Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2010
Or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file numbers:
001-32701
333-127115
EMERGENCY MEDICAL SERVICES CORPORATION
EMERGENCY MEDICAL SERVICES L.P.
(Exact name
of Registrants as Specified in their Charters)
|
|
20-3738384
|
Delaware
|
|
20-2076535
|
(State or
other jurisdiction of
|
|
(IRS
Employer
|
incorporation
or organization)
|
|
Identification
Numbers)
|
|
|
|
6200 S. Syracuse Way, Suite 200
|
|
|
Greenwood Village, CO
|
|
80111
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
Registrants
telephone number, including area code:
303-495-1200
Former
name, former address and former fiscal year, if changed since last report:
Not applicable
Indicate by check
mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
x
No
o
Indicate by check
mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
o
Yes
o
No
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See definitions of large
accelerated filer, accelerated filer, and smaller reporting company in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
|
|
Accelerated
filer
x
|
|
|
|
Non-accelerated
filer
o
|
|
Smaller
reporting company
o
|
(Do not
check if a smaller reporting company)
|
|
|
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange act). Yes
o
No
x
Shares
of class A common stock outstanding at July 30, 2010 30,265,888;
shares of class B common stock outstanding at July 30, 2010 65,052;
LP exchangeable units outstanding at July 30, 2010 13,724,676.
Table of Contents
EMERGENCY MEDICAL SERVICES CORPORATION
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2010
2
Table of Contents
EMERGENCY MEDICAL SERVICES CORPORATION
PART I. FINANCIAL INFORMATION
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2010
ITEM 1.
FINANCIAL STATEMENTS (UNAUDITED)
Emergency Medical Services Corporation
Consolidated Statements of Operations and
Comprehensive Income
(unaudited; in thousands, except share and per share
data)
|
|
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
|
)
|
Income before equity in earnings of unconsolidated
subsidiary
|
|
23,859
|
|
28,923
|
|
54,795
|
|
52,937
|
|
Equity in earnings of unconsolidated subsidiary
|
|
105
|
|
96
|
|
199
|
|
153
|
|
Net income
|
|
23,964
|
|
29,019
|
|
54,994
|
|
53,090
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) during the
period
|
|
1,101
|
|
(1,377
|
)
|
1,543
|
|
(2,534
|
)
|
Unrealized gains (losses) on derivative financial instruments
|
|
(563
|
)
|
916
|
|
(85
|
)
|
1,267
|
|
Comprehensive income
|
|
$
|
24,502
|
|
$
|
28,558
|
|
$
|
56,452
|
|
$
|
51,823
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
The
accompanying notes are an integral part of these financial statements.
3
Table of Contents
Emergency Medical Services Corporation
Consolidated Balance Sheets
(in thousands, except share and per share data)
|
|
June 30,
|
|
December 31,
|
|
|
|
2010
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
313,033
|
|
$
|
332,888
|
|
Insurance
collateral
|
|
30,936
|
|
24,986
|
|
Trade
and other accounts receivable, net
|
|
483,597
|
|
459,088
|
|
Parts
and supplies inventory
|
|
22,392
|
|
22,270
|
|
Prepaids
and other current assets
|
|
32,578
|
|
19,662
|
|
Current
deferred tax assets
|
|
|
|
6,323
|
|
Total
current assets
|
|
882,536
|
|
865,217
|
|
Non-current
assets:
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
121,324
|
|
125,855
|
|
Intangible
assets, net
|
|
144,567
|
|
102,654
|
|
Non-current
deferred tax assets
|
|
5,827
|
|
13,468
|
|
Insurance
collateral
|
|
144,740
|
|
143,886
|
|
Goodwill
|
|
386,500
|
|
381,951
|
|
Other
long-term assets
|
|
19,301
|
|
21,676
|
|
Total
assets
|
|
$
|
1,704,795
|
|
$
|
1,654,707
|
|
Liabilities and Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
66,832
|
|
$
|
70,759
|
|
Accrued
liabilities
|
|
267,585
|
|
273,704
|
|
Current
deferred tax liability
|
|
11,494
|
|
|
|
Current
portion of long-term debt
|
|
11,848
|
|
4,676
|
|
Total
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
|
|
Equity:
|
|
|
|
|
|
Preferred
stock ($0.01 par value; 20,000,000 shares authorized, 0 issued and
outstanding)
|
|
|
|
|
|
Class A
common stock ($0.01 par value; 100,000,000 shares authorized, 30,285,248
and 29,541,411 issued and outstanding in 2010 and 2009,
respectively)
|
|
303
|
|
295
|
|
Class B
common stock ($0.01 par value; 40,000,000 shares authorized, 65,052 issued
and outstanding in 2010 and 2009)
|
|
1
|
|
1
|
|
Class B
special voting stock ($0.01 par value; 1 share authorized, issued and
outstanding in 2010 and 2009)
|
|
|
|
|
|
LP
exchangeable units (13,724,676 units issued and outstanding in 2010 and 2009)
|
|
90,776
|
|
90,776
|
|
Additional
paid-in capital
|
|
297,544
|
|
275,316
|
|
Retained
earnings
|
|
374,036
|
|
319,042
|
|
Accumulated
other comprehensive income
|
|
2,115
|
|
657
|
|
Total
equity
|
|
764,775
|
|
686,087
|
|
Total
liabilities and equity
|
|
$
|
1,704,795
|
|
$
|
1,654,707
|
|
The accompanying notes are an integral part of these financial
statements.
4
Table of Contents
Emergency Medical Services Corporation
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
and amortization
|
|
16,321
|
|
16,661
|
|
33,008
|
|
33,741
|
|
Loss
on disposal of property, plant and equipment
|
|
45
|
|
38
|
|
89
|
|
36
|
|
Equity-based
compensation expense
|
|
1,441
|
|
1,104
|
|
2,545
|
|
1,754
|
|
Excess
tax benefits from stock-based compensation
|
|
(2,917
|
)
|
|
|
(13,498
|
)
|
|
|
Loss
on early debt extinguishment
|
|
19,091
|
|
|
|
19,091
|
|
|
|
Equity
in earnings of unconsolidated subsidiary
|
|
(105
|
)
|
(96
|
)
|
(199
|
)
|
(153
|
)
|
Dividends
received
|
|
|
|
|
|
403
|
|
713
|
|
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
|
|
Parts
and supplies inventory
|
|
75
|
|
(87
|
)
|
(87
|
)
|
(107
|
)
|
Prepaids
and other current assets
|
|
(8,828
|
)
|
12,530
|
|
(12,216
|
)
|
4,690
|
|
Accounts
payable and accrued liabilities
|
|
7,093
|
|
20,120
|
|
13,099
|
|
11,620
|
|
Insurance
accruals
|
|
4,754
|
|
(1,124
|
)
|
6,232
|
|
2,753
|
|
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
|
|
(8,652
|
)
|
(12,878
|
)
|
(15,168
|
)
|
(20,085
|
)
|
Proceeds
from sale of property, plant and equipment
|
|
66
|
|
39
|
|
108
|
|
60
|
|
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 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 credit facility
|
|
425,000
|
|
|
|
425,000
|
|
|
|
Debt
issue costs
|
|
(11,749
|
)
|
|
|
(11,749
|
)
|
|
|
Payment
for premiums for debt extinguishment
|
|
(14,513
|
)
|
|
|
(14,513
|
)
|
|
|
Excess
tax benefits from stock-based compensation
|
|
2,917
|
|
|
|
13,498
|
|
|
|
Net
change 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
|
|
The accompanying notes are an integral part of these financial
statements.
5
Table of Contents
Emergency Medical Services Corporation
Notes to Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
1.
General
Basis of Presentation of Financial Statements
The accompanying interim
consolidated financial statements for Emergency Medical Services Corporation (EMSC
or the Company) have been prepared in accordance with U. S. generally
accepted accounting principles (GAAP) for interim reporting, and accordingly,
do not include all of the disclosures required for annual financial statements.
In the opinion of management, all adjustments considered necessary for fair
presentation have been included. All such adjustments are of a normal,
recurring nature. Operating results for the three and six month periods ended June 30,
2010 are not necessarily indicative of the results that may be expected for the
full year ending December 31, 2010. For further information, see the
Companys consolidated financial statements, including the accounting policies
and notes thereto, included in the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2009.
The consolidated financial
statements of EMSC include those of its direct subsidiary, Emergency Medical
Services L.P. (EMS LP), a Delaware limited partnership. The Companys
business is conducted primarily through two operating subsidiaries, American
Medical Response, Inc. (AMR), its healthcare transportation services
segment, and EmCare Holdings Inc. (EmCare), its facility-based physician
services segment.
The Company is party to a
management agreement with a wholly-owned subsidiary of Onex Corporation, the
Companys principal equityholder. In exchange for an annual management fee of
$1.0 million, the Onex subsidiary provides the Company with corporate finance
and strategic planning consulting services. For each of the three and six
months ended June 30, 2010 and 2009, the Company expensed $250 and $500,
respectively, in respect of this fee.
2.
Summary of
Significant Accounting Policies
Consolidation
The consolidated financial
statements include all wholly-owned subsidiaries of EMSC, including AMR and
EmCare and their respective subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial
statements requires management to make estimates and assumptions relating to
the reporting of results of operations, financial condition and related
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results may differ from those estimates under different
assumptions or conditions.
Insurance
Insurance collateral is
comprised principally of government and investment grade securities and cash
deposits with third parties and supports the Companys insurance program and
reserves. Certain of these investments, if sold or otherwise liquidated, would
have to be replaced by other suitable financial assurances and are, therefore,
considered restricted.
Insurance reserves are
established for automobile, workers compensation, general liability and professional
liability claims utilizing policies with both fully-insured and self-insured
components. This includes the use of an off-shore captive insurance program
through a wholly-owned subsidiary for certain liability programs for both
EmCare and AMR. In those instances where the Company has obtained third-party
insurance coverage, the Company generally retains liability for the first $1 to
$2 million of the loss. Insurance reserves cover known claims and
incidents within the level of Company retention that may result in the
assertion of additional claims, as well as
6
Table of Contents
claims from unknown incidents that may be asserted
arising from activities through the balance sheet date.
The Company establishes
reserves for claims based upon an assessment of actual claims and claims
incurred but not reported. The reserves are established based on quarterly
consultation with third-party independent actuaries using actuarial principles
and assumptions that consider a number of factors, including historical claim
payment patterns (including legal costs) and changes in case reserves and the
assumed rate of inflation in healthcare costs and property damage repairs.
The Companys most recent
actuarial valuation was completed in June 2010. As a result of this and
previous actuarial valuations, the Company recorded an increase of $1.5 million
in its provision for insurance liabilities related to reserves for losses in
prior years during the three months ended June 30, 2010. A total decrease of $1.3 million was recorded
during the six months ended June 30, 2010.
As a result of the actuarial valuation completed in June 2009, the
Company recorded an increase in its provision for insurance liabilities of $4.4
million during the three months ended June 30, 2009 and $5.2 million
during the six months ended June 30, 2009.
The long-term portion of
insurance reserves was $156.1 million and $143.6 million as of June 30,
2010 and December 31, 2009, respectively.
Trade and Other Accounts Receivable, net
The Company estimates its
allowances based on payor reimbursement schedules, historical collections and
write-off experience and other economic data. The allowances for contractual
discounts and uncompensated care are reviewed monthly. Account balances are
charged off against the uncompensated care allowance when it is probable the
receivable will not be recovered. Write-offs to the contractual allowance occur
when payment is received. The allowance for uncompensated care is related
principally to receivables recorded for self-pay patients. The Companys accounts receivable and
allowances are as follows:
|
|
June 30,
2010
|
|
December 31,
2009
|
|
Gross
trade accounts receivable
|
|
$
|
2,050,884
|
|
$
|
1,955,152
|
|
Allowance
for contractual discounts
|
|
1,058,380
|
|
1,001,285
|
|
Allowance
for uncompensated care
|
|
590,954
|
|
572,015
|
|
Net
trade accounts receivable
|
|
401,550
|
|
381,852
|
|
Other
receivables, net
|
|
82,047
|
|
77,236
|
|
Net
accounts receivable
|
|
$
|
483,597
|
|
$
|
459,088
|
|
Other receivables represent
EmCare hospital subsidies and fees and AMR fees for stand-by and special events
and subsidies from community organizations.
AMR contractual allowances
are determined primarily on payor reimbursement schedules that are included and
regularly updated in the billing systems, and by historical collection
experience. The billing systems
calculate the difference between payor specific gross billings and
contractually agreed to, or governmentally driven, reimbursement rates. The allowance for uncompensated care at AMR
is related principally to receivables recorded for self-pay patients. AMRs allowances on self-pay accounts
receivable are estimated on claim level, historical write-off experience.
Accounts receivable
allowances at EmCare are estimated based on cash collection and write-off
experience at a facility level contract and facility specific payor mix. These allowances are reviewed and adjusted
monthly through revenue provisions. In
addition, a look-back analysis is done, typically after 15 months, to compare
actual cash collected on a date of service basis to the revenue recorded for
that period. Any adjustment necessary
for an overage or deficit in these allowances based on actual collections is
recorded through a revenue adjustment in the current period.
Revenue Recognition
Revenue is recognized at the
time of service and is recorded net of provisions for contractual discounts and
estimated uncompensated care. Provisions for estimated contractual discounts
are related principally to differences between gross charges and specific payor,
including governmental, reimbursement schedules. Provisions for estimated
uncompensated care are related principally to the number of self-pay patients
treated in the period. Provisions for contractual discounts and estimated
uncompensated care as a
7
Table of Contents
percentage of gross revenue and as a
percentage of gross revenue less provision for contractual discounts are as
follows:
|
|
Quarter ended
June 30,
|
|
Six months ended
June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Gross revenue
|
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
Provision for contractual discounts
|
|
53.1
|
%
|
49.4
|
%
|
52.6
|
%
|
48.7
|
%
|
Revenue net of contractual discounts
|
|
46.9
|
%
|
50.6
|
%
|
47.4
|
%
|
51.3
|
%
|
Provision for uncompensated care as a percentage
of gross revenue
|
|
18.3
|
%
|
20.4
|
%
|
18.5
|
%
|
20.0
|
%
|
Provision
for uncompensated care as a percentage of gross revenue less contractual
discounts
|
|
39.0
|
%
|
40.2
|
%
|
39.1
|
%
|
39.0
|
%
|
Healthcare reimbursement is
complex and may involve lengthy delays. Third-party payors are continuing their
efforts to control expenditures for healthcare, including proposals to revise
reimbursement policies. The Company has from time to time experienced delays in
reimbursement from third-party payors. In addition, third-party payors may
disallow, in whole or in part, claims for reimbursement based on determinations
that certain amounts are not reimbursable under plan coverage, determinations
of medical necessity, or the need for additional information. Laws and
regulations governing the Medicare and Medicaid programs are very complex and
subject to interpretation. Revenue is recognized on an estimated basis in the
period which related services are rendered.
