAP measures such
as net income, cash flows provided by or used in operating,
investing or financing activities or other financial statement data
presented in our consolidated financial statements as an indicator
of financial performance or liquidity. Reconciliations of non-GAAP
financial measures are provided in this news release.
Reconciliation for the forward-looking Adjusted EBITDA projections
presented herein is not being provided due to the number of
variables in the projected Adjusted EBITDA range. Since Adjusted
EBITDA and free cash flow are not measures determined in accordance
with GAAP and are susceptible to varying calculations, these
measures, as presented, may not be comparable to other similarly
titled measures of other companies.
EMERGENCY
MEDICAL SERVICES CORPORATION Consolidated Statements of
Operations and Other Information (unaudited; in thousands,
except shares, per share data and other information)
Quarter ended June 30, Six months
ended June 30, 2010 2009 2010 2009
Net revenue $ 708,804 $ 637,291 $ 1,388,158
$ 1,250,313 Compensation and benefits 496,443 438,628
976,760 865,162 Operating expenses 90,586 82,173 177,115 166,845
Insurance expense 25,942 28,357 48,012 50,861 Selling, general and
administrative expenses 18,298 16,279 35,156 31,315 Depreciation
and amortization expense 15,692 16,157
31,872 32,925 Income from operations
61,843 55,697 119,243 103,205 Interest income from restricted
assets 859 1,120 1,714 2,386 Interest expense (5,060 ) (10,279 )
(13,326 ) (20,469 ) Realized gain on investments 57 847 149 1,486
Interest and other income 206 423 471 940 Loss on early debt
extinguishment (19,091 ) - (19,091 )
-
Income before income taxes and
equity in earnings of unconsolidated subsidiary
38,814 47,808 89,160 87,548 Income tax expense (14,955 ) (18,885 )
(34,365 ) (34,611 ) Equity in earnings of unconsolidated subsidiary
105 96 199 153
Net income $ 23,964 $ 29,019 $ 54,994 $
53,090 Basic earnings per common share $ 0.54
$ 0.69 $ 1.26 $ 1.26 Diluted earnings per common share $ 0.54 $
0.67 $ 1.23 $ 1.23 Weighted average common shares outstanding,
basic 44,011,821 42,354,667 43,792,979 42,140,632 Weighted average
common shares outstanding, diluted 44,703,834 43,334,340 44,620,562
43,215,657
Other Information EmCare patient
encounters 2,746,154 2,391,090 5,277,649 4,573,222 EmCare weighted
patient encounters (1) 2,405,495 2,131,113 4,634,130 4,072,299 AMR
ambulance transports 716,853 731,620 1,427,105 1,458,228 AMR
weighted transports (2) 723,682 739,156 1,440,541 1,473,786
Earnings Per Share Reconciliation GAAP diluted
earnings per share $ 0.54 $ 0.67 $ 1.23 $ 1.23 Adjustment
for loss on early debt extinguishment 0.26 - 0.26 - Adjustment for
NY Accrual 0.04 - 0.04 -
Diluted earnings per share,
excluding loss on early debt extinguishment and NY Accrual
$ 0.84 $ 0.67 $ 1.54 $ 1.23
(1) EmCare weighted encounters
include a weighting of Radiology and Anesthesia encounters due to
the differences in reimbursement for these services.
(2) AMR weighted transports
include a weighting of wheelchair transports due to the differences
in reimbursement for these services.
EMERGENCY MEDICAL SERVICES CORPORATION
Reconciliation of Segment Adjusted EBITDA to Income from
Operations (unaudited; in thousands) Quarter
ended June 30, Six months ended June 30, 2010
2009 2010 2009 AMR Adjusted EBITDA
excluding NY Accrual $ 34,860 $ 32,425 $ 67,262 $ 66,313 NY Accrual
(3,100 ) - (3,100 ) -
Adjusted EBITDA 31,760 32,425 64,162 66,313 Depreciation and
amortization expense (11,070 ) (12,242 ) (22,304 ) (24,948 )
Interest income from restricted assets (344 ) (435 )
(688 ) (990 ) Income from operations 20,346
19,748 41,170 40,375
EmCare Adjusted EBITDA 46,634 40,549 88,667
72,203 Depreciation and amortization expense (4,622 ) (3,915 )
(9,568 ) (7,977 ) Interest income from restricted assets
(515 ) (685 ) (1,026 ) (1,396 ) Income from
operations 41,497 35,949 78,073
62,830
Total Adjusted EBITDA
excluding NY Accrual 81,494 72,974 155,929 138,516 NY Accrual
(3,100 ) - (3,100 ) -
Adjusted EBITDA 78,394 72,974 152,829 138,516 Depreciation and
amortization expense (15,692 ) (16,157 ) (31,872 ) (32,925 )
Interest income from restricted assets (859 ) (1,120
) (1,714 ) (2,386 ) Income from operations $ 61,843
$ 55,697 $ 119,243 $ 103,205
EMERGENCY MEDICAL SERVICES CORPORATION Reconciliation of
Adjusted EBITDA to Net Income (unaudited; in thousands)
Quarter ended June 30, Six months
ended June 30, 2010 2009 2010 2009
Adjusted EBITDA $ 78,394 $ 72,974 $ 152,829 $ 138,516
Depreciation and amortization expense (15,692 ) (16,157 ) (31,872 )
(32,925 ) Interest income from restricted assets (859 )
(1,120 ) (1,714 ) (2,386 ) Income from
operations 61,843 55,697 119,243 103,205 Interest income from
