Emergency Medical Services Corporation (NYSE: EMS) (EMSC or the
Company) today announces results for the third quarter ended
September 30, 2010.
William A. Sanger, Chairman and Chief Executive Officer, said,
“EMSC continued to generate strong revenue and earnings during the
quarter. Revenue at both segments benefited from organic and
acquisition growth, and diluted EPS increased by 24.7% in spite of
unusual employee medical claims in the quarter. We also
strengthened our balance sheet during the quarter and now have $346
million in cash to capitalize on market opportunities.”
Results of Operations for the Third Quarter 2010
For the quarter ended September 30, 2010, EMSC generated net
revenue of $737.2 million, an increase of 10.8% compared to
the same period last year.
EMSC generated net income of $36.8 million, or $0.82 per diluted
share for the third quarter of 2010, compared to net income of
$28.9 million, or $0.66 per diluted share, in the third quarter of
2009, an increase of $7.9 million and 24.7%, respectively. Adjusted
EBITDA was $80.1 million, an increase of 10.8% 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, continued compensation
management and a decrease in operating expenses as a percentage of
revenue. Partially offsetting these items, the Company incurred
$3.0 million ($0.04 impact to diluted EPS) of increased employee
medical claim charges related to four large claims in our
self-insured health plans. These charges were recorded primarily at
AMR, and are included as a component of compensation and benefit
expense. We have historically not seen this severity of large
claims. We do not believe this represents a long-term trend, and we
have seen a return to normal claim levels since the end of the
quarter. Net income was also positively impacted by a reduction in
interest expense due to entering into our new credit facility in
April 2010.
Cash provided by operating activities was $54.6 million in the
third quarter of 2010, compared to $68.9 million for the same
quarter last year. Cash paid for income taxes increased $23.5
million as the Company utilized most of its net operating loss
carry-forwards in 2009. Days Sales Outstanding (DSO) decreased by
one day from the prior quarter. Changes in insurance accruals and
other assets and liabilities increased cash $11.2 million and were
related to the timing of insurance and interest payments.
Net cash used in investing activities was $20.4 million for the
quarter ended September 30, 2010, compared to $8.9 million for the
same period in 2009. Insurance collateral funding increased by
$10.1 million compared to the third quarter 2009 due to timing
differences in insurance funding. Net capital expenditures were
$16.2 million in the third quarter of 2010 compared to $13.5
million in the same period last year.
For the quarter ended September 30, 2010, net cash used in
financing activities was $1.5 million compared to net cash provided
by financing activities of $4.0 million for the third quarter of
2009. At September 30, 2010, there were no amounts outstanding
under our revolving credit facility.
Free cash flow was $34.4 million in the third quarter of 2010
compared to $61.2 million in the third quarter of 2009. The
difference is attributable primarily to the increase in cash paid
for income taxes of $23.5 million and other 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 Nine Months Ended September 30,
2010
EMSC net revenue was $2.13 billion for the nine months ended
September 30, 2010, an increase of 11.0% compared to the same
period last year.
During the second 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 debt
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 $2.36 per diluted share for the nine months ended
September 30, 2010 compared to $1.89 per diluted share for the same
period last year, an increase of 25.0%. Including these items, the
Company generated net income of $91.8 million, or $2.06 per diluted
share, for the nine months ended September 30, 2010.
Adjusted EBITDA was $236.0 million ($232.9 million including the
NY Accrual), an increase of 12.0% 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
expenses as a percentage of revenue, offset in part by higher
compensation and benefit costs.
Cash provided by operating activities was $139.4 million for the
nine months ended September 30, 2010, compared to $209.8 million
for the same period last year. The decrease in operating cash flows
was primarily from an increase of $45.7 million of cash paid for
income taxes in 2010, increases in accounts receivable in 2010 and
the cash flow benefit related to tax deductions in 2010 from
stock-based compensation.
Net cash used in investing activities was $80.8 million for the
nine months ended September 30, 2010, compared to $31.7 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 in 2010.
For the nine months ended September 30, 2010, net cash used in
financing activities was $45.8 million compared to net cash
provided by financing activities of $6.8 million for the same
period in 2009. The increase in cash used in financing activities
is related primarily to our debt refinancing in the second quarter
of 2010 including a principal reduction of $25 million.