As a result, there is a reasonable possibility that recorded estimates
will change materially in the short-term. Such amounts, including adjustments
between provisions for contractual discounts and uncompensated care, are
adjusted in future periods, as adjustments become known. These
adjustments were less than 1% of net revenue for the three and six month
periods ending June 30, 2010 and 2009.
The Company also provides
services to patients who have no insurance or other third-party payor coverage.
In certain circumstances, federal law requires providers to render services to
any patient who requires emergency care regardless of their ability to pay.
Equity Structure
On December 21, 2005,
the Company effected a reorganization and issued 8.1 million shares of
class A common stock in an initial public offering. Pursuant to the
reorganization, EMS LP, the former top-tier holding company of AMR and EmCare,
became the consolidated subsidiary of EMSC, a newly formed corporation. To
effect the reorganization, the holders of the capital stock of the sole general
partner of EMS LP contributed that capital stock to the Company in exchange for
class B common stock; the general partner was merged into the Company and the
Company became the sole general partner of EMS LP. Concurrently, the holders of
class B units of EMS LP contributed their units to the Company in exchange for
shares of the Companys class A common stock, and the holders of certain class
A units of EMS LP contributed their units to the Company in exchange for shares
of the Companys class B common stock.
As of June 30, 2010,
the Company holds 68.9% of the equity interests in EMS LP. LP exchangeable
units, held by persons affiliated with the Companys principal equity holder,
represent the balance of the EMS LP equity. The LP exchangeable units are
exchangeable at any time, at the option of the holder, for shares of the
Companys class B common stock on a one-for-one basis. The holders of the LP
exchangeable units have the right to vote, through the trustee holder of the
Companys class B special voting stock, at all stockholder meetings at which
holders of the Companys class B common stock or class B special voting stock
are entitled to vote.
In the EMS LP partnership
agreement, the Company has agreed to maintain the economic equivalency of the
LP exchangeable units and the class B common stock, and the holders of the LP
exchangeable units have no general voting rights. The LP exchangeable units,
when considered with the class B special voting stock, have the same rights,
privileges and characteristics of the Companys class B common stock. The LP
exchangeable units are intended to be economically equivalent to the class B
common stock of the Company in that the LP exchangeable units carry the right
to vote (by virtue of the class B special voting stock) with the holders of
class B common stock as if one class, and entitle holders to receive
distributions only if the equivalent dividends are declared on the Companys
class B common stock. Accordingly, the Company accounts for the LP exchangeable
units as if the LP
8
Table of Contents
exchangeable units were shares of its common
stock, including reporting the LP exchangeable units in the equity section of
the Companys balance sheet and including the number of outstanding LP
exchangeable units in both its basic and diluted earnings per share
calculations.
Fair Value Measurement
The Company classifies its
financial instruments that are reported at fair value based on a hierarchal
framework which ranks the level of market price observability used in measuring
financial instruments at fair value. Market price observability is impacted by
a number of factors, including the type of instrument and the characteristics
specific to the instrument. Instruments
with readily available active quoted prices or for which fair value can be
measured from actively quoted prices generally will have a higher degree of
market price observability and a lesser degree of judgment used in measuring
fair value.
Financial instruments
measured and reported at fair value are classified and disclosed in one of the
following categories:
Level 1 Quoted prices are
available in active markets for identical assets or liabilities as of the
reporting date. The Company does not
adjust the quoted price for these assets or liabilities.
Level 2 Pricing inputs are
other than quoted prices in active markets, which are either directly or
indirectly observable as of the reporting date, and fair value is determined
through the use of models or other valuation methodologies.
Level 3 Pricing inputs are
unobservable as of the reporting date and reflect the Companys own assumptions
about the fair value of the asset or liability.
The following table
summarizes the valuation of EMSCs financial instruments as of June 30,
2010 by the above fair value hierarchy levels:
Description
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Securities
|
|
$
|
81,753
|
|
$
|
67,827
|
|
$
|
13,926
|
|
$
|
|
|
Derivatives
|
|
$
|
35
|
|
$
|
|
|
$
|
35
|
|
$
|
|
|
3.
Acquisitions
During the three months
ended March 31, 2010, the Company made a purchase price allocation
adjustment related to the acquisition of the management services entity of
Pinnacle Anesthesia Consultants, P.A. and Pinnacle Consultants Mid-Atlantic,
L.L.C. (together, the Pinnacle Acquisition) which closed in December 2009. Based on an independent valuation analysis
performed, $31.1 million was reclassified from goodwill to intangible assets,
and, as a result, an adjustment was also made to amortization expense.
On May 28, 2010, the
Company completed the acquisition of V.I.P. Professional Services, Inc.,
the parent of Gold Coast Ambulance Service, which provides emergency and
non-emergency ambulance services in southwest Ventura County, California. On June 4, 2010, an affiliate of the
Company completed the acquisition of professional entities which provide
anesthesiology services for Clinical Partners Management Company, an existing
subsidiary of the Company. On June 30,
2010, the Company completed its acquisition of Affilion, Inc., which
provides emergency department physician staffing and related management
services to hospitals in Arizona, New Mexico and Texas. Also on June 30, 2010, an affiliate of
the Company completed its acquisition of Fredericksburg Anesthesia Consultants,
PLLC, a provider of anesthesia services to facilities in south Texas. The total cost of these and other smaller
acquisitions was $51.0 million and the Company has recorded $35.0 million of
goodwill, which amount is subject to adjustment based upon completion of
purchase price allocations.
4.
Accrued
Liabilities
Accrued liabilities were as
follows at June 30, 2010 and December 31, 2009:
9
Table of Contents
|
|
June 30,
2010
|
|
December 31,
2009
|
|
Accrued
wages and benefits
|
|
$
|
114,760
|
|
$
|
92,721
|
|
Accrued
paid time-off
|
|
27,321
|
|
24,290
|
|
Current
portion of self-insurance reserves
|
|
56,542
|
|
62,832
|
|
Accrued
restructuring
|
|
171
|
|
181
|
|
Current
portion of compliance and legal
|
|
5,758
|
|
2,814
|
|
Accrued
billing and collection fees
|
|
4,168
|
|
4,093
|
|
Accrued
profit sharing
|
|
18,093
|
|
34,000
|
|
Accrued
interest
|
|
1,090
|
|
9,773
|
|
Accrued
income taxes payable
|
|
|
|
5,454
|
|
Other
|
|
39,682
|
|
37,546
|
|
Total
accrued liabilities
|
|
$
|
267,585
|
|
$
|
273,704
|
|
5.
Long-Term
Debt
On April 8, 2010, the
Company completed the financing of new senior secured credit facilities
consisting of a $425 million term loan and a $150 million revolving credit
facility. The term loan bears interest
at LIBOR, plus a margin of 3.00%, and requires quarterly principal repayments
until maturity in 2015. The revolving facility bears interest at LIBOR,
plus a margin of 3.00%, and is repayable at maturity in 2015. The senior
secured credit facilities can be expanded and the interest rate margins stepped
down to 2.75% upon achieving certain leverage ratios. Substantially all
of EMS LPs domestic assets are pledged as collateral under the new senior
secured credit facilities. The revolving
facility is also subject to an annual commitment fee of 0.5% on unutilized
commitments.
In conjunction with
completing the financing under the new credit facilities, the Company repaid
the balance outstanding on the previous senior secured term loan and redeemed
the Companys 10% senior subordinated notes.
During the three months ended June 30, 2010, the Company recorded a
loss on early debt extinguishment of $19.1 million which included certain
unamortized debt issuance costs as well as costs associated with the redemption
of the senior subordinated notes.
Long-term debt consisted of
the following at June 30, 2010 and December 31, 2009:
|
|
June 30,
2010
|
|
December 31,
2009
|
|
Senior
subordinated notes
|
|
$
|
|
|
$
|
250,000
|
|
Senior
secured term loan due 2015 (3.35% at June 30, 2010)
|
|
425,000
|
|
199,765
|
|
Notes
due at various dates from 2010 to 2022 with interest rates from 6% to 10%
|
|
1,696
|
|
1,249
|
|
Capital
lease obligations due at various dates from 2010 to 2018 (see note 7)
|
|
839
|
|
2,916
|
|
|
|
427,535
|
|
453,930
|
|
Less
current portion
|
|
(11,848
|
)
|
(4,676
|
)
|
Total
long-term debt
|
|
$
|
415,687
|
|
$
|
449,254
|
|
6.
Derivative
Instruments and Hedging Activities
The Company manages its
exposure to changes in market interest rates and fuel prices and from time to
time uses highly effective derivative instruments to manage well-defined risk
exposures. The Company monitors its
positions and the credit ratings of its counterparties and does not anticipate
non-performance by the counterparties.
The Company does not use derivative instruments for speculative
purposes.
At June 30, 2010, the
Company was party to a series of fuel hedge transactions with a major financial
institution under one master agreement. Each of the transactions effectively
fixes the cost of diesel fuel at prices ranging from $2.96 to $3.29 per gallon.
The Company purchases the diesel fuel at the market rate and periodically
settles with its counterparty for the difference between the national average
price for the period published by the Department of Energy and the agreed upon
fixed price. The transactions fix the price for a total of 6.8 million
gallons, which
10
Table of Contents
represent approximately 32% of the Companys
total estimated usage over the hedge period, and are spread over periods from July 2010
through June 2012. As of June 30,
2010, the Company recorded, as a component of other comprehensive income before
applicable tax impacts, an asset associated with the fair value of the fuel
hedge of less than $0.1 million, compared to $0.2 million as of December 31,
2009. The net additional payments made or received under these hedge agreements
did not have a material impact on operating expenses during the six months
ended June 30, 2010.
7.
Commitments
and Contingencies
Lease Commitments
The
Company leases various facilities and equipment under operating lease
agreements.
The Company also leases
certain leasehold improvements under capital leases. Assets under capital leases are capitalized
using inherent interest rates at the inception of each lease. Capital leases
are collateralized by the underlying assets.
Forward Purchase Commitment
Beginning in March 2009, AMR
entered into a series of forward purchase contracts which fixed the price for a
portion of its total monthly diesel fuel usage from April 1, 2009 through June
30, 2010. Based on the terms of the contracts, the Company has concluded they do
not quality as derivatives. There was no material impact to operating expenses
related to these contracts during the three or six month periods ended June 30,
2010.
Services
The Company is subject to
the Medicare and Medicaid fraud and abuse laws which prohibit, among other
things, any false claims, or any bribe, kickback or rebate in return for the
referral of Medicare and Medicaid patients. Violation of these prohibitions may
result in civil and criminal penalties and exclusion from participation in the
Medicare and Medicaid programs. Management has implemented policies and
procedures that management believes will assure that the Company is in
substantial compliance with these laws and regulations but there can be no
assurance the Company will not be found to have violated certain of these laws
and regulations. From time to time, the Company receives requests for
information from government agencies pursuant to their regulatory or
investigational authority. Such requests can include subpoenas or demand
letters for documents to assist the government in audits or investigations. The
Company is cooperating with the government agencies conducting these
investigations and is providing requested information to the government
agencies. Other than the proceedings described below, management believes that
the outcome of any of these investigations would not have a material adverse
effect on the Company.
Other Legal Matters
On December 13, 2005, a
lawsuit purporting to be a class action was commenced against AMR in Spokane,
Washington in Washington State Court, Spokane County. The complaint
alleges that AMR billed patients and third party payors for transports it
conducted between 1998 and 2005 at higher rates than contractually
permitted. The court has certified a class in this case which is
comprised of approximately 15,000 Spokane County residents. At this time,
AMR does not believe that any incorrect billings are material in amount.
In December 2006, AMR
received a subpoena from the Department of Justice (DOJ). The subpoena requested copies of documents
for the period from January 2000 through the present. The subpoena required AMR to produce a broad
range of documents relating to the operations of certain AMR affiliates in New
York. The Company produced documents
responsive to the subpoena. The
government has identified claims for reimbursement that the government believes
lack support for the level billed, and invited the Company to respond to the
identified areas of concern. The Company
reviewed the information provided by the government, provided its response, and
is currently in discussions with the DOJ and the Office of the Inspector
General of Health and Human Services regarding resolution of this matter. During the three months ended June 30,
2010, the Company recorded a $3.1 million reserve for its estimate of likely
exposure in this matter.
Four different lawsuits
purporting to be class actions have been filed against AMR and certain
subsidiaries in California alleging violations of California wage and hour
laws. On April 16, 2008, Lori
Bartoni commenced a suit in the Superior Court for the State of California,
County of Alameda; on July 8, 2008, Vaughn Banta filed suit in the
Superior Court of the State of California, County of Los Angeles; on January 22,
2009, Laura Karapetian filed suit in the Superior Court of the State of
California, County of Los Angeles; and on March 11, 2010, Melanie Aguilar
filed suit in the Superior Court of the State of California County of Los
Angeles. The Banta and Karapetian cases
have been
11
Table of Contents
coordinated with the Bartoni case in the
Superior Court for the State of California, County of Alameda. At the present time, the courts have not
certified classes in any of these cases.
Plaintiffs allege principally that the AMR entities failed to pay daily
overtime charges pursuant to California law, and failed to provide required meal
breaks or pay premium compensation for missed meal breaks. Plaintiffs are seeking to certify the classes
and are seeking lost wages, punitive damages, attorneys fees and other
sanctions permitted under California law for violations of wage hour laws. The Company is unable at this time to estimate
the amount of potential damages, if any.