restricted assets 859 1,120 1,714 2,386 Interest expense (5,060 )
(10,279 ) (13,326 ) (20,469 ) Realized gain on investments 57 847
149 1,486 Interest and other income 206 423 471 940 Loss on early
debt extinguishment (19,091 ) - (19,091
) -
Income before income taxes and
equity in earnings of unconsolidated subsidiary
38,814 47,808 89,160 87,548 Income tax expense (14,955 ) (18,885 )
(34,365 ) (34,611 ) Equity in earnings of unconsolidated subsidiary
105 96 199 153
Net income $ 23,964 $ 29,019 $ 54,994 $
53,090
EMERGENCY MEDICAL SERVICES
CORPORATION Reconciliation of Adjusted EBITDA to Net Cash
Provided by Operating Activities (unaudited; in
thousands) Quarter ended June 30, Six months
ended June 30, 2010 2009 2010 2009
Adjusted EBITDA $ 78,394 $ 72,974 $ 152,829 $ 138,516
Interest paid (4,431 ) (9,774 ) (12,190 ) (19,651 ) Change in
accounts receivable (21,750 ) 3,499 (19,559 ) 874 Change in other
operating assets/liabilities 3,094 31,439 7,028 18,956 Equity based
compensation 1,441 1,104 2,545 1,754 Excess tax benefits from
stock-based compensation (2,917 ) - (13,498 ) - Income tax expense,
net of change in deferred taxes (13,982 ) (1,552 ) (33,525 ) (2,683
) Other 308 1,307 1,112
3,173 Net cash provided by operating activities $
40,157 $ 98,997 $ 84,742 $ 140,939
EMERGENCY MEDICAL SERVICES CORPORATION
Condensed Consolidated Balance Sheets (in thousands)
June 30, December 31, 2010 2009
(Unaudited) (Audited) Assets Current assets:
Cash and cash equivalents $ 313,033 $ 332,888 Trade and other
accounts receivable, net 483,597 459,088 Other current assets
85,906 73,241 Total current assets 882,536 865,217
Non-current assets: Property, plant and equipment, net 121,324
125,855 Goodwill and other intangible assets, net 531,067 484,605
Other long-term assets 169,868 179,030 Total assets $
1,704,795 $ 1,654,707
Liabilities and Equity Current
liabilities $ 357,759 $ 349,139 Long-term debt 415,687 449,254
Insurance reserves and other long-term liabilities 166,574
170,227 Total liabilities 940,020 968,620 Total equity
764,775 686,087 Total liabilities and equity $
1,704,795 $ 1,654,707
EMERGENCY MEDICAL
SERVICES CORPORATION Condensed Consolidated Statements of
Cash Flows (unaudited; in thousands) Quarter
ended June 30, Six months ended June 30, 2010
2009 2010 2009 Cash Flows from Operating
Activities Net income $ 23,964 $ 29,019 $ 54,994 $ 53,090
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation, amortization, and other 14,785
17,707 22,348 36,091 Loss on early debt extinguishment 19,091 -
19,091 - Deferred income taxes 973 17,333 840 31,928 Changes in
operating assets/liabilities, net of acquisitions: Trade and other
accounts receivable (21,750 ) 3,499 (19,559 ) 874 Insurance
accruals 4,754 (1,124 ) 6,232 2,753 Other assets and liabilities
(1,660 ) 32,563 796
16,203 Net cash provided by operating activities
40,157 98,997 84,742
140,939
Cash Flows from Investing Activities
Purchases of property, plant and equipment, net (8,586 ) (12,839 )
(15,060 ) (20,025 ) Acquisition of businesses, net of cash received
(47,675 ) (133 ) (50,975 ) (133 ) Net change in insurance
collateral (7,627 ) (15,243 ) (5,261 ) (1,933 ) Other investing
activities 10,648 27 10,938
(643 ) Net cash used in by investing activities
(53,240 ) (28,188 ) (60,358 ) (22,734 )
Cash Flows from Financing Activities EMSC issuance of
class A common stock 1,791 3,825 6,193 4,723 Repayments of capital
lease obligations and other debt (451,443 ) (1,453 ) (452,627 )
(2,612 ) Borrowings under revolving credit facility 425,000 -
425,000 - Debt issue costs (11,749 ) - (11,749 ) - Payment of
premiums for debt extinguishment (14,513 ) - (14,513 ) - Excess tax
benefits from stock-based compensation 2,917 - 13,498 - (Decrease)
Increase in bank overdrafts (6,942 ) (190 )
(10,041 ) 650 Net cash (used in) provided by
financing activities (54,939 ) 2,182
(44,239 ) 2,761 Change in cash and cash
equivalents (68,022 ) 72,991 (19,855 ) 120,966 Cash and cash
equivalents, beginning of period 381,055
194,148 332,888 146,173 Cash and
cash equivalents, end of period $ 313,033 $ 267,139 $
313,033 $ 267,139 Free cash flow $ 34,592 $
70,942 $ 75,359 $ 118,338
EMERGENCY MEDICAL SERVICES CORPORATION
Reconciliation of Free Cash Flow to Net Cash Provided by
Operating Activities (unaudited; in thousands)
Quarter ended June 30, Six months ended
June 30, 2010 2009 2010 2009
Free cash flow $ 34,592 $ 70,942 $ 75,359 $ 118,338 Purchase of
property, plant and equipment, net 8,586 12,839 15,060 20,025 Net
change in insurance collateral 7,627 15,243 5,261 1,933 Other
investing activities (10,648 ) (27 ) (10,938 )
643 Net cash provided by operating activities $ 40,157
$ 98,997 $ 84,742 $ 140,939
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