Emergency Medical Services Announces Q3 2009 Diluted EPS of $0.66
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Highlights:
-- Net revenue was $665.1 million, a decrease of 2.1% compared to the third
quarter of 2008, or a 15.0% increase excluding FEMA hurricane deployment
revenue of $101.1 million in 2008 (there was no FEMA hurricane
deployment revenue in 2009);
-- Net income was $28.9 million, an increase of 0.9% compared to the third
quarter of 2008; Adjusted EBITDA was $72.3 million, a decrease of 1.6%
compared to the third quarter of 2008, which benefited from the FEMA
hurricane deployment;
-- Diluted EPS was $0.66 for the third quarter of 2009 compared to $0.66
for the third quarter of 2008, which benefited from the FEMA hurricane
deployment;
-- Cash provided by operating activities was $68.9 million compared to
$75.0 million in the third quarter of 2008; Free cash flow was $61.2
million in the quarter compared to $65.5 million for the same quarter
last year; and
-- Based on third quarter results, the Company expects full year 2009 EPS
and Adjusted EBITDA to be at the high end of its existing guidance
range.
GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)-- Emergency Medical Services Corporation (NYSE: EMS) (EMSC or the Company) today announces results for the third quarter ended September 30, 2009.
William A. Sanger, Chairman and Chief