The Company is involved in
other litigation arising in the ordinary course of business. Management believes the outcome of these
legal proceedings will not have a material adverse impact on its financial condition,
results of operations or liquidity.
8.
Equity
Based Compensation
The Companys stock options
are valued using the Black-Scholes valuation method on the date of grant. Equity based compensation has been issued
under the plans described below.
Equity
Option Plan
Under the Companys Equity
Option Plan, key employees were granted options that permit the individuals to
purchase class A common shares and vest ratably generally over a period of four
years. In addition, certain performance measures must be met for 50% of the
options to become exercisable; these performance measures were satisfied during
2009 with respect to the options granted under the Equity Option Plan. As the vesting period for these options was
completed prior to 2010, the Company did not record a compensation charge
during each of the three and six months ended June 30, 2010 as well as
during the three months ended June 30, 2009. A compensation charge of $97 was recorded for
the six months ended June 30, 2009.
Options are no longer granted under the Equity Option Plan, but rather
under the Companys Second Amended and Restated Long-Term Incentive Plan
described below.
Long-Term
Incentive Plan
The Companys original 2007
Long-Term Incentive Plan was approved by stockholders in May 2007, amended
and restated in May 2008, and a Second Amended and Restated Long-Term
Incentive Plan (the Plan) was approved by stockholders in May 2010. The Plan provides for the grant of long-term
incentives, including various equity-based incentives, to those persons with
responsibility for the success and growth of the Company and its
subsidiaries. Options granted under the
Plan vest and become exercisable ratably over a period of four years from the
date of grant and have a maximum term of ten years. In addition, for options granted under the
Plan prior to January 1, 2009, certain performance measures were required
to be met for 50% of these options to become exercisable; these performance
measures were satisfied during the first quarter of 2010.
The Company granted options
and restricted stock to key employees during the three months ended June 30,
2010 under the Plan. The options permit
employees to purchase a total of 166,500 shares of class A common stock at a
weighted average exercise price of $56.34 per share, vest ratably over a period
of four to five years, and have a maximum term of ten years. The Company also granted 166,500 shares of
restricted stock pursuant to the Plan, which vest ratably over a period of
three years.
The Company recorded a
compensation charge of $1,297 and $979 during the three months ended June 30,
2010 and 2009, respectively, and $2,276 and $1,407 during the six months ended June 30,
2010 and 2009, respectively, in connection with the Plan.
Non-Employee
Director Compensation Plan
The Non-Employee Director
Compensation Plan, approved in May 2007, is available to non-employee
directors of the Company, other than the Chair of the Compliance
Committee. Under this plan, eligible
directors are granted Restricted Stock Units (RSUs) following each annual
stockholder meeting with each RSU representing one share of the Companys class
A common stock. As of May 2010,
eligible directors now receive a grant of RSUs having a fair market value of
$133 on the date of grant based on the closing price of the Companys class A
common stock on the business day immediately preceding the grant date. The Non-Employee Director
12
Table of Contents
Compensation Plan allows directors to defer
income from the grant of RSUs, which vest immediately prior to the election of
directors at the next annual stockholder meeting. In connection with this plan, the Company
granted 2,324 RSUs per director in 2010 and 3,018 RSUs per director in
2009. The Company expensed $144 and $125
during the three month periods ended June 30, 2010 and 2009, respectively,
and $269 and $250 during the six month periods ended June 30, 2010 and
2009, respectively.
Stock
Purchase Plan/Employee Stock Purchase Plan
During the second quarter of
2010, the Company commenced an offering of its class A common stock to eligible
employees and independent contractors associated with the Company and its
subsidiaries pursuant to a Stock Purchase Plan and the Companys Employee Stock
Purchase Plan (together, the SPPs). The purchases of stock under the
SPPs will occur in October 2010 at a 5% discount to the closing price of
the Companys class A common stock on October 15, 2010, and as such no
compensation charge has been recorded for the SPPs in the second quarter of
2010.
9.
Segment
Information
The Company is organized
around two separately managed business units: healthcare transportation
services and facility-based physician services, which have been identified as
operating segments. The healthcare transportation services reportable segment
focuses on providing a full range of medical transportation services from basic
patient transit to the most advanced emergency care and pre-hospital
assistance. The facility-based physician services reportable segment provides
physician services to hospitals primarily for emergency departments and urgent
care centers, as well as for hospitalist/inpatient, radiology, teleradiology
and anesthesiology services. The Chief
Executive Officer has been identified as the chief operating decision maker (CODM) as
he assesses the performance of the business units and decides how to allocate
resources to the business units.
Net income before equity in
earnings of unconsolidated subsidiary, income tax expense, interest and other
income, realized gain on investments, loss on early debt extinguishment,
interest expense and depreciation and amortization (Adjusted EBITDA) is the
measure of profit and loss that the CODM uses to assess performance, measure
liquidity and make decisions. The accounting policies for reported segments are
the same as for the Company as a whole.
|
|
Quarter ended June 30,
|
|
Six months ended June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Healthcare Transportation
Services
|
|
|
|
|
|
|
|
|
|
Net Revenue
|
|
$
|
344,159
|
|
$
|
335,504
|
|
$
|
681,121
|
|
$
|
671,950
|
|
Segment Adjusted EBITDA
|
|
31,760
|
|
32,425
|
|
64,162
|
|
66,313
|
|
Facility-Based Physician Services
|
|
|
|
|
|
|
|
|
|
Net Revenue
|
|
$
|
364,645
|
|
301,787
|
|
$
|
707,037
|
|
578,363
|
|
Segment Adjusted EBITDA
|
|
46,634
|
|
40,549
|
|
88,667
|
|
72,203
|
|
Total
|
|
|
|
|
|
|
|
|
|
Total Net Revenue
|
|
$
|
708,804
|
|
637,291
|
|
$
|
1,388,158
|
|
1,250,313
|
|
Total Adjusted EBITDA
|
|
78,394
|
|
72,974
|
|
152,829
|
|
138,516
|
|
Reconciliation of Adjusted EBITDA
to Net Income
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
78,394
|
|
$
|
72,974
|
|
$
|
152,829
|
|
$
|
138,516
|
|
Depreciation and amortization expense
|
|
(15,692
|
)
|
(16,157
|
)
|
(31,872
|
)
|
(32,925
|
)
|
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 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
|
|
13
Table of Contents
A
reconciliation of Adjusted EBITDA to cash flows provided by operating
activities is as follows:
|
|
For the quarter ended June 30,
|
|
For the 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
|
|
Cash
flows provided by operating activities
|
|
$
|
40,157
|
|
$
|
98,997
|
|
$
|
84,742
|
|
$
|
140,939
|
|
10.
Guarantors
of Debt
EMS LPs wholly-owned
subsidiaries, AMR HoldCo, Inc. and EmCare HoldCo, Inc., are the
borrowers under the senior secured credit facility, which includes a full,
unconditional and joint and several guarantee by EMSC, EMS LP and EMSCs
domestic subsidiaries. The senior secured credit facility does not include a
guarantee by the Companys captive insurance subsidiary and only limited
guarantees from any future non-domestic subsidiaries. All of the operating
income and cash flow of EMSC, EMS LP, AMR HoldCo, Inc. and EmCare HoldCo, Inc.
is generated by AMR, EmCare and their subsidiaries. As a result, funds
necessary to meet the debt service obligations under the senior secured credit
facility are provided by the distributions or advances from the subsidiary companies,
AMR and EmCare. Investments in subsidiary operating companies are accounted for
on the equity method. Accordingly, entries necessary to consolidate EMSC, EMS
LP, AMR HoldCo, Inc., EmCare HoldCo, Inc. and all of their
subsidiaries are reflected in the Eliminations/Adjustments column. Separate
complete financial statements of the borrowers, EMS LP and subsidiary
guarantors would not provide additional material information that would be
useful in assessing the financial composition of the borrowers, EMS LP or the
subsidiary guarantors. The condensed consolidating financial statements for
EMSC,EMS LP, the borrowers, the guarantors and the non-guarantor are as
follows:
14
Table of Contents
Consolidating Statement of Operations
For the quarter ended June 30, 2010
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
Eliminations/
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo, Inc.
|
|
HoldCo, Inc.
|
|
Guarantors
|
|
Non-Guarantor
|
|
Adjustments
|
|
Total
|
|
Net revenue
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
708,804
|
|
$
|
18,863
|
|
$
|
(18,863
|
)
|
$
|
708,804
|
|
Compensation and
benefits
|
|
|
|
|
|
|
|
|
|
496,443
|
|
|
|
|
|
496,443
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
90,586
|
|
|
|
|
|
90,586
|
|
Insurance expense
|
|
|
|
|
|
|
|
|
|
25,370
|
|
19,435
|
|
(18,863
|
)
|
25,942
|
|
Selling, general and
administrative expenses
|
|
|
|
|
|
|
|
|
|
18,298
|
|
|
|
|
|
18,298
|
|
Depreciation and
amortization expense
|
|
|
|
|
|
|
|
|
|
15,692
|
|
|
|
|
|
15,692
|
|
Income (loss) from
operations
|
|
|
|
|
|
|
|
|
|
62,415
|
|
(572
|
)
|
|
|
61,843
|
|
Interest income from
restricted assets
|
|
|
|
|
|
|
|
|
|
344
|
|
515
|
|
|
|
859
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
(5,060
|
)
|
|
|
|
|
(5,060
|
)
|
Realized gain on
investments
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
57
|
|
Interest and other
income
|
|
|
|
|
|
|
|
|
|
206
|
|
|
|
|
|
206
|
|
Loss on early debt
extinguishment
|
|
|
|
|
|
|
|
|
|
(19,091
|
)
|
|
|
|
|
(19,091
|
)
|
Income before income
taxes
|
|
|
|
|
|
|
|
|
|
38,814
|
|
|
|
|
|
38,814
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
(14,955
|
)
|
|
|
|
|
(14,955
|
)
|
Income before equity in
earnings of unconsolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
23,859
|
|
|
|
|
|
23,859
|
|
Equity in earnings of
unconsolidated subsidiaries
|
|
23,964
|
|
23,964
|
|
3,235
|
|
20,729
|
|
105
|
|
|
|
(71,892
|
)
|
105
|
|
Net income
|
|
$
|
23,964
|
|
$
|
23,964
|
|
$
|
3,235
|
|
$
|
20,729
|
|
$
|
23,964
|
|
$
|
|
|
$
|
(71,892
|
)
|
$
|
23,964
|
|
Consolidating Statement of Operations
For the quarter ended June 30, 2009
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
Eliminations/
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo, Inc.
|
|
HoldCo, Inc.
|
|
Guarantors
|
|
Non-Guarantor
|
|
Adjustments
|
|
Total
|
|
Net revenue
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
637,291
|
|
$
|
7,147
|
|
$
|
(7,147
|
)
|
$
|
637,291
|
|
Compensation and
benefits
|
|
|
|
|
|
|
|
|
|
438,628
|
|
|
|
|
|
438,628
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
82,173
|
|
|
|
|
|
82,173
|
|
Insurance expense
|
|
|
|
|
|
|
|
|
|
26,825
|
|
8,679
|
|
(7,147
|
)
|
28,357
|
|
Selling, general and
administrative expenses
|
|
|
|
|
|
|
|
|
|
16,279
|
|
|
|
|
|
16,279
|
|
Depreciation and
amortization expense
|
|
|
|
|
|
|
|
|
|
16,157
|
|
|
|
|
|
16,157
|
|
Income (loss) from
operations
|
|
|
|
|
|
|
|
|
|
57,229
|
|
(1,532
|
)
|
|
|
55,697
|
|
Interest income from
restricted assets
|
|
|
|
|
|
|
|
|
|
435
|
|
685
|
|
|
|
1,120
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
(10,279
|
)
|
|
|
|
|
(10,279
|
)
|
Realized gain on
investments
|
|
|
|
|
|
|
|
|
|
|
|
847
|
|
|
|
847
|
|
Interest and other
income
|
|
|
|
|
|
|
|
|
|
423
|
|
|
|
|
|
423
|
|
Income before income
taxes
|
|
|
|
|
|
|
|
|
|
47,808
|
|
|
|
|
|
47,808
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
(18,885
|
)
|
|
|
|
|
(18,885
|
)
|
Income before equity in
earnings of unconsolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
28,923
|
|
|
|
|
|
28,923
|
|
Equity in earnings of
unconsolidated subsidiaries
|
|
29,019
|
|
29,019
|
|
8,591
|
|
20,428
|
|
96
|
|
|
|
(87,057
|
)
|
96
|
|
Net income
|
|
$
|
29,019
|
|
$
|
29,019
|
|
$
|
8,591
|
|
$
|
20,428
|
|
$
|
29,019
|
|
$
|
|
|
$
|
(87,057
|
)
|
$
|
29,019
|
|
15
Table of Contents
Consolidating Statement of Operations
For the six months ended June 30, 2010
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
Eliminations/
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo, Inc.
|
|
HoldCo, Inc.