Free cash flow was $109.7 million in the nine months ended
September 30, 2010 compared to $179.5 million for the same period
in 2009. The difference is attributable primarily to the
aforementioned changes in operating and non-acquisition related
investing activities.
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 September 30, 2010, AMR generated net
revenue of $352.2 million, an increase of 4.0% compared to the same
quarter last year. The increase in net revenue was from an increase
in emergency transports and increases in other revenue, offset by a
decrease in interfacility transports.
AMR’s Adjusted EBITDA was $31.4 million, a decrease of 1.2%
compared to the same quarter last year. The decrease in Adjusted
EBITDA is attributable to the negative impact of $2.5 million in
increased benefit costs related to higher employee medical claims
for the Company’s self-insured health plans and increased fuel
costs. Insurance expense for the quarter ended September 30, 2010
included a favorable prior period insurance adjustment of $3.0
million compared to a favorable prior period adjustment of $2.1
million in the same period last year. Income from operations was
$19.9 million, an increase of 3.9% compared to the same quarter in
2009.
For the nine months ended September 30, 2010, AMR’s net revenue
was $1.03 billion, an increase of 2.2% compared to the same period
last year. Adjusted EBITDA was $98.7 million ($95.6 million
including the NY Accrual recorded in the second quarter), an
increase of 0.6% compared to the same period last year. Income from
operations, including the NY Accrual, was $61.1 million, an
increase of 2.6% compared to the same period in 2009.
EmCare
For the quarter ended September 30, 2010, EmCare generated net
revenue of $385.0 million, an increase of 18.0% compared to the
same quarter last year. The increase in revenue is attributable
primarily to the addition of 39 net new contracts since June 30,
2009, and revenue increases at existing contracts. Revenue at
existing contracts grew 1.4% notwithstanding a 0.9% decline in same
store patient encounters. 2009 patient encounters were positively
impacted by increased visits related to the H1N1 virus.
Adjusted EBITDA was $48.6 million for the quarter compared to
$40.4 million last year, an increase of 20.2%. The increase in
Adjusted EBITDA was driven primarily by the net impact of revenue
and volume increases from net new contracts in addition to a
decrease in operating, insurance and general and administrative
expense as a percentage of net revenue. Insurance expense for the
quarter ended September 30, 2010 included an unfavorable prior
period insurance adjustment of $3.2 million compared to an
unfavorable prior period adjustment of $1.3 million in the same
period last year. Income from operations was $42.9 million, an
increase of 18.2% over the same period in 2009.
For the nine months ended September 30, 2010, EmCare’s net
revenue was $1.09 billion, an increase of 20.7% compared to the
same period last year. Adjusted EBITDA was $137.3 million, an
increase of 21.9% compared to the same period last year. Income
from operations was $121.0 million, an increase of 22.0% compared
to the same period in 2009.
Guidance
Adjusted EBITDA guidance is being revised to an expected range
of $317 million to $322 million from our previously announced range
of $321 million to $328 million (excluding the NY Accrual). Diluted
2010 EPS guidance is being revised to an expected range of $3.20 -
$3.26 from 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 $314 million to $319 million
and $2.90 - $2.96, respectively. The change in guidance is driven
primarily by the increased cost of employee medical claims in Q3
2010.
