EMS Emergency Medical Services Corp

Emergency Medical Services Corporation (NYSE: EMS) Highlights: -- Net revenue was $478.5 million for the second quarter ended June 30, 2006, an increase of 7.5% compared to the same quarter last year; -- EBITDA was $45.0 million for the second quarter, an increase of 19.5% compared to the same quarter last year; -- Diluted earnings per share were $0.25 for the second quarter ($0.26 per diluted share excluding stock option expense); -- The Company has increased EBITDA guidance to a range of $168.0 to $172.0 million (previously $156.0 to $160.0 million) for 2006; -- The Company has increased diluted EPS guidance to a range of $0.85 to $0.90 (previously $0.75 to $0.78) for 2006; and -- In addition to the previously announced debt reduction payment of $10.0 million, the Company made an unscheduled debt reduction payment of $9.4 million in July 2006. Emergency Medical Services Corporation (NYSE: EMS) (EMSC or the Company) today announced results for the second quarter ended June 30, 2006. Results of Operations for the Second Quarter 2006 For the second quarter ended June 30, 2006, EMSC generated net revenue of $478.5 million, an increase of 7.5% compared to the same quarter last year. The Company generated EBITDA of $45.0 million (including a $0.9 million restructuring charge), an increase of 19.5% compared to the same quarter last year. A reconciliation of EBITDA to GAAP financial measures is included in this news release. EMSC generated net income of $10.7 million, or $0.25 per diluted share, on 42.4 million average weighted shares outstanding ($0.26 per diluted share excluding stock option expense), for the second quarter of 2006, compared to net income of $6.5 million, or $0.14 per diluted share, on 33.6 million average weighted shares outstanding, for the same quarter last year. The improvement in earnings is primarily due to revenue increases from contract wins, higher net revenue per patient encounter, targeted expense reductions and favorable insurance trends. Operating cash flows for the quarter ended June 30, 2006, were $75.6 million, compared to $44.1 million for the same quarter last year. Changes in operating assets and liabilities during the quarter included a decrease in accounts receivable of $11.9 million, including an $11.0 million tax refund, increases in insurance accruals of $1.5 million, decreases in prepaid and other current assets of $4.5 million, and an increase in accounts payable and accrued liabilities of $23.5 million, primarily due to timing differences in our vendor-related disbursements and interest accruals on our debt. Net cash used in investing activities was $22.6 million for the quarter ended June 30, 2006, compared to $20.5 million for the same quarter last year. Investing activities during the quarter related primarily to net capital expenditures of $15.4 million for the purchase of new vehicles, medical equipment and technology-related assets, and a net change of $6.9 million in insurance collateral. For the quarter ended June 30, 2006, net cash used in financing activities was $22.3 million, compared to $16.5 million for the same quarter last year. Financing activities during the quarter included an unscheduled payment on our senior secured term loan of $10.0 million. "We are pleased with our performance during the second quarter of 2006. We continue to demonstrate year over year contract growth, enter new markets and launch new services. Our increase in cash flow has enabled us to execute on our acquisition plan and make unscheduled debt reduction payments totaling $19.4 million so far this year. We are exceptionally pleased with EmCare's continued strong performance and growth, and are encouraged by AMR's performance improvement over the first quarter of 2006. We continue to make progress at AMR in the face of decreased hospital census, fuel cost increases and staffing challenges," said William A. Sanger, Chairman and Chief Executive Officer. Results of Operations for the Six Months Ended June 30, 2006 For the six months ended June 30, 2006, EMSC generated net revenue of $947.6 million, an increase of 8.4% compared to the same period last year. EBITDA was $83.9 million (including a $0.9 million restructuring charge), an increase of 15.0% compared to the same period last year (excluding Laidlaw International, Inc. acquisition-related compensation charges in January, 2005). EMSC generated net income of $18.0 million, or $0.42 per diluted share, on 42.4 million average weighted shares outstanding ($0.43 per diluted share excluding stock option expense), for the six months ended June 30, 2006, compared to net income of $4.9 million for the same period last year. Operating cash flows for the six months ended June 30, 2006, were $112.4 million, compared to $86.1 million for the same period last year. Changes in operating assets and liabilities included a decrease in accounts receivable of $31.9 million, an increase in insurance accruals of $9.0 million, and a net contribution of $9.2 million from other operating assets and liabilities. Net cash used in investing activities was $41.8 million for the six months ended June 30, 2006, compared to $860.8 million (including $828.8 million related to the acquisition of AMR and EmCare from Laidlaw in February 2005) for the same period in 2005. Net cash used in investing activities during the six months ended June 30, 2006, relates primarily to net capital expenditures of $28.3 million for the purchase of new vehicles, medical equipment and technology-related assets, and a net change in insurance collateral of $12.5 million. For the six months ended June 30, 2006, net cash used in financing activities was $19.0 million, compared to net cash provided by financing activities of $802.2 million (including $820.9 million related to the acquisition of AMR and EmCare from Laidlaw in February 2005) for the six months ended June 30, 2005. 