|
|
Guarantors
|
|
Non-Guarantor
|
|
Adjustments
|
|
Total
|
|
Net revenue
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
1,388,158
|
|
$
|
26,101
|
|
$
|
(26,101
|
)
|
$
|
1,388,158
|
|
Compensation and
benefits
|
|
|
|
|
|
|
|
|
|
976,760
|
|
|
|
|
|
976,760
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
177,115
|
|
|
|
|
|
177,115
|
|
Insurance expense
|
|
|
|
|
|
|
|
|
|
46,837
|
|
27,276
|
|
(26,101
|
)
|
48,012
|
|
Selling, general and
administrative expenses
|
|
|
|
|
|
|
|
|
|
35,156
|
|
|
|
|
|
35,156
|
|
Depreciation and
amortization expense
|
|
|
|
|
|
|
|
|
|
31,872
|
|
|
|
|
|
31,872
|
|
Income (loss) from
operations
|
|
|
|
|
|
|
|
|
|
120,418
|
|
(1,175
|
)
|
|
|
119,243
|
|
Interest income from
restricted assets
|
|
|
|
|
|
|
|
|
|
688
|
|
1,026
|
|
|
|
1,714
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
(13,326
|
)
|
|
|
|
|
(13,326
|
)
|
Realized gain on
investments
|
|
|
|
|
|
|
|
|
|
|
|
149
|
|
|
|
149
|
|
Interest and other
income
|
|
|
|
|
|
|
|
|
|
471
|
|
|
|
|
|
471
|
|
Loss on early
extinguishment of debt
|
|
|
|
|
|
|
|
|
|
(19,091
|
)
|
|
|
|
|
(19,091
|
)
|
Income before income
taxes
|
|
|
|
|
|
|
|
|
|
89,160
|
|
|
|
|
|
89,160
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
(34,365
|
)
|
|
|
|
|
(34,365
|
)
|
Income before equity in
earnings of unconsolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
54,795
|
|
|
|
|
|
54,795
|
|
Equity in earnings of
unconsolidated subsidiaries
|
|
54,994
|
|
54,994
|
|
13,521
|
|
41,473
|
|
199
|
|
|
|
(164,982
|
)
|
199
|
|
Net income
|
|
$
|
54,994
|
|
$
|
54,994
|
|
$
|
13,521
|
|
$
|
41,473
|
|
$
|
54,994
|
|
$
|
|
|
$
|
(164,982
|
)
|
$
|
54,994
|
|
Consolidating Statement of Operations
For the six months ended June 30, 2009
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
Eliminations/
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo, Inc.
|
|
HoldCo, Inc.
|
|
Guarantors
|
|
Non-Guarantor
|
|
Adjustments
|
|
Total
|
|
Net revenue
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
1,250,313
|
|
$
|
14,030
|
|
$
|
(14,030
|
)
|
$
|
1,250,313
|
|
Compensation and
benefits
|
|
|
|
|
|
|
|
|
|
865,162
|
|
|
|
|
|
865,162
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
166,845
|
|
|
|
|
|
166,845
|
|
Insurance expense
|
|
|
|
|
|
|
|
|
|
47,979
|
|
16,912
|
|
(14,030
|
)
|
50,861
|
|
Selling, general and
administrative expenses
|
|
|
|
|
|
|
|
|
|
31,315
|
|
|
|
|
|
31,315
|
|
Depreciation and
amortization expense
|
|
|
|
|
|
|
|
|
|
32,925
|
|
|
|
|
|
32,925
|
|
Income (loss) from
operations
|
|
|
|
|
|
|
|
|
|
106,087
|
|
(2,882
|
)
|
|
|
103,205
|
|
Interest income from
restricted assets
|
|
|
|
|
|
|
|
|
|
990
|
|
1,396
|
|
|
|
2,386
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
(20,469
|
)
|
|
|
|
|
(20,469
|
)
|
Realized gain on
investments
|
|
|
|
|
|
|
|
|
|
|
|
1,486
|
|
|
|
1,486
|
|
Interest and other
income
|
|
|
|
|
|
|
|
|
|
940
|
|
|
|
|
|
940
|
|
Income before income
taxes
|
|
|
|
|
|
|
|
|
|
87,548
|
|
|
|
|
|
87,548
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
(34,611
|
)
|
|
|
|
|
(34,611
|
)
|
Income before equity in
earnings of unconsolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
52,937
|
|
|
|
|
|
52,937
|
|
Equity in earnings of unconsolidated
subsidiaries
|
|
53,090
|
|
53,090
|
|
17,935
|
|
35,155
|
|
153
|
|
|
|
(159,270
|
)
|
153
|
|
Net income
|
|
$
|
53,090
|
|
$
|
53,090
|
|
$
|
17,935
|
|
$
|
35,155
|
|
$
|
53,090
|
|
$
|
|
|
$
|
(159,270
|
)
|
$
|
53,090
|
|
16
Table of Contents
Consolidating Balance Sheet
As of June 30, 2010
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
Eliminations/
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo, Inc.
|
|
HoldCo, Inc.
|
|
Guarantors
|
|
Non-Guarantor
|
|
Adjustments
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
297,207
|
|
$
|
15,826
|
|
$
|
|
|
$
|
313,033
|
|
Insurance
collateral
|
|
|
|
|
|
|
|
|
|
9,600
|
|
89,010
|
|
(67,674
|
)
|
30,936
|
|
Trade
and other accounts receivable, net
|
|
|
|
|
|
|
|
|
|
483,144
|
|
453
|
|
|
|
483,597
|
|
Parts
and supplies inventory
|
|
|
|
|
|
|
|
|
|
22,392
|
|
|
|
|
|
22,392
|
|
Prepaids
and other current assets
|
|
|
|
|
|
|
|
|
|
28,705
|
|
490
|
|
3,383
|
|
32,578
|
|
Current
deferred tax assets
|
|
|
|
|
|
|
|
|
|
(3,834
|
)
|
3,834
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
837,214
|
|
109,613
|
|
(64,291
|
)
|
882,536
|
|
Non-current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant, and equipment, net
|
|
|
|
|
|
|
|
|
|
121,324
|
|
|
|
|
|
121,324
|
|
Intercompany
receivable
|
|
|
|
|
|
286,520
|
|
127,369
|
|
|
|
|
|
(413,889
|
)
|
|
|
Intangible
assets, net
|
|
|
|
|
|
|
|
|
|
144,567
|
|
|
|
|
|
144,567
|
|
Non-current
deferred tax assets
|
|
|
|
|
|
|
|
|
|
9,953
|
|
(6,120
|
)
|
1,994
|
|
5,827
|
|
Insurance
collateral
|
|
|
|
|
|
|
|
|
|
34,785
|
|
79,798
|
|
30,157
|
|
144,740
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
386,042
|
|
458
|
|
|
|
386,500
|
|
Other
long-term assets
|
|
|
|
|
|
8,578
|
|
3,637
|
|
7,086
|
|
|
|
|
|
19,301
|
|
Investment
and advances in subsidiaries
|
|
764,775
|
|
764,775
|
|
419,309
|
|
345,452
|
|
35,223
|
|
|
|
(2,329,534
|
)
|
|
|
Assets
|
|
$
|
764,775
|
|
$
|
764,775
|
|
$
|
714,407
|
|
$
|
476,458
|
|
$
|
1,576,194
|
|
$
|
183,749
|
|
$
|
(2,775,563
|
)
|
$
|
1,704,795
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
66,778
|
|
$
|
54
|
|
$
|
|
|
$
|
66,832
|
|
Accrued
liabilities
|
|
|
|
|
|
802
|
|
288
|
|
238,993
|
|
25,351
|
|
2,151
|
|
267,585
|
|
Current
deferred tax liability
|
|
|
|
|
|
|
|
|
|
11,494
|
|
|
|
|
|
11,494
|
|
Current
portion of long-term debt
|
|
|
|
|
|
7,331
|
|
3,294
|
|
1,223
|
|
|
|
|
|
11,848
|
|
Current
liabilities
|
|
|
|
|
|
8,133
|
|
3,582
|
|
318,488
|
|
25,405
|
|
2,151
|
|
357,759
|
|
Long-term
debt
|
|
|
|
|
|
285,919
|
|
128,456
|
|
1,312
|
|
|
|
|
|
415,687
|
|
Insurance
reserves and other long-term liabilities
|
|
|
|
|
|
|
|
|
|
86,568
|
|
114,297
|
|
(34,291
|
)
|
166,574
|
|
Intercompany
payable
|
|
|
|
|
|
|
|
|
|
405,065
|
|
8,824
|
|
(413,889
|
)
|
|
|
Liabilities
|
|
|
|
|
|
294,052
|
|
132,038
|
|
811,433
|
|
148,526
|
|
(446,029
|
)
|
940,020
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
common stock
|
|
303
|
|
|
|
|
|
|
|
|
|
30
|
|
(30
|
)
|
303
|
|
Class B
common stock
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Partnership
equity
|
|
90,776
|
|
388,624
|
|
318,565
|
|
70,059
|
|
387,108
|
|
|
|
(1,164,356
|
)
|
90,776
|
|
Additional
paid-in capital
|
|
297,544
|
|
|
|
|
|
|
|
|
|
4,316
|
|
(4,316
|
)
|
297,544
|
|
Retained
earnings
|
|
374,036
|
|
374,036
|
|
101,780
|
|
272,256
|
|
375,538
|
|
26,522
|
|
(1,150,132
|
)
|
374,036
|
|
Comprehensive
income
|
|
2,115
|
|
2,115
|
|
10
|
|
2,105
|
|
2,115
|
|
4,355
|
|
(10,700
|
)
|
2,115
|
|
Equity
|
|
764,775
|
|
764,775
|
|
420,355
|
|
344,420
|
|
764,761
|
|
35,223
|
|
(2,329,534
|
)
|
764,775
|
|
Liabilities
and Equity
|
|
$
|
764,775
|
|
$
|
764,775
|
|
$
|
714,407
|
|
$
|
476,458
|
|
$
|
1,576,194
|
|
$
|
183,749
|
|
$
|
(2,775,563
|
)
|
$
|
1,704,795
|
|
17
Table of Contents
Consolidating Balance Sheet
As of December 31, 2009
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
Eliminations/
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo, Inc.
|
|
HoldCo, Inc.
|
|
Guarantors
|
|
Non-Guarantor
|
|
Adjustments
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
317,538
|
|
$
|
15,350
|
|
$
|
|
|
$
|
332,888
|
|
Insurance collateral
|
|
|
|
|
|
|
|
|
|
10,792
|
|
19,450
|
|
(5,256
|
)
|
24,986
|
|
Trade and other accounts
receivable, net
|
|
|
|
|
|
|
|
|
|
458,558
|
|
530
|
|
|
|
459,088
|
|
Parts and supplies
inventory
|
|
|
|
|
|
|
|
|
|
22,270
|
|
|
|
|
|
22,270
|
|
Prepaids and other
current assets
|
|
|
|
|
|
|
|
|
|
19,650
|
|
12
|
|
|
|
19,662
|
|
Current deferred tax
assets
|
|
|
|
|
|
|
|
|
|
2,489
|
|
3,834
|
|
|
|
6,323
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
831,297
|
|
39,176
|
|
(5,256
|
)
|
865,217
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant, and
equipment, net
|
|
|
|
|
|
|
|
|
|
125,855
|
|
|
|
|
|
125,855
|
|
Intercompany receivable
|
|
|
|
|
|
268,220
|
|
185,153
|
|
|
|
|
|
(453,373
|
)
|
|
|
Intangible assets, net
|
|
|
|
|
|
|
|
|
|
102,654
|
|
|
|
|
|
102,654
|
|
Non-current deferred tax
assets
|
|
|
|
|
|
|
|
|
|
19,588
|
|
(6,120
|
)
|
|
|
13,468
|
|
Insurance collateral
|
|
|
|
|
|
|
|
|
|
56,166
|
|
85,165
|
|
2,555
|
|
143,886
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
381,493
|
|
458
|
|
|
|
381,951
|
|
Other long-term assets
|
|
|
|
|
|
4,281
|
|
1,898
|
|
15,497
|
|
|
|
|
|
21,676
|
|
Investment and advances
in subsidiaries
|
|
686,087
|
|
686,087
|
|
394,715
|
|
291,358
|
|
34,343
|
|
|
|
(2,092,590
|
)
|
|
|
Assets
|
|
$
|
686,087
|
|
$
|
686,087
|
|
$
|
667,216
|
|
$
|
478,409
|
|
$
|
1,566,893
|
|
$
|
118,679
|
|
$
|
(2,548,664
|
)
|
$
|
1,654,707
|
|
Liabilities
and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
70,696
|
|
$
|
63
|
|
$
|
|
|
$
|
70,759
|
|
Accrued liabilities
|
|
|
|
|
|
5,117
|
|
4,656
|
|
231,855
|
|
32,077
|
|
(1
|
)
|
273,704
|
|
Current portion of
long-term debt
|
|
|
|
|
|
1,447
|
|
650
|
|
2,579
|
|
|
|
|
|
4,676
|
|
Current liabilities
|
|
|
|
|
|
6,564
|
|
5,306
|
|
305,130
|
|
32,140
|
|
(1
|
)
|
349,139
|
|
Long-term debt
|
|
|
|
|
|
264,891
|
|
182,777
|
|
1,586
|
|
|
|
|
|
449,254
|
|
Insurance reserves and
other long-term liabilities
|
|
|
|
|
|
|
|
|
|
129,555
|
|
43,372
|
|
(2,700
|
)
|
170,227
|
|
Intercompany payable
|
|
|
|
|
|
|
|
|
|
444,549
|
|
8,824
|
|
(453,373
|
)
|
|
|
Liabilities
|
|
|
|
|
|
271,455
|
|
188,083
|
|
880,820
|
|
84,336
|
|
(456,074
|
)
|
968,620
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common
stock
|
|
295
|
|
|
|
|
|
|
|
|
|
30
|
|
(30
|
)
|
295
|
|
Class B common
stock
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Partnership equity
|
|
90,776
|
|
366,388
|
|
307,447
|
|
58,941
|
|
366,388
|
|
|
|
(1,099,164
|
)
|
90,776
|
|
Additional paid-in
capital
|
|
275,316
|
|
|
|
|
|
|
|
|
|
4,316
|
|
(4,316
|
)
|
275,316
|
|
Retained earnings
|
|
319,042
|
|
319,042
|
|
88,261
|
|
230,781
|
|
319,028
|
|
28,080
|
|
(985,192
|
)
|
319,042
|
|
Comprehensive income
|
|
657
|
|
657
|
|
53
|
|
604
|
|
657
|
|
1,917
|
|
(3,888
|
)
|
657
|
|
Equity
|
|
686,087
|
|
686,087
|
|
395,761
|
|
290,326
|
|
686,073
|
|
34,343
|
|
(2,092,590
|
)
|
686,087
|
|
Liabilities and Equity
|
|
$
|
686,087
|
|
$
|
686,087
|
|
$
|
667,216
|
|
$
|
478,409
|
|
$
|
1,566,893
|
|
$
|
118,679
|
|
$
|
(2,548,664
|
)
|
$
|
1,654,707
|
|
18
Table of Contents
Condensed Consolidating Statement of Cash Flows
For the quarter ended June 30, 2010
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo
Inc.
|
|
HoldCo
Inc.