Conference Call
EMSC management will host a conference call and live audio
webcast on Tuesday, November 2, 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 changes in the healthcare industry; 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, loss on early debt
extinguishment, 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 investing 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
September 30, Nine months ended September 30,
2010 2009 2010
2009 Net revenue $ 737,180
$ 665,056 $ 2,125,338 $ 1,915,369
Compensation and benefits 523,263 467,625 1,500,023 1,332,787
Operating expenses 91,023 85,510 268,138 252,355 Insurance expense
25,793 24,845 73,805 75,706 Selling, general and administrative
expenses 17,742 15,871 52,898 47,186 Depreciation and amortization
expense 16,528 15,733 48,400
48,658 Income from operations 62,831 55,472
182,074 158,677 Interest income from restricted assets 717 1,082
2,431 3,468 Interest expense (4,856 ) (10,280 ) (18,182 ) (30,749 )
Realized gain on investments 730 544 879 2,030 Interest and other
income 277 502 748 1,442 Loss on early debt extinguishment -
- (19,091 ) - Income
before income taxes and equity in earnings of unconsolidated
subsidiary 59,699 47,320 148,859 134,868 Income tax expense (22,990
) (18,533 ) (57,355 ) (53,144 ) Equity in earnings of
unconsolidated subsidiary 53 91
252 244 Net income $ 36,762 $ 28,878
$ 91,756 $ 81,968 Basic earnings
per common share $ 0.83 $ 0.67 $ 2.09 $ 1.93 Diluted earnings per
common share $ 0.82 $ 0.66 $ 2.06 $ 1.89 Weighted average common
shares outstanding, basic 44,100,239 42,809,582 43,896,524
42,366,065 Weighted average common shares outstanding, diluted
44,699,169 43,769,788 44,648,135 43,402,818
Other
Information EmCare patient encounters 2,851,582 2,553,675
8,129,231 7,126,650 EmCare weighted patient encounters (1)
2,518,109 2,234,675 7,152,239 6,306,727 AMR ambulance transports
731,931 719,013 2,159,036 2,177,241 AMR weighted transports (2)
738,853 726,353 2,179,394 2,200,139
Earnings Per
Share Reconciliation GAAP diluted earnings per share $
2.06 $ 1.89 Adjustment for loss on early debt extinguishment
0.26 - Adjustment for NY Accrual 0.04 -
Diluted earnings per share, excluding loss
on early debt extinguishment and NY Accrual
$ 2.36 $ 1.89
(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 September 30, Nine
months ended September 30, 2010
2009 2010 2009
AMR Adjusted EBITDA excluding NY Accrual $ 31,449 $
31,838 $ 98,711 $ 98,151 NY Accrual - -
(3,100 ) - Adjusted EBITDA 31,449 31,838
95,611 98,151 Depreciation and amortization expense (11,325 )
(12,199 ) (33,629 ) (37,147 ) Interest income from restricted
assets (240 ) (495 ) (928 ) (1,485 )
Income from operations 19,884 19,144
61,054 59,519
EmCare
Adjusted EBITDA 48,627 40,449 137,294 112,652 Depreciation and
amortization expense (5,203 ) (3,534 ) (14,771 ) (11,511 ) Interest
income from restricted assets (477 ) (587 )
(1,503 ) (1,983 ) Income from operations 42,947
36,328 121,020 99,158
Total Adjusted EBITDA excluding NY Accrual
80,076 72,287 236,005 210,803 NY Accrual - -
(3,100 ) - Adjusted EBITDA 80,076
72,287 232,905 210,803 Depreciation and amortization expense
(16,528 ) (15,733 ) (48,400 ) (48,658 ) Interest income from
restricted assets (717 ) (1,082 ) (2,431 )
(3,468 ) Income from operations $ 62,831 $ 55,472
$ 182,074 $ 158,677
EMERGENCY MEDICAL SERVICES CORPORATION
Reconciliation of Adjusted EBITDA to Net Income and Net Cash
Provided by Operating Activities (unaudited; in
thousands) Quarter ended September 30,
Nine months ended September 30, 2010
2009 2010
2009 Adjusted EBITDA $ 80,076 $ 72,287 $
232,905 $ 210,803 Depreciation and amortization expense (16,528 )
(15,733 ) (48,400 ) (48,658 ) Interest income from restricted
assets (717 ) (1,082 ) (2,431 ) (3,468
) Income from operations 62,831 55,472 182,074 158,677 Interest
income from restricted assets 717 1,082 2,431 3,468 Interest
expense (4,856 ) (10,280 ) (18,182 ) (30,749 ) Realized gain on
investments 730 544 879 2,030 Interest and other income 277 502 748