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 emergency department and hospital-based management services segment. American Medical Response (AMR) For the second quarter ended June 30, 2006, AMR generated net revenue of $293.9 million, an increase of 3.2% compared to the same quarter last year. EBITDA was $25.4 million (excluding a $0.9 million restructuring charge), equal to EBITDA in the same quarter last year. Results were affected by lower than expected interfacility transport volume due to lower hospital census, increased fuel costs and market-specific staffing shortages, partially offset by lower insurance and selling, general and administrative costs. For the six months ended June 30, 2006, AMR generated net revenue of $589.2 million, an increase of 4.5% compared to the same period last year. EBITDA was $48.5 million (excluding a $0.9 million restructuring charge), a decrease of 6.8% compared to the same period last year (excluding Laidlaw acquisition-related compensation charges in January 2005). EmCare For the second quarter ended June 30, 2006, EmCare generated net revenue of $184.6 million, an increase of 15.1% compared to the same quarter last year. EBITDA was $20.6 million, an increase of 66.7% compared to the same quarter last year. The increase in EBITDA resulted primarily from revenue increases from existing contracts, new contracts and reduced insurance expense. For the six months ended June 30, 2006, EmCare generated net revenue of $358.4 million, an increase of 15.3% compared to the same period last year. EBITDA was $36.3 million, an increase of 73.6% compared to the same period last year (excluding Laidlaw acquisition-related compensation charges in January 2005). Guidance EMSC has increased its EBITDA and EPS guidance for the year ended December 31, 2006. The Company expects EBITDA to be in the range of $168.0 million to $172.0 million, up from the initial guidance range of $156.0 million to $160.0 million. Diluted EPS is expected to be in the range of $0.85 to $0.90, up from the initial guidance range of $0.75 to $0.78. Conference Call EMSC management will host a conference call and live audio webcast on Thursday, August 3, 2006, 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 Under the recognized brands of EmCare and American Medical Response, Emergency Medical Services Corporation, headquartered in Greenwood Village, Colorado, is a leading provider of emergency medical services in the United States, serving more than nine million patients each year. EmCare provides outsourced emergency department staffing and management services to 347 hospitals nationwide. American Medical Response is America's leading provider of ambulance services with local operations in 36 states and the District of Columbia. For more 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. 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, both as it exists now and as it may change in the future; our ability to recruit and retain qualified physicians and other healthcare professionals, and enforce our non-compete agreements with our physicians; 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 generate cash flow to service our debt obligations and fund the cost of capital expenditures to maintain and upgrade our vehicle fleet and medical equipment; and the loss of existing contracts and the accuracy of our assessment of costs under new contracts. Comparability of Historical Financial Data The comparability of our financial information has been affected by a number of significant events and transactions. In February 2005, AMR and EmCare were acquired by Emergency Medical Services L.P. For the month ended January 31, 2005, prior to the acquisition, the AMR and EmCare businesses formerly owned by Laidlaw International, Inc., are referred to as the "Predecessor." In addition, EMSC completed an IPO in December 2005 and used net proceeds from this offering to pay down a portion of a senior secured credit facility entered into as part of the acquisition. Generally the results of operations of our segments are comparable from quarter to quarter except for certain capital costs, such as interest and amortization, and Laidlaw acquisition-related compensation charges. Non-GAAP Financial Measures Reconciliation This press release includes presentations of EBITDA, which is defined as operating income plus depreciation and amortization expense. EBITDA is commonly used by management and investors as a measure of leverage capacity, debt service ability and liquidity. EBITDA is not considered a measure of financial performance under U.S. generally