|
|
Guarantors
|
|
Non-guarantors
|
|
Total
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
8,856
|
|
$
|
31,301
|
|
$
|
40,157
|
|
Cash
Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
|
|
|
|
|
|
|
|
(8,652
|
)
|
|
|
(8,652
|
)
|
Proceeds from sale of
property, plant and equipment
|
|
|
|
|
|
|
|
|
|
66
|
|
|
|
66
|
|
Acquisition of
businesses, net of cash received
|
|
|
|
|
|
|
|
|
|
(47,675
|
)
|
|
|
(47,675
|
)
|
Net change in insurance
collateral
|
|
|
|
|
|
|
|
|
|
23,208
|
|
(30,835
|
)
|
(7,627
|
)
|
Net change in deposits
and other assets
|
|
|
|
|
|
|
|
|
|
10,648
|
|
|
|
10,648
|
|
Net cash provided by
(used in) investing activities
|
|
|
|
|
|
|
|
|
|
(22,405
|
)
|
(30,835
|
)
|
(53,240
|
)
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMSC issuance of class A
common stock
|
|
1,791
|
|
|
|
|
|
|
|
|
|
|
|
1,791
|
|
Repayments of capital
lease obligations and other debt
|
|
|
|
|
|
(310,679
|
)
|
(139,580
|
)
|
(1,184
|
)
|
|
|
(451,443
|
)
|
Borrowings under credit
facility
|
|
|
|
|
|
293,250
|
|
131,750
|
|
|
|
|
|
425,000
|
|
Debt issue costs
|
|
|
|
|
|
(8,107
|
)
|
(3,642
|
)
|
|
|
|
|
(11,749
|
)
|
Payment of premiums for
debt extinguishment
|
|
|
|
|
|
(10,014
|
)
|
(4,499
|
)
|
|
|
|
|
(14,513
|
)
|
Excess tax benefits from
stock-based compensation
|
|
|
|
|
|
|
|
|
|
2,917
|
|
|
|
2,917
|
|
Net change in bank
overdrafts
|
|
|
|
|
|
|
|
|
|
(6,942
|
)
|
|
|
(6,942
|
)
|
Net intercompany
borrowings (payments)
|
|
(1,791
|
)
|
|
|
35,550
|
|
15,971
|
|
(49,730
|
)
|
|
|
|
|
Net cash used in
financing activities
|
|
|
|
|
|
|
|
|
|
(54,939
|
)
|
|
|
(54,939
|
)
|
Change in cash and cash
equivalents
|
|
|
|
|
|
|
|
|
|
(68,488
|
)
|
466
|
|
(68,022
|
)
|
Cash and cash
equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
365,695
|
|
15,360
|
|
381,055
|
|
Cash and cash
equivalents, end of period
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
297,207
|
|
$
|
15,826
|
|
$
|
313,033
|
|
Condensed Consolidating Statement of Cash Flows
For the quarter ended June 30, 2009
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo
Inc.
|
|
HoldCo
Inc.
|
|
Guarantors
|
|
Non-guarantors
|
|
Total
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) operating activities
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
101,646
|
|
$
|
(2,649
|
)
|
$
|
98,997
|
|
Cash
Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
|
|
|
|
|
|
|
|
(12,878
|
)
|
|
|
(12,878
|
)
|
Proceeds from sale of
property, plant and equipment
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
39
|
|
Acquisition of
businesses, net of cash received
|
|
|
|
|
|
|
|
|
|
(133
|
)
|
|
|
(133
|
)
|
Net change in insurance
collateral
|
|
|
|
|
|
|
|
|
|
(1,627
|
)
|
(13,616
|
)
|
(15,243
|
)
|
Net change in deposits and
other assets
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
27
|
|
Net cash used in
investing activities
|
|
|
|
|
|
|
|
|
|
(14,572
|
)
|
(13,616
|
)
|
(28,188
|
)
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMSC issuance of class A
common stock
|
|
3,825
|
|
|
|
|
|
|
|
|
|
|
|
3,825
|
|
Repayments of capital
lease obligations and other debt
|
|
|
|
|
|
|
|
|
|
(1,453
|
)
|
|
|
(1,453
|
)
|
Net change in bank
overdrafts
|
|
|
|
|
|
|
|
|
|
(190
|
)
|
|
|
(190
|
)
|
Net intercompany
borrowings (payments)
|
|
(3,825
|
)
|
|
|
|
|
|
|
3,825
|
|
|
|
|
|
Net cash provided by
financing activities
|
|
|
|
|
|
|
|
|
|
2,182
|
|
|
|
2,182
|
|
Change in cash and cash
equivalents
|
|
|
|
|
|
|
|
|
|
89,256
|
|
(16,265
|
)
|
72,991
|
|
Cash and cash
equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
177,516
|
|
16,632
|
|
194,148
|
|
Cash and cash
equivalents, end of period
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
266,772
|
|
$
|
367
|
|
$
|
267,139
|
|
19
Table of Contents
Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2010
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo
Inc.
|
|
HoldCo
Inc.
|
|
Guarantors
|
|
Non-guarantors
|
|
Total
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
56,432
|
|
$
|
28,310
|
|
$
|
84,742
|
|
Cash
Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
|
|
|
|
|
|
|
|
(15,168
|
)
|
|
|
(15,168
|
)
|
Proceeds from sale of
property, plant and equipment
|
|
|
|
|
|
|
|
|
|
108
|
|
|
|
108
|
|
Acquisition of
businesses, net of cash received
|
|
|
|
|
|
|
|
|
|
(50,975
|
)
|
|
|
(50,975
|
)
|
Net change in insurance
collateral
|
|
|
|
|
|
|
|
|
|
22,573
|
|
(27,834
|
)
|
(5,261
|
)
|
Net change in deposits
and other assets
|
|
|
|
|
|
|
|
|
|
10,938
|
|
|
|
10,938
|
|
Net cash (used in)
provided by investing activities
|
|
|
|
|
|
|
|
|
|
(32,524
|
)
|
(27,834
|
)
|
(60,358
|
)
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMSC issuance of class A
common stock
|
|
6,193
|
|
|
|
|
|
|
|
|
|
|
|
6,193
|
|
Repayments of capital
lease obligations and other debt
|
|
|
|
|
|
(310,338
|
)
|
(139,427
|
)
|
(2,862
|
)
|
|
|
(452,627
|
)
|
Borrowings under credit
facility
|
|
|
|
|
|
293,250
|
|
131,750
|
|
|
|
|
|
425,000
|
|
Debt issue costs
|
|
|
|
|
|
(8,107
|
)
|
(3,642
|
)
|
|
|
|
|
(11,749
|
)
|
Payment of premiums for
debt extinguishment
|
|
|
|
|
|
(10,014
|
)
|
(4,499
|
)
|
|
|
|
|
(14,513
|
)
|
Excess tax benefits from
stock-based compensation
|
|
|
|
|
|
|
|
|
|
13,498
|
|
|
|
13,498
|
|
Net change in bank
overdrafts
|
|
|
|
|
|
|
|
|
|
(10,041
|
)
|
|
|
(10,041
|
)
|
Net intercompany
borrowings (payments)
|
|
(6,193
|
)
|
|
|
35,209
|
|
15,818
|
|
(44,834
|
)
|
|
|
|
|
Net cash used in
financing activities
|
|
|
|
|
|
|
|
|
|
(44,239
|
)
|
|
|
(44,239
|
)
|
Change in cash and cash
equivalents
|
|
|
|
|
|
|
|
|
|
(20,331
|
)
|
476
|
|
(19,855
|
)
|
Cash and cash
equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
317,538
|
|
15,350
|
|
332,888
|
|
Cash and cash equivalents,
end of period
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
297,207
|
|
$
|
15,826
|
|
$
|
313,033
|
|
Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2009
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo
Inc.
|
|
HoldCo
Inc.
|
|
Guarantors
|
|
Non-guarantors
|
|
Total
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) operating activities
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
144,622
|
|
$
|
(3,683
|
)
|
$
|
140,939
|
|
Cash
Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
|
|
|
|
|
|
|
|
(20,085
|
)
|
|
|
(20,085
|
)
|
Proceeds from sale of
property, plant and equipment
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
60
|
|
Net change in insurance
collateral
|
|
|
|
|
|
|
|
|
|
(262
|
)
|
(1,671
|
)
|
(1,933
|
)
|
Net change in deposits
and other assets
|
|
|
|
|
|
|
|
|
|
(776
|
)
|
|
|
(776
|
)
|
Net cash used in
investing activities
|
|
|
|
|
|
|
|
|
|
(21,063
|
)
|
(1,671
|
)
|
(22,734
|
)
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMSC issuance of class A
common stock
|
|
4,723
|
|
|
|
|
|
|
|
|
|
|
|
4,723
|
|
Repayments of capital
lease obligations and other debt
|
|
|
|
|
|
|
|
|
|
(2,612
|
)
|
|
|
(2,612
|
)
|
Net change in bank
overdrafts
|
|
|
|
|
|
|
|
|
|
650
|
|
|
|
650
|
|
Net intercompany
borrowings (payments)
|
|
(4,723
|
)
|
|
|
|
|
|
|
4,723
|
|
|
|
|
|
Net cash provided by
financing activities
|
|
|
|
|
|
|
|
|
|
2,761
|
|
|
|
2,761
|
|
Change in cash and cash
equivalents
|
|
|
|
|
|
|
|
|
|
126,320
|
|
(5,354
|
)
|
120,966
|
|
Cash and cash
equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
140,452
|
|
5,721
|
|
146,173
|
|
Cash and cash
equivalents, end of period
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
266,772
|
|
$
|
367
|
|
$
|
267,139
|
|
11.
Subsequent Events
The Companys management has
evaluated events subsequent to June 30, 2010 through the issue date of
this report. There has been no material
event noted in this period which would either impact the results reflected in
this report or the Companys results going forward.
20
Table of Contents
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking
Statements and Factors That May Affect Results
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 this Quarterly Report on Form 10-Q is filed with the Securities and
Exchange Commission, 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 EMSCs filings with the SEC from
time to time, including in the section entitled Risk Factors in the Companys
most recent Annual Report on Form 10-K and in subsequent Quarterly Reports
on Form 10-Q. Among the factors that could cause future results to differ
materially from those provided in this Quarterly Report on Form 10-Q 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.
All references to we, our,
us or EMSC refer to Emergency Medical Services Corporation and its
subsidiaries, including Emergency Medical Services L.P., or EMS LP. Our
business is conducted primarily through two operating subsidiaries, American
Medical Response, Inc., or AMR, and EmCare Holdings Inc., or EmCare.
This Report should be read
in conjunction with the Companys consolidated financial statements and notes
thereto included in our Annual Report on Form 10-K filed with the SEC on
February 19, 2010.
Company Overview
We are a leading provider of
emergency medical services and facility-based physician services in the United
States. We operate our business and market our services under the AMR and
EmCare brands. AMR, over its more than 50 years of operating history, is a
leading provider of ground and fixed-wing ambulance services in the United
States based on net revenue and number of transports. EmCare, over its more
than 35 years of operating history, is a leading provider of physician services
in the United States based on number of contracts with hospitals and affiliated
physician groups. Through EmCare, we
provide facility-based physician services for emergency departments and
hospitalist/inpatient, anesthesiology, radiology, and teleradiology programs.
Key Factors and Measures We Use to Evaluate Our Business
The key factors and measures
we use to evaluate our business focus on the number of patients we treat and
transport and the costs we incur to provide the necessary care and
transportation for each of our patients.
We evaluate our revenue net
of provisions for contractual payor discounts and provisions for uncompensated
care. Medicaid, Medicare and certain other payors receive discounts from our
standard charges, which we refer to as contractual discounts. In addition,
individuals we treat and transport may be personally responsible for a
deductible or co-pay under their third party payor coverage, and most of our
contracts require us to treat and transport patients who have no insurance or
other third party payor coverage. Due to the uncertainty regarding
collectibility of charges associated with services we provide to these
patients, which we refer to as uncompensated care, our net revenue recognition
is based on expected cash collections. Our net revenue represents gross
billings after provisions for
21
Table of Contents
contractual discounts and
estimated uncompensated care. Provisions for contractual discounts and
uncompensated care have increased historically primarily as a result of
increases in gross billing rates without corresponding increases in payor
reimbursement.
The table below summarizes
our approximate payor mix as a percentage of both net revenue and total
transports and patient encounters for the three and six months ended June 30,
2010 and 2009. In determining the net revenue payor mix, we use cash
collections in the period as an approximation of net revenue recorded.
|
|
Percentage of Cash Collections (Net Revenue)
|
|
Percentage of Total Volume
|
|
|
|
Quarter ended
June 30,
|
|
Six months ended
June 30,
|
|
Quarter ended
June 30,
|
|
Six months ended
June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Medicare
|
|
21.7
|
%
|
23.4
|
%
|
21.9
|
%
|
23.6
|
%
|
24.7
|
%
|
24.3
|
%
|
24.9
|
%
|
25.1
|
%
|
Medicaid
|
|
5.3
|
%
|
4.6
|
%
|
5.1
|
%
|
4.5
|
%
|
12.7
|
%
|
11.2
|
%
|
12.5
|
%
|
11.0
|
%
|
Commercial insurance and managed care
|
|
49.9
|
%
|
51.5
|
%
|
49.8
|
%
|
50.7
|
%
|
43.3
|
%
|
42.9
|
%
|
43.0
|
%
|
42.5
|
%
|
Self-pay
|
|
4.2
|
%
|
3.9
|
%
|
4.2
|
%
|
4.0
|
%
|
19.3
|
%
|
21.6
|
%
|
19.6
|
%
|
21.4
|
%
|
Subsidies & fees
|
|
18.9
|
%
|
16.6
|
%
|
19.0
|
%
|
17.2
|
%
|
|
|
|
|
|
|
|
|
Total
|
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
Our 2010 volume mix has been
positively impacted when compared to the 2009 volume mix primarily due to the
recent expansion of our Anesthesia business, which has a much lower percentage
of self-pay mix when compared to our emergency department, radiology or inpatient
services businesses, and to a decreased percentage of self-pay patients treated
in 2010. Our payor mix was negatively impacted during the 2009 periods
presented due to an increased level of self-pay patients treated in response to
the H1N1 virus, which did not recur in 2010.