1,442 Loss on early debt extinguishment - - (19,091 ) - Income tax
expense (22,990 ) (18,533 ) (57,355 ) (53,144 ) Equity in earnings
of unconsolidated subsidiary 53 91
252 244 Net income $ 36,762 $
28,878 $ 91,756 $ 81,968
Adjusted EBITDA $ 80,076 $ 72,287 $ 232,905 $ 210,803 Interest paid
(4,195 ) (9,773 ) (16,385 ) (29,424 ) Change in accounts receivable
(10,882 ) 7,574 (30,441 ) 8,448 Change in other operating
assets/liabilities 11,164 (2,956 ) 18,192 16,000 Equity based
compensation 2,042 1,121 4,587 2,875 Excess tax benefits from
stock-based compensation (479 ) - (13,977 ) - Income tax expense,
net of change in deferred taxes (24,092 ) (472 ) (57,617 ) (3,155 )
Other 989 1,081 2,101
4,254 Net cash provided by operating activities $
54,623 $ 68,862 $ 139,365 $ 209,801
EMERGENCY MEDICAL SERVICES CORPORATION Condensed
Consolidated Balance Sheets (in thousands)
September 30, December 31, 2010
2009 (Unaudited) (Audited)
Assets Current assets: Cash and cash equivalents $ 345,716 $
332,888 Trade and other accounts receivable, net 492,723 459,088
Other current assets 68,241 73,241 Total current
assets 906,680 865,217 Non-current assets: Property, plant and
equipment, net 126,759 125,855 Goodwill and other intangible
assets, net 527,147 484,605 Other long-term assets 177,420
179,030 Total assets $ 1,738,006 $ 1,654,707
Liabilities and Equity Current liabilities $ 357,863 $
349,139 Long-term debt 410,307 449,254 Insurance reserves and other
long-term liabilities 166,152 170,227 Total
liabilities 934,322 968,620 Total equity 803,684
686,087 Total liabilities and equity $ 1,738,006 $ 1,654,707
EMERGENCY MEDICAL SERVICES CORPORATION Condensed
Consolidated Statements of Cash Flows and Reconciliation of Net
Cash Provided by Operating Activities to Free Cash Flow
(unaudited; in thousands)
Quarter ended September 30, Nine months ended September
30, 2010 2009
2010 2009 Cash Flows from
Operating Activities Net income $ 36,762 $ 28,878 $ 91,756 $
81,968 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation, amortization, and other 18,681
17,305 41,029 53,396 Loss on early debt extinguishment - - 19,091 -
Deferred income taxes (1,102 ) 18,061 (262 ) 49,989 Changes in
operating assets/liabilities, net of acquisitions: Trade and other
accounts receivable (10,882 ) 7,574 (30,441 ) 8,448 Insurance
accruals (3,891 ) 4,280 2,341 7,033 Other assets and liabilities
15,055 (7,236 ) 15,851
8,967 Net cash provided by operating activities
54,623 68,862 139,365
209,801
Cash Flows from Investing Activities
Purchases of property, plant and equipment, net (16,187 ) (13,535 )
(31,247 ) (33,560 ) Acquisition of businesses, net of cash received
(183 ) (1,241 ) (51,158 ) (1,374 ) Net change in insurance
collateral (4,140 ) 6,002 (9,401 ) 4,069 Other investing activities
83 (166 ) 11,021 (809 )
Net cash used in investing activities (20,427 )
(8,940 ) (80,785 ) (31,674 )
Cash Flows
from Financing Activities EMSC issuance of class A common stock
221 2,437 6,414 7,160 Repayments of capital lease obligations and
other debt (3,275 ) (1,214 ) (455,902 ) (3,826 ) Borrowings under
revolving credit facility - - 425,000 - Debt issue costs (219 ) -
(11,968 ) - Payment of premiums for debt extinguishment - - (14,513
) - Acquisition of treasury stock (1,289 ) - (1,289 ) - Excess tax
benefits from stock-based compensation 479 - 13,977 - Increase
(Decrease) in bank overdrafts 2,570 2,821
(7,471 ) 3,471 Net cash (used in)
provided by financing activities (1,513 ) 4,044
(45,752 ) 6,805 Change in cash
and cash equivalents 32,683 63,966 12,828 184,932 Cash and cash
equivalents, beginning of period 313,033
267,139 332,888 146,173 Cash and
cash equivalents, end of period $ 345,716 $ 331,105 $
345,716 $ 331,105 Net cash provided by
operating activities $ 54,623 $ 68,862 $ 139,365 $ 209,801 Purchase
of property, plant and equipment, net (16,187 ) (13,535 ) (31,247 )
(33,560 ) Net change in insurance collateral (4,140 ) 6,002 (9,401
) 4,069 Other investing activities 83 (166 )
11,021 (809 ) Free cash flow $ 34,379 $
61,163 $ 109,738 $ 179,501
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