accepted accounting principles (GAAP), and the items excluded from EBITDA are significant components in understanding and assessing our financial performance. EBITDA should not be considered in isolation or as an alternative to such GAAP measures 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. Since EBITDA is not a measure determined in accordance with GAAP and is susceptible to varying calculations, EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. -0- *T EMERGENCY MEDICAL SERVICES CORPORATION Unaudited Condensed Statements of Operations and Other Information Including a Reconciliation of EBITDA to Net Income (in thousands, except shares, per share data and other information) Consolidated Consolidated Consolidated Consolidated three months three months six months five months ended ended ended ended June 30, June 30, June 30, June 30, 2006 2005 2006 2005 ------------ ------------ ------------ ------------ Net revenue $478,451 $445,019 $947,575 $731,408 ------------ ------------ ------------ ------------ Compensation and benefits 330,927 307,613 656,974 503,303 Operating expenses 69,203 63,374 135,657 102,544 Insurance expense 19,204 22,427 42,111 39,334 Selling, general and administrative expenses 13,170 13,915 28,009 22,594 Restructuring charges 919 - 919 - Laidlaw compensation charges - - - - ------------ ------------ ------------ ------------ EBITDA $45,028 $37,690 $83,905 $63,633 ============ ============ ============ ============ Reconciliation of EBITDA to net income (loss) EBITDA $45,028 $37,690 $83,905 $63,633 Depreciation and amortization expense (16,360) (15,072) (32,204) (23,968) ------------ ------------ ------------ ------------ Income (loss) from operations 28,668 22,618 51,701 39,665 Interest expense (11,445) (11,759) (22,737) (21,583) Realized (loss) gain on investments (306) 33 (525) (6) Interest and other income (expense) 780 85 1,132 98 Loss on early debt extinguishment (193) - (193) - Income tax (expense) benefit (6,788) (4,516) (11,416) (7,178) Equity in earnings of unconsolidated subsidiary 2 - 17 - ------------ ------------ ------------ ------------ Net income (loss) $10,718 $6,461 $17,979 $10,996 ============ ============ ============ ============ Basic net income per common share $0.26 $0.14 $0.43 $0.28 Diluted net income per common share $0.25 $0.14 $0.42 $0.27 Average common shares outstanding, basic 41,497,245 33,119,626 41,497,238 33,080,530 Average common shares outstanding, diluted 42,356,192 33,643,365 42,377,804 33,393,730 Other Information EmCare patient visits 1,631,705 1,541,868 3,179,310 2,516,690 AMR ambulance transports 724,854 722,752 1,457,615 1,202,320 AMR weighted transports 740,816 739,519 1,488,876 1,230,438 Predecessor combined Pro forma one month six months ended ended January 31, June 30, 2005 2005(1) ----------- ---------- Net revenue $143,069 $874,477 ----------- ---------- Compensation and benefits 103,191 606,494 Operating expenses 18,469 121,013 Insurance expense 7,768 47,102 Selling, general and administrative expenses 4,283 26,877 Restructuring charges - - Laidlaw compensation charges 14,440 14,440 ----------- ---------- EBITDA $(5,082) $58,551 =========== ========== EBITDA $(5,082) $58,551 Depreciation and amortization expense (3,894) (27,862) ----------- ---------- Income (loss) from operations (8,976) 30,689 Interest expense (1,169) (22,752) Realized (loss) gain on investments 13 7 Interest and other income (expense) (4) 94 Loss on early debt extinguishment - - Income tax (expense) benefit 4,060 (3,118) Equity in earnings of unconsolidated subsidiary - - ----------- ---------- Net income (loss) $(6,076) $4,920 =========== ========== Basic net income per common share N/A N/A Diluted net income per common share N/A N/A Average common shares outstanding, basic N/A N/A Average common shares outstanding, diluted N/A N/A Other Information EmCare patient visits 464,500 2,981,190 AMR ambulance transports 243,700 1,446,020 AMR weighted transports 249,421 1,479,859 (1) Pro forma combined one-month Predecessor with five-month Successor. *T -0- *T EMERGENCY MEDICAL SERVICES CORPORATION Unaudited Reconciliation of Segment EBITDA to Income from Operations (in thousands) Consolidated Consolidated Consolidated Consolidated three months three months six months five months ended ended ended ended June 30, June 30, June 30, June 30, 2006 2005 2006 2005 ------------ ------------ ------------ ------------ AMR EBITDA $24,444 $25,342 $47,603 $45,148 Depreciation and amortization expense (13,051) (12,041) (25,661) (19,445) Income (loss) from operations 11,393 13,301 21,942 25,703 ------------ ------------ ------------ ------------ EmCare EBITDA 20,584 12,348 36,302 18,485 Depreciation and amortization expense (3,309) (3,031) (6,543) (4,523) ------------ ------------ ------------ ------------ Income (loss) from operations 17,275 9,317 29,759 13,962 ------------ ------------ ------------ ------------ Total EBITDA 45,028 37,690 83,905 63,633 Depreciation and amortization expense (16,360) (15,072) (32,204) (23,968) Income (loss) from operations $28,668 $22,618 $51,701 $39,665 ============ ============ ============ ============ Predecessor Pro forma combined six one month months ended ended January 31, June 30, 2005(1) 2005(2) ----------- ---------- AMR