In addition to continually
monitoring our payor mix, we also analyze certain measures in each of our
business segments.
AMR
Approximately 88% of AMRs
net revenue for the six months ended June 30, 2010 was transport revenue
derived from the treatment and transportation of patients, including fixed wing
medical transportation services, based on billings to third party payors,
healthcare facilities and patients. The balance of AMRs net revenue is derived
from direct billings to communities, government agencies and other contracted
customers for the provision of training, dispatch center and other
services. AMRs measures for net revenue
include transports (segregated into ambulance and wheelchair transports and
that we weight in certain analyses) and net revenue per transport.
The change from period to
period in the number of transports is influenced by changes in transports in
existing markets from both new and existing facilities we serve for
non-emergency transports, the effects of general community conditions for
emergency transports and the impact of newly acquired businesses and markets
AMR has exited.
The costs we incur in our
AMR business segment consist primarily of compensation and benefits for medical
crews and support personnel, direct and indirect operating costs to provide
transportation services, and costs related to accident and insurance claims.
AMRs key cost measures include unit hours and cost per unit hour (to measure
compensation-related costs and the efficiency of our ambulance deployment),
operating costs per transport, and accident and insurance claims.
We have focused our risk
mitigation efforts on employee training for proper patient handling techniques,
development of clinical and medical equipment protocols, driving safety,
implementation of technology to reduce auto incidents and other risk mitigation
processes which we believe have resulted in a reduction in the frequency,
severity and development of claims.
Our AMR business segment
requires various investments in long-term assets and depreciation expense
relates primarily to charges for usage of these assets, including vehicles,
computer hardware and software, equipment, and other technologies. Amortization expense relates primarily to
intangibles recorded for customer relationships.
22
Table of Contents
EmCare
Of EmCares net revenue for
the six months ended June 30, 2010, approximately 77% was derived from our
hospital contracts for emergency department staffing and approximately 23% was
derived from hospitalist, anesthesiology, radiology, teleradiology and other
hospital management services.
Approximately 77% of EmCares net revenue was generated from billings to
third party payors and patients for patient encounters and approximately 23%
was generated from billings to hospitals and affiliated physician groups for
professional services. EmCares key net revenue measures are patient encounters
(segregated into emergency department visits, radiology reads, and
anesthesiology and hospitalist encounters and that we weight in certain
analyses), net revenue per patient encounter, and number of contracts.
The change from period to
period in the number of patient encounters under our same store contracts is
influenced by general community conditions as well as hospital-specific
elements, many of which are beyond our direct control.
The costs incurred in our
EmCare business segment consist primarily of compensation and benefits for
physicians and other professional providers, professional liability costs, and
contract and other support costs. EmCares key cost measures include provider
compensation per patient encounter and professional liability costs.
We have developed extensive
professional liability risk mitigation processes, including risk assessments on
medical professionals and hospitals, extensive incident reporting and tracking
processes, clinical fail-safe programs, training and education and other risk
mitigation programs which we believe have resulted in a reduction in the
frequency, severity and development of claims.
Our EmCare business segment
is less capital intensive than AMR, and EmCares depreciation expense relates
primarily to charges for usage of computer hardware and software, and other
technologies. Amortization expense
relates primarily to intangibles recorded for customer relationships.
Factors Affecting Operating Results
Changes in
Net New Contracts
Our operating results are
affected directly by the number of net new contracts and related volumes we
have in a period, reflecting the effects of both new contracts and contract
expirations. We regularly bid for new contracts, frequently in a formal
competitive bidding process that often requires written responses to a Request
for Proposal, or RFP, and, in any fiscal period, certain of our contracts will
expire. We may elect not to seek extension or renewal of a contract, or may
reduce certain services, if we determine that we cannot continue to provide
such services on favorable terms. With respect to expiring contracts we would
like to renew, we may be required to seek renewal through an RFP, and we may
not be successful in retaining any such contracts, or retaining them on terms
that are as favorable as present terms.
Inflation
Certain of our expenses,
such as wages and benefits, insurance, fuel and equipment repair and
maintenance costs, are subject to normal inflationary pressures. Fuel expense
represented 10.0% and 9.0% of AMRs operating expenses for the three months
ended June 30, 2010 and 2009, respectively, and 9.8% and 8.5% for the six
months ended June 30, 2010 and 2009, respectively. Although we have generally been able to
offset inflationary and other cost increases through increased operating
efficiencies and successful negotiation of fees and subsidies, we can provide
no assurance that we will be able to offset any future inflationary cost increases
through similar efficiencies and fee changes.
Critical Accounting Policies
Revenue
Recognition
Management regularly
analyzes the ultimate collectibility of accounts receivable after certain
stages of the
23
Table of Contents
collection cycle using a
look-back analysis to determine the amount of receivables subsequently
collected. Adjustments related to this analysis were less than 1% of net
revenue for the three and six month periods ended June 30, 2010 and 2009.
Results of
Operations
Quarter and
Six Months Ended June 30, 2010 Compared to the Quarter and Six Months
Ended June 30, 2009
The following tables present
a comparison of financial data from our unaudited consolidated statements of
operations for the three and six months ended June 30, 2010 and 2009 for
EMSC and our two operating segments.
Non-GAAP
Measures
Adjusted
EBITDA.
Adjusted EBITDA 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. Adjusted
EBITDA is commonly used by management and investors as a performance measure
and liquidity indicator. Adjusted EBITDA is not considered a measure of
financial performance under U.S. generally accepted accounting principles, or
GAAP, and the items excluded from Adjusted EBITDA are significant components in
understanding and assessing our financial performance. Adjusted 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 financial
statements as an indicator of financial performance or liquidity. Since
Adjusted EBITDA is not a measure determined in accordance with GAAP and is
susceptible to varying calculations, Adjusted EBITDA, as presented, may not be
comparable to other similarly titled measures of other companies. The tables
set forth a reconciliation of Adjusted EBITDA to net income and cash flows
provided by operating activities.
Unaudited Consolidated Results of Operations and as a
Percentage of Net Revenue
(dollars in thousands)
EMSC
|
|
Quarter ended
June 30, 2010
|
|
Quarter ended
June 30, 2009
|
|
Six months ended
June 30, 2010
|
|
Six months ended
June 30, 2009
|
|
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
Net revenue
|
|
$
|
708,804
|
|
100.0
|
%
|
$
|
637,291
|
|
100.0
|
%
|
$
|
1,388,158
|
|
100.0
|
%
|
$
|
1,250,313
|
|
100.0
|
%
|
Compensation and
benefits
|
|
496,443
|
|
70.0
|
|
438,628
|
|
68.8
|
|
976,760
|
|
70.4
|
|
865,162
|
|
69.2
|
|
Operating expenses
|
|
90,586
|
|
12.8
|
|
82,173
|
|
12.9
|
|
177,115
|
|
12.8
|
|
166,845
|
|
13.3
|
|
Insurance expense
|
|
25,942
|
|
3.7
|
|
28,357
|
|
4.4
|
|
48,012
|
|
3.5
|
|
50,861
|
|
4.1
|
|
Selling, general and
administrative expenses
|
|
18,298
|
|
2.6
|
|
16,279
|
|
2.6
|
|
35,156
|
|
2.5
|
|
31,315
|
|
2.5
|
|
Interest income from
restricted assets
|
|
(859
|
)
|
(0.1
|
)
|
(1,120
|
)
|
(0.2
|
)
|
(1,714
|
)
|
(0.1
|
)
|
(2,386
|
)
|
(0.2
|
)
|
Adjusted EBITDA
|
|
$
|
78,394
|
|
11.1
|
%
|
$
|
72,974
|
|
11.5
|
%
|
$
|
152,829
|
|
11.0
|
%
|
$
|
138,516
|
|
11.1
|
%
|
Depreciation and
amortization expenses
|
|
(15,692
|
)
|
(2.2
|
)
|
(16,157
|
)
|
(2.5
|
)
|
(31,872
|
)
|
(2.3
|
)
|
(32,925
|
)
|
(2.6
|
)
|
Interest expense
|
|
(5,060
|
)
|
(0.7
|
)
|
(10,279
|
)
|
(1.6
|
)
|
(13,326
|
)
|
(1.0
|
)
|
(20,469
|
)
|
(1.6
|
)
|
Realized gain on
investments
|
|
57
|
|
0.0
|
|
847
|
|
0.1
|
|
149
|
|
0.0
|
|
1,486
|
|
0.1
|
|
Interest and other
income
|
|
206
|
|
0.0
|
|
423
|
|
0.1
|
|
471
|
|
0.0
|
|
940
|
|
0.1
|
|
Loss on early debt extinguishment
|
|
(19,091
|
)
|
(2.7
|
)
|
|
|
|
|
(19,091
|
)
|
(1.4
|
)
|
|
|
|
|
Income tax expense
|
|
(14,955
|
)
|
(2.1
|
)
|
(18,885
|
)
|
(3.0
|
)
|
(34,365
|
)
|
(2.5
|
)
|
(34,611
|
)
|
(2.8
|
)
|
Equity in earnings of
unconsolidated subsidiary
|
|
105
|
|
0.0
|
|
96
|
|
0.0
|
|
199
|
|
0.0
|
|
153
|
|
0.0
|
|
Net income
|
|
$
|
23,964
|
|
3.4
|
%
|
$
|
29,019
|
|
4.6
|
%
|
$
|
54,994
|
|
4.0
|
%
|
$
|
53,090
|
|
4.2
|
%
|
24
Table of Contents
Unaudited Reconciliation of Adjusted EBITDA to Cash Flows
Provided by Operating Activities
(dollars in thousands)
|
|
For the quarter ended June 30,
|
|
For the 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
|
|
Cash
flows provided by operating activities
|
|
$
|
40,157
|
|
$
|
98,997
|
|
$
|
84,742
|
|
$
|
140,939
|
|
Unaudited Segment Results of Operations and as a
Percentage of Net Revenue
(dollars in thousands)
AMR
|
|
Quarter ended
June 30, 2010
|
|
Quarter ended
June 30, 2009
|
|
Six months ended
June 30, 2010
|
|
Six months ended
June 30, 2009
|
|
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
Net revenue
|
|
$
|
344,159
|
|
100.0
|
%
|
$
|
335,504
|
|
100.0
|
%
|
$
|
681,121
|
|
100.0
|
%
|
$
|
671,950
|
|
100.0
|
%
|
Compensation and
benefits
|
|
211,302
|
|
61.4
|
|
207,820
|
|
61.9
|
|
419,653
|
|
61.6
|
|
416,094
|
|
61.9
|
|
Operating expenses
|
|
78,439
|
|
22.8
|
|
72,084
|
|
21.5
|
|
154,078
|
|
22.6
|
|
146,619
|
|
21.8
|
|
Insurance expense
|
|
12,775
|
|
3.7
|
|
13,928
|
|
4.2
|
|
23,960
|
|
3.5
|
|
25,016
|
|
3.7
|
|
Selling, general and
administrative expenses
|
|
10,227
|
|
3.0
|
|
9,682
|
|
2.9
|
|
19,956
|
|
2.9
|
|
18,898
|
|
2.8
|
|
Interest income from
restricted assets
|
|
(344
|
)
|
(0.1
|
)
|
(435
|
)
|
(0.1
|
)
|
(688
|
)
|
(0.1
|
)
|
(990
|
)
|
(0.1
|
)
|
Adjusted EBITDA
|
|
$
|
31,760
|
|
9.2
|
%
|
$
|
32,425
|
|
9.7
|
%
|
$
|
64,162
|
|
9.4
|
%
|
$
|
66,313
|
|
9.9
|
%
|
Reconciliation of
Adjusted EBITDA to income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
31,760
|
|
9.2
|
|
32,425
|
|
9.7
|
|
64,162
|
|
9.4
|
|
66,313
|
|
9.9
|
|
Depreciation and
amortization expense
|
|
(11,070
|
)
|
(3.2
|
)
|
(12,242
|
)
|
(3.6
|
)
|
(22,304
|
)
|
(3.3
|
)
|
(24,948
|
)
|
(3.7
|
)
|
Interest income from
restricted assets
|
|
(344
|
)
|
(0.1
|
)
|
(435
|
)
|
(0.1
|
)
|
(688
|
)
|
(0.1
|
)
|
(990
|
)
|
(0.1
|
)
|
Income from operations
|
|
$
|
20,346
|
|
5.9
|
%
|
$
|
19,748
|
|
5.9
|
%
|
$
|
41,170
|
|
6.0
|
%
|
$
|
40,375
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Table of Contents
EmCare
|
|
Quarter ended
June 30, 2010
|
|
Quarter ended
June 30, 2009
|
|
Six months ended
June 30, 2010
|
|
Six months ended
June 30, 2009
|
|
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
Net revenue
|
|
$
|
364,645
|
|
100.0
|
%
|
$
|
301,787
|
|
100.0
|
%
|
$
|
707,037
|
|
100.0
|
%
|
$
|
578,363
|
|
100.0
|
%
|
Compensation and
benefits
|
|
285,141
|
|
78.2
|
|
230,808
|
|
76.5
|
|
557,107
|
|
78.8
|
|
449,068
|
|
77.6
|
|
Operating expenses
|
|
12,147
|
|
3.3
|
|
10,089
|
|
3.3
|
|
23,037
|
|
3.3
|
|
20,226
|
|
3.5
|
|
Insurance expense
|
|
13,167
|
|
3.6
|
|
14,429
|
|
4.8
|
|
24,052
|
|
3.4
|
|
25,845
|
|
4.5
|
|
Selling, general and
administrative expenses
|
|
8,071
|
|
2.2
|
|
6,597
|
|
2.2
|
|
15,200
|
|
2.1
|
|
12,417
|
|
2.1
|
|
Interest income from
restricted assets
|
|
(515
|
)
|
(0.1
|
)
|
(685
|
)
|
(0.2
|
)
|
(1,026
|
)
|
(0.1
|
)
|
(1,396
|
)
|
(0.2
|
)
|
Adjusted EBITDA
|
|
$
|
46,634
|
|
12.8
|
%
|
$
|
40,549
|
|
13.4
|
%
|
$
|
88,667
|
|
12.5
|
%
|
$
|
72,203
|
|
12.5
|
%
|
Reconciliation of
Adjusted EBITDA to income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
46,634
|
|
12.8
|
|
40,549
|
|
13.4
|
|
88,667
|
|
12.5
|
|
72,203
|
|
12.5
|
|
Depreciation and
amortization expenses
|
|
(4,622
|
)
|
(1.3
|
)
|
(3,915
|
)
|
(1.3
|
)
|
(9,568
|
)
|
(1.4
|
)
|
(7,977
|
)
|
(1.4
|
)
|
Interest income from
restricted assets
|
|
(515
|
)
|
(0.1
|
)
|
(685
|
)
|
(0.2
|
)
|
(1,026
|
)
|
(0.1
|
)
|
(1,396
|
)
|
(0.2
|
)
|
Income from operations
|
|
$
|
41,497
|
|
11.4
|
%
|
$
|
35,949
|
|
11.9
|
%
|
$
|
78,073
|
|
11.0
|
%
|
$
|
62,830
|
|
10.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended June 30, 2010 compared to the quarter ended June 30,
2009
Consolidated
Our results for the three
months ended June 30, 2010 reflect an increase in net revenue of $71.5
million and a decrease in net income of $5.1 million compared to the three
months ended June 30, 2009. The decrease in net income was
attributable primarily to the loss on early debt extinguishment in connection
with our new credit facilities and was offset by growth in income from
operations and a decrease in interest expense. Basic and diluted earnings
per share were both $0.54 for the three months ended June 30, 2010.
Excluding the impact from the loss on early debt extinguishment of $19.1
million and a $3.1 million reserve recorded in connection with a tentative
legal settlement, or the New York Accrual, disclosed in note 7, under the
caption Commitments and Contingencies of the notes accompanying the consolidated
financial statements, basic and diluted earnings per share were $0.85 and
$0.84, respectively, for the three months ended June 30, 2010. Basic and diluted earnings per share were
$0.69 and $0.67, respectively, for the same period in 2009.
Net
revenue.
For the three months ended June 30, 2010, we
generated net revenue of $708.8 million compared to $637.3 million for the
three months ended June 30, 2009, representing an increase of 11.2%.
The increase is attributable primarily to increases in revenues on existing
contracts and increased volume from net new contracts and acquisitions.
Adjusted
EBITDA.
Adjusted EBITDA was $78.4 million, or 11.1% of net revenue, for the
three months ended June 30, 2010 compared to $73.0 million, or 11.5% of
net revenue for the three months ended June 30, 2009.
Interest
expense.
Interest expense for the three months ended June 30,
2010 was $5.1 million compared to $10.3 million for the three months ended June 30,
2009. The decrease was due to entering
into our new credit facility in April 2010 and the redemption of our
senior subordinated notes which resulted in a decrease to our effective
interest rate compared to our previous debt structure.
Income tax
expense.
Income tax expense decreased by $3.9 million for the
three months ended June 30, 2010 compared to the same period in
2009. Our effective tax rate for the three months ended June 30,
2010 was 38.5% and was 39.5% for the same period in 2009.
AMR
Net revenue.
Net revenue for
the three months ended June 30, 2010 was $344.2 million, an increase of
$8.7 million, or 2.6%, from $335.5 million for the same period in 2009. The increase in net revenue was due primarily
to
26
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an increase in net revenue
per weighted transport of 4.8%, or $15.7 million, partially offset by a
decrease of 2.1%, or $7.0 million, in weighted transport volume. Net
revenue per weighted transport increased 4.1% from rate increases and 0.7% from
growth in our managed transportation business.
Weighted transports decreased 15,500 from the same quarter last year.
This change was due to a decrease in weighted transport volume in existing
markets of 2.2%, or 16,000 weighted transports, due to the exit of certain
contracts in existing markets, and a decrease of 6,100 weighted transports from
the exit of certain markets, which decreases were partially offset by an
increase of 6,600 weighted transports from our entry into new markets.
Compensation
and benefits.
Compensation and benefit costs for the three months
ended June 30, 2010 were $211.3 million, or 61.4% of net revenue, compared
to $207.8 million, or 61.9% of net revenue, for the same period last year.
Ambulance crew wages per ambulance unit hour increased by approximately 4.4%,
or $5.0 million, attributable primarily to annual wage rate
increases. Ambulance unit hours decreased period over period by
2.7%, or $3.1 million, due primarily to the reduction in volume in existing
markets and increased efficiency in our ambulance unit hour deployment.
Compensation and benefits decreased as a percentage of net revenue due in part to
the growth in our managed transportation business. Our managed transportation costs are
reflected primarily in operating expenses.
Operating
expenses.
Operating expenses for the three months ended June 30,
2010 were $78.4 million, or 22.8% of net revenue, compared to $72.1 million, or
21.5% of net revenue, for the three months ended June 30, 2009. The change is due primarily to increased fuel
costs of $1.4 million, increased costs associated with growth in our managed
transportation business of $1.9 million, and a reserve recorded in connection
with the New York Accrual of $3.1 million.
Insurance
expense.
Insurance expense for the three months ended June 30,
2010 was $12.8 million, or 3.7% of net revenue, compared to $13.9 million, or
4.2% of net revenue, for the same period in 2009. We recorded an increase
of prior year insurance provisions of $1.0 million during the three months
ended June 30, 2010 compared to an increase of $1.3 million during the
three months ended June 30, 2009.
Selling,
general and administrative.
Selling, general and
administrative expense for the three months ended June 30, 2010 was $10.2
million, or 3.0% of net revenue, compared to $9.7 million, or 2.9% of net
revenue, for the three months ended June 30, 2009.
Depreciation
and amortization.
Depreciation and amortization expense for the
three months ended June 30, 2010 was $11.1 million, or 3.2% of net
revenue, compared to $12.2 million, or 3.6% of net revenue, for the same period
in 2009. The decrease was due primarily
to AMRs ability to utilize fewer ambulances to service its existing contracts
and the timing of replacing fully depreciated assets.
EmCare
Net
revenue.
Net revenue for the three months ended June 30,
2010 was $364.6 million, an increase of $62.9 million, or 20.8%, from $301.8
million for the three months ended June 30, 2009. The increase was due
primarily to an increase in patient encounters from net new hospital contracts
and net revenue increases in existing contracts. Following March 31, 2009,
we added 54 net new contracts which accounted for a net revenue increase of
$48.4 million for the three months ended June 30, 2010. Of the 54
net new contracts added since March 31, 2009, 46 were added in 2009
resulting in an incremental increase in 2010 net revenue of $45.4 million. EmCare
has added 34 new contracts and terminated 26 contracts to date in 2010,
resulting in an increase in net revenue of $3.0 million for the three months
ended June 30, 2010. Net revenue under our same store contracts
(contracts in existence for the entirety of both periods) increased $11.8
million, or 4.5%, for the three months ended June 30, 2010. The
change is due to a 5.7% increase in revenue per weighted patient encounter
primarily as a result of rate increases from our third-party payors, improvement
in our payor mix and an increase in acuity.
The number of current period same store weighted patient encounters
decreased 1.2% compared to the prior period due to H1N1 volume during the
second quarter of 2009.
Compensation
and benefits.
Compensation and benefits costs for the three months
ended June 30, 2010 were $285.1 million, or 78.2% of net revenue, compared
to $230.8 million, or 76.5% of net revenue, for the same period in 2009.
Provider compensation costs increased $39.6 million from net new contract additions.
Same store provider
27
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compensation costs were $9.0
million higher than the prior period due primarily to a 6.5% increase in
provider compensation per weighted patient encounter. Non-provider
compensation and total benefits costs increased by $4.9 million due primarily
to our recent acquisitions.
Operating
expenses.
Operating expenses for the three months ended
June 30, 2010 were $12.1 million, or 3.3% of net revenue, compared to
$10.1 million, or 3.3% of net revenue, for the same period in 2009.
Operating expenses increased due primarily to higher collection agency and
billing fees incurred in connection with our net new contracts added since March 31,
2009 and the expansion of our anesthesiology and radiology businesses.
Insurance
expense.
Professional liability insurance expense for the
three months ended June 30, 2010 was $13.2 million, or 3.6% of net
revenue, compared to $14.4 million, or 4.8% of net revenue, for the three
months ended June 30, 2009. We recorded an increase of prior year
insurance provisions of $0.5 million during the three months ended June 30,
2010 compared to an increase of $3.1 million during the three months ended June 30,
2009.
Selling,
general and administrative.
Selling, general and
administrative expense for the three months ended June 30, 2010 was $8.1
million, or 2.2% of net revenue, compared to $6.6 million, or 2.2% of net
revenue, for the three months ended June 30, 2009. The $1.5 million increase was due primarily
to growth in the number of net new contracts since March 31, 2009.
Depreciation
and amortization.
Depreciation and amortization expense for the
three months ended June 30, 2010 was $4.6 million, or 1.3% of net revenue,
compared to $3.9 million, or 1.3% of net revenue, for the three months ended June 30,
2009. The $0.7 million increase was due
primarily to additional amortization expense associated with a contract
intangible asset recorded on acquisitions completed subsequent to March 31,
2009.
Six months ended June 30, 2010 compared to the six months ended June 30,
2009
Consolidated
Our results for the six
months ended June 30, 2010 reflect an increase in net revenue of $137.8
million and an increase in net income of $1.9 million compared to the six
months ended June 30, 2009. The increase in net income is attributable
primarily to growth in income from operations, a decrease in interest expense,
partially offset by the loss on early debt extinguishment. Basic and diluted earnings per share were
$1.26 and $1.23, respectively, for the six months ended June 30, 2010 and
2009.
Net
revenue.
For the six months ended June 30, 2010, net
revenue was $1,388.2 million compared to $1,250.3 million for the six months
ended June 30, 2009, representing an increase of 11.0%. The increase is
attributable primarily to increases in revenues on existing contracts and
increased volume from net new contracts and acquisitions.
Adjusted
EBITDA.
Adjusted EBITDA was $152.8 million, or 11.0% of net
revenue, for the six months ended June 30, 2010 compared to $138.5
million, or 11.1% of net revenue for the six months ended June 30, 2009.
Interest
expense.
Interest expense for the six months ended June 30,
2010 was $13.3 million compared to $20.5 million for the six months ended June 30,
2009. The decrease was due to entering into our new credit facility
in April 2010 and the redemption of our senior subordinated notes which
resulted in a decrease to our effective interest rate compared to our previous
debt structure.
Income tax
expense.
Income tax expense decreased $0.2 million for the
six months ended June 30, 2010 compared to the same period in 2009.
Our effective tax rate for the six months ended June 30, 2010
was 38.5% and was 39.5% for the same period in 2009.
AMR
Net
revenue.
Net revenue for the six months ended June 30,
2010 was $681.1 million, an increase of $9.2
28
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million, or 1.4%, from
$672.0 million for the same period in 2009. The increase in net revenue was due
primarily to an increase in net revenue per weighted transport of 3.7%, or
$24.3 million, partially offset by a decrease of 2.3%, or $15.1 million,
in weighted transport volume. Net
revenue per weighted transport increased 3.0% from rate increases and 0.7% from
growth in our managed transportation business.
Weighted transports decreased 33,200 from the same period last
year. This change was due to a decrease in weighted transport volume in
existing markets of 2.2%, or 31,400 weighted transports, due to the exit of
certain contracts in existing markets, and a decrease of 12,400 weighted
transports from the exit of certain markets, which decreases were partially
offset by an increase of 10,600 weighted transports from our entry into new
markets.
Compensation
and benefits.
Compensation and benefit costs for the six months ended
June 30, 2010 were $419.7 million, or 61.6% of net revenue, compared to
$416.1 million, or 61.9% of net revenue, for the six months ended June 30,
2009. Ambulance crew wages per ambulance unit hour increased by approximately
4.5%, or $10.0 million, attributable primarily to annual wage rate
increases. Ambulance unit hours decreased period over period by
3.2%, or $7.4 million, due primarily to the reduction in volume in existing
markets and increased efficiency in our ambulance unit hour deployment.
Compensation and benefits decreased as a percentage of net revenue due in part
to the growth in our managed transportation business. Our managed transportation costs are
reflected primarily in operating expenses.
Operating
expenses.
Operating expenses for the six months ended June 30,
2010 were $154.1 million, or 22.6% of net revenue, compared to $146.6 million,
or 21.8% of net revenue, for the six months ended June 30, 2009. The
change is due primarily to increased fuel costs of $2.7 million, increased costs
associated with growth in our managed transportation business of $3.6 million,
and a reserve recorded in connection with the New York Accrual of $3.1 million.
Insurance
expense.
Insurance expense for the six months ended June 30,
2010 was $24.0 million, or 3.5% of net revenue, compared to $25.0 million, or
3.7% of net revenue, for the same period in 2009. We recorded an increase of
prior year insurance provisions of $0.1 million during the six months ended June 30,
2010 compared to an increase of $2.0 million during the six months ended June 30,
2009.
Selling,
general and administrative.
Selling, general and
administrative expense for the six months ended June 30, 2010 was $20.0
million, or 2.9% of net revenue, compared to $18.9 million, or 2.8% of net
revenue, for the six months ended June 30, 2009.
Depreciation
and amortization.
Depreciation and amortization expense for the
six months ended June 30, 2010 was $22.3 million, or 3.3% of net revenue,
compared to $24.9 million, or 3.7% of net revenue, for the same period in
2009. The decrease was due
primarily to AMRs ability to utilize fewer ambulances to service its existing
contracts and the timing of replacing fully depreciated assets.
EmCare
Net
revenue.
Net revenue for the
six months ended June 30, 2010 was $707.0 million, an increase of $128.7
million, or 22.2%, from $578.4 million for the six months ended June 30,
2009. The increase was due primarily to an increase in patient encounters from
net new hospital contracts and net revenue increases in existing contracts.
Following December 31, 2008, we added 61 net new contracts which accounted
for a net revenue increase of $94.5 million. Of the 61 net new contracts
added since December 31, 2008, 53 were added in 2009 resulting in an
increase in 2010 net revenue of $86.6 million.