EBITDA $1,074 $46,222 Depreciation and amortization expense (3,418) (22,863) ----------- -------- Income (loss) from operations (2,344) 23,359 ----------- -------- EmCare EBITDA (6,156) 12,329 Depreciation and amortization expense (476) (4,999) ----------- -------- Income (loss) from operations (6,632) 7,330 ----------- -------- Total EBITDA (5,082) 58,551 Depreciation and amortization expense (3,894) (27,862) ----------- -------- Income (loss) from operations $(8,976) $30,689 =========== ======== (1) Loss from operations includes Laidlaw compensation charges of $5.8 million at AMR and $8.6 million at EmCare in connection with the acquisition from Laidlaw. (2) Pro forma combined one-month Predecessor with five-month Successor. *T -0- *T EMERGENCY MEDICAL SERVICES CORPORATION Condensed Balance Sheets (in thousands) Unaudited Consolidated Consolidated June 30, December 31, 2006 2005 ------------ ------------ Assets Current assets: Cash and cash equivalents $69,660 $18,048 Trade and other accounts receivable, net 377,822 411,184 Other current assets 84,246 86,064 ------------ ------------ Total current assets 531,728 515,296 Non-current assets: Property, plant and equipment, net 142,404 138,037 Goodwill and other intangible assets, net 323,606 329,351 Other long-term assets 298,539 284,344 ------------ ------------ Total assets $1,296,277 $1,267,028 ============ ============ Liabilities and Equity Current liabilities $288,559 $277,435 Long-term debt 485,404 495,520 Other long-term liabilities 159,181 149,089 ------------ ------------ Total liabilities 933,144 922,044 Total equity 363,133 344,984 ------------ ------------ Total liabilities and equity $1,296,277 $1,267,028 ============ ============ *T -0- *T EMERGENCY MEDICAL SERVICES CORPORATION Unaudited Condensed Statements of Cash Flows (in thousands) Consolidated Consolidated Consolidated Consolidated three months three months six months five months ended ended ended ended June 30, June 30, June 30, June 30, 2006 2005 2006 2005 ------------ ------------ ------------ ------------ Cash Flows from Operating Activities Net income (loss) $10,718 $6,461 $17,979 $10,996 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation, amortization, deferred taxes and other 23,522 14,706 44,391 24,391 Non-cash Laidlaw allocated compensation expense - - - - Changes in operating assets/ liabilities: Trade and other accounts receivable 11,903 7,099 31,881 23,276 Insurance accruals 1,528 3,767 8,987 8,226 Other assets and liabilities 27,968 12,052 9,177 23,921 ------------ ------------ ------------ ------------ Net cash provided by (used in) operating activities 75,639 44,085 112,415 90,810 ------------ ------------ ------------ ------------ Cash Flows from Investing Activities EMS LP purchase of AMR and EmCare - - - (828,775) Purchase of property, plant and equipment, net (15,396) (9,338) (28,296) (19,576) Insurance collateral (6,883) (15,663) (12,515) (22,434) Other investing activities (277) 4,480 (1,034) 3,129 ------------ ------------ ------------ ------------ Net cash (used in) provided by investing activities (22,556) (20,521) (41,845) (867,656) ------------ ------------ ------------ ------------ Cash Flows from Financing Activities EMS LP purchase of AMR and EmCare - 251 - 820,938 Other financing activities (22,264) (16,793) (18,958) (27,358) ------------ ------------ ------------ ------------ Net cash provided by financing activities (22,264) (16,542) (18,958) 793,580 ------------ ------------ ------------ ------------ Change in cash and cash equivalents 30,819 7,022 51,612 16,734 Cash and cash equivalents, beginning of period 38,841 24,343 18,048 14,631 ------------ ------------ ------------ ------------ Cash and cash equivalents, end of period $69,660 $31,365 $69,660 $31,365 ============ ============ ============ ============ Predecessor combined Pro forma one month six months ended ended January 31, June 30, 2005 2005(1) ----------- ---------- Cash Flows from Operating Activities Net income (loss) $(6,076) $4,920 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation, amortization, deferred taxes and other (209) 24,182 Non-cash Laidlaw allocated compensation expense 14,440 14,440 Trade and other accounts receivable (20,771) 2,505 Insurance accruals 1,772 9,998 Other assets and liabilities 6,164 30,085 ----------- ---------- Net cash provided by (used in) operating activities (4,680) 86,130 ----------- ---------- Cash Flows from Investing Activities EMS LP purchase of AMR and EmCare - (828,775) Purchase of property, plant and equipment, net (3,890) (23,466) Insurance collateral 12,534 (9,900) Other investing activities (1,828) 1,301 ----------- ---------- Net cash (used in) provided by investing activities 6,816 (860,840) ----------- ---------- Cash Flows from Financing Activities EMS LP purchase of AMR and EmCare - 820,938 Other financing activities 8,632 (18,726) ----------- ---------- Net cash provided by financing activities 8,632 802,212 ----------- ---------- Change in cash and cash equivalents 10,768 27,502 Cash and cash equivalents, beginning of period 3,863 3,863 ----------- ---------- Cash and cash equivalents, end of period $14,631 $31,365 =========== ========== (1) Pro forma combined one-month Predecessor with five-month Successor. *T