EmCare has
added 34 new contracts and terminated 26 contracts to date in 2010, resulting
in an increase in net revenue of $7.9 million for the six months ended June 30,
2010. Net revenue under our same
store contracts increased $25.2 million, or 5.2%, for the six months ended June 30,
2010. The change is primarily due to a 4.8% increase in revenue per
weighted patient encounter primarily as a result of rate increases from our
third-party payors, improvement in our payor mix and an increase in
acuity. The number of current period
same store weighted patient encounters increased 0.4% compared to the prior
period notwithstanding increased volume during the second quarter of 2009 from
the H1N1 virus and from a milder flu season in 2010.
Compensation
and benefits.
Compensation and
benefits costs for the six months ended June 30, 2010 were $557.1 million,
or 78.8% of net revenue, compared to $449.1 million, or 77.6% of net revenue
for the same period in 2009. Provider compensation costs increased $76.3
million from net new contract additions. Same store provider
29
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compensation
costs were $21.1 million over the prior period primarily due to a 6.2% increase
in provider compensation per weighted patient encounter. Non-provider compensation and total benefits
costs increased by $11.2 million due primarily to our recent acquisitions.
Operating
expenses.
Operating expenses
for the six months ended June 30, 2010 were $23.0 million, or 3.3% of net
revenue, compared to $20.2 million, or 3.5% of net revenue, for the same period
in 2009.
Operating expenses increased due primarily to higher
collection agency and billing fees incurred in connection with our net new
contracts added since December 31, 2008 and the expansion of our
anesthesiology and radiology businesses.
Insurance
expense.
Professional
liability insurance expense for the six months ended June 30, 2010 was
$24.1 million, or 3.4% of net revenue, compared to $25.8 million, or 4.5% of
net revenue, for the six months ended June 30, 2009.
We recorded a decrease of
prior year insurance provisions of $1.4 million during the six months ended June 30,
2010 compared to an increase of $3.2 million during the six months ended June 30,
2009.
Selling,
general and administrative.
Selling,
general and administrative expense for the six months ended June 30, 2010
was $15.2 million, or 2.1% of net revenue, compared to $12.4 million, or 2.1%
of net revenue, for the six months ended June 30, 2009.
The $2.8 million increase
was due primarily to growth in the number of net new contracts since December 31,
2008.
Depreciation
and amortization.
Depreciation and
amortization expense for the six months ended June 30, 2010 was $9.6
million, or 1.4% of net revenue, compared to $8.0 million, or 1.4% of net
revenue, for the six months ended June 30, 2009.
The $1.6
million increase was due primarily to additional amortization expense
associated with a contract intangible asset recorded on acquisitions completed
subsequent to December 31, 2008.
Critical
Accounting Policies
For a discussion of
accounting policies that we consider critical to our business operations and
the understanding of our results of operations that affect the more significant
judgments and estimates used in the preparation of our unaudited condensed
consolidated financial statements, please refer to Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Policies contained in our annual report on Form 10-K
for the year ended December 31, 2009 and incorporated by reference herein.
As of June 30, 2010, there were no significant changes in our critical
accounting policies or estimation procedures.
Liquidity
and Capital Resources
Our primary source of
liquidity is cash flows provided by our operating activities. We can also use
our revolving senior secured credit facility, described below, to supplement
cash flows provided by our operating activities if we decide to do so for
strategic or operating reasons. Our liquidity needs are primarily to service
long-term debt and to fund working capital requirements, capital expenditures
related to the acquisition of vehicles and medical equipment,
technology-related assets and insurance-related deposits.
On April 8, 2010, we
completed the financing of new senior secured credit facilities, which is
further described in note 5 of the notes accompanying the consolidated
financial statements. In conjunction with completing the financing under the
new credit facilities, we repaid the balance outstanding on the previous senior
secured term loan and redeemed our 10% senior subordinated notes. These transactions
will reduce our effective interest rate going forward compared to the rate
under our previous debt structure.
We believe our cash and cash
equivalents, net cash from our operating activities, and amounts available
under our senior secured credit facility will meet the liquidity requirements
of our business through at least the next 12 months. We have available to us,
upon compliance with customary conditions, $150.0 million under the revolving
credit facility, less outstanding letters of credit of $45.8 million at June 30,
2010.
Cash Flow
The table below summarizes
cash flow information derived from our statements of cash flows for the periods
indicated, amounts in thousands.
30
Table of Contents
|
|
Six months ended
June 30,
|
|
|
|
2010
|
|
2009
|
|
Net
cash provided by (used in):
|
|
|
|
|
|
Operating
activities
|
|
$
|
84,742
|
|
$
|
140,939
|
|
Investing
activities
|
|
(60,358
|
)
|
(22,734
|
)
|
Financing
activities
|
|
(44,239
|
)
|
2,761
|
|
|
|
|
|
|
|
|
|
Operating
activities
. Net 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 in 2009. Cash tax payments increased $31.1
million due to utilization of net operating loss carryforwards in 2009. Prepaids and other current assets decreased
cash flows from operations $12.2 million during the six months ended June 30,
2010 compared to an increase of $4.7 million during the six months ended June 30,
2009 primarily due to the timing of insurance related premium payments. Trade and other accounts receivable decreased
cash flows from operations $19.6 million during the six months ended June 30,
2010 primarily due to revenue growth and a one day increase in days sales
outstanding, or DSO, due to temporary Medicare delays and a system conversion
in one AMR region.
We regularly analyze DSO
which is calculated by dividing our net revenue for the quarter by the number
of days in the quarter. The result is divided into net accounts
receivable at the end of the period. DSO provides us with a gauge to
measure receivables, revenue and collection activities. The reductions
since March 31, 2009 shown below are due to additional collections on
accounts receivable as a result of continued billing and collection process
enhancements at both AMR and EmCare. The following table outlines our DSO
by segment and in total excluding the impact of acquisitions completed within
the specific quarter:
|
|
Q2 2010
|
|
Q1 2010
|
|
Q4 2009
|
|
Q3 2009
|
|
Q2 2009
|
|
Q1 2009
|
|
AMR
|
|
68
|
|
66
|
|
68
|
|
70
|
|
73
|
|
74
|
|
EmCare
|
|
55
|
|
56
|
|
60
|
|
58
|
|
61
|
|
65
|
|
EMSC
|
|
62
|
|
61
|
|
64
|
|
64
|
|
67
|
|
70
|
|
Investing
activities
. 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 relates to $51.0 million used in the acquisition of
businesses during 2010. This is offset
by an increase in cash provided by other investing activities of $11.6 million
primarily due to a reduction in performance bond collateral during the six
months ended June 30, 2010.
Financing
activities.
For the six months ended June 30, 2010, net
cash used in financing activities was $44.2 million compared to cash provided
by financing activities of $2.8 million for the same period in 2009.
During the six months ended June 30, 2010 we incurred $11.7 million in
debt issuance costs related to our new credit facility and used $25.0 million
to reduce our total outstanding debt. We
also incurred $14.5 million in cash payments related to the redemption of our
senior subordinated notes during the six months ended June 30, 2010. This is offset by the cash flow benefit
related to tax deductions for stock-based compensation during the six months
ended June 30, 2010. At June 30,
2010 there were no amounts outstanding under our revolving credit facility.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary exposure to
market risk consists of changes in interest rates on certain of our borrowings
and changes in fuel prices. While we
have from time to time entered into transactions to mitigate our exposure to
both changes in interest rates and fuel prices, we do not use these instruments
for speculative or trading purposes.
We manage our exposure to
changes in market interest rates and fuel prices and, as appropriate, use
highly effective derivative instruments to manage well-defined risk
exposures. As of June 30, 2010, we
were party to a
31
Table of Contents
series of fuel hedge
transactions with a major financial institution under one master
agreement. Each of the transactions
effectively fixes the cost of diesel fuel at prices ranging from $2.96 to $3.29
per gallon. We purchase the diesel fuel
at the market rate and periodically settle with our counterparty for the
difference between the national average price for the period published by the
Department of Energy and the agreed upon fixed price. The transactions fix the price for a total of
6.8 million gallons, which represents approximately 32% of our total estimated
usage over the hedge period, and are spread over periods from July 2010
through June 2012.
As of June 30, 2010, we
had $426.7 million of debt excluding capital leases, of which $425.0 million
was variable rate debt under our credit facility. An increase or decrease in interest rates of
0.2% will impact our interest costs by $0.9 million annually.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain a system of
disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act))
that are designed to ensure that information required to be disclosed in the
reports that we file under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commissions rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by an issuer in the reports that it files or furnishes
under the Exchange Act is accumulated and communicated to the issuers
management, including its principal executive officer or officers and principal
financial officer or officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, our management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives, and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
Based on their evaluation of
our disclosure controls and procedures conducted within 90 days of the date of
filing this Report on Form 10-Q, our principal executive officer and our
principal financial officer have concluded that, as of the date of their
evaluation, our disclosure controls and procedures (as defined in Rules 13a
-15(e) and 15d -15(e) promulgated under the Exchange Act) are
effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our
internal control over financial reporting that occurred during our fiscal
quarter ended June 30, 2010 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
32
Table of Contents
EMERGENCY MEDICAL SERVICES CORPORATION
PART II. OTHER INFORMATION
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2010
ITEM 1.
LEGAL PROCEEDINGS
As
referenced in our Annual Report on Form 10-K for the year ended December 31,
2009, we have responded to a subpoena from the Department of Justice, or DOJ,
relating to certain AMR affiliates in New York. We are currently in discussions
with the DOJ and the Office of Inspector General of Health and Human Services
regarding resolution of this matter and have recorded a $3.1 million reserve in
connection with the matter.
For additional information
regarding legal proceedings, please refer to note 7, under the caption Commitments
and Contingencies of the notes accompanying the consolidated financial
statements included herein, to our Annual Report on Form 10-K filed with
the SEC on February 19, 2010 and to our Quarterly Report on Form 10-Q
filed with the SEC on May 4, 2010.
ITEM 1A.
RISK FACTORS
There have been no material
changes from the risk factors disclosed in the Risk Factors section of the
Companys Annual Report on Form 10-K for the year ended December 31,
2009.
33
Table of Contents
ITEM 6.
EXHIBITS
10.3.3
|
|
Amendment to Employment
Agreement, dated May 18, 2010, between Randel G. Owen and Emergency
Medical Services Corporation.*
|
|
|
|
10.19.1
|
|
Amendment to Employment
Agreement, dated March 16, 2010, between Mark Bruning and American
Medical Response, Inc.*
|
|
|
|
10.20
|
|
EMSC Physician Stock Purchase
Plan (incorporated by reference to Exhibit 4.2 of the Companys Registration
Statement on Form S-3 filed June 24, 2010).
|
|
|
|
10.21
|
|
EMSC Deferred Compensation
Plan (incorporated by reference to Exhibit 4.1 of the Companys Registration
Statement on Form S-8 filed June 24, 2010).
|
|
|
|
31.1
|
|
Certification of the Chief
Executive Officer of Emergency Medical Services Corporation pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
31.2
|
|
Certification of the Chief
Executive Officer of Emergency Medical Services Corporation, as general
partner of Emergency Medical Services L.P., pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
|
|
|
|
31.3
|
|
Certification of the Chief
Financial Officer of Emergency Medical Services Corporation pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
31.4
|
|
Certification of the Chief
Financial Officer of Emergency Medical Services Corporation, as general
partner of Emergency Medical Services L.P., pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
|
|
|
|
32.1
|
|
Certification of the Chief
Executive Officer and the Chief Financial Officer of Emergency Medical
Services Corporation pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
32.2
|
|
Certification of the Chief
Executive Officer and the Chief Financial Officer of Emergency Medical Services
Corporation, as general partner of Emergency Medical Services L.P. pursuant
to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*
|
* Filed with this report
34
Table of Contents
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrants have duly caused this
report to be signed on their behalf by the undersigned, thereunto duly
authorized.
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EMERGENCY
MEDICAL SERVICES CORPORATION
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(registrant)
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August 5, 2010
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By:
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/s/ William A. Sanger
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Date
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William A. Sanger
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Chairman and Chief
Executive Officer
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August 5, 2010
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By:
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/s/ Randel G. Owen
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Date
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Randel G. Owen
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Chief Financial Officer
and Executive Vice President
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EMERGENCY
MEDICAL SERVICES L.P.
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(registrant)
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By:
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Emergency Medical Services
Corporation, its General Partner
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August 5, 2010
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By:
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/s/ William A. Sanger
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Date
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William A. Sanger
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Chairman and Chief
Executive Officer
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August 5, 2010
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By:
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/s/ Randel G. Owen
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Date
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Randel G. Owen
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Chief Financial Officer
and Executive Vice President
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35
Table of Contents
EXHIBIT INDEX
10.3.3
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Amendment to Employment Agreement, dated
May 18, 2010, between Randel G. Owen and Emergency Medical Services
Corporation.*
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10.19.1
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Amendment to Employment
Agreement, dated March 16, 2010, between Mark Bruning and American
Medical Response, Inc.*
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10.20
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EMSC Physician Stock
Purchase Plan (incorporated by reference to Exhibit 4.2 of the Companys
Registration Statement on Form S-3 filed June 24, 2010).
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10.21
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EMSC Deferred Compensation
Plan (incorporated by reference to Exhibit 4.1 of the Companys Registration
Statement on Form S-8 filed June 24, 2010).
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31.1
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Certification of the Chief
Executive Officer of Emergency Medical Services Corporation pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.*
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31.2
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Certification of the Chief
Executive Officer of Emergency Medical Services Corporation, as general
partner of Emergency Medical Services L.P., pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
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31.3
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Certification of the Chief
Financial Officer of Emergency Medical Services Corporation pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.*
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31.4
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Certification of the Chief
Financial Officer of Emergency Medical Services Corporation, as general
partner of Emergency Medical Services L.P., pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
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32.1
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Certification of the Chief
Executive Officer and the Chief Financial Officer of Emergency Medical
Services Corporation pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
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32.2
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Certification of the Chief
Executive Officer and the Chief Financial Officer of Emergency Medical
Services Corporation, as general partner of Emergency Medical Services L.P.
pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*
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* Filed with this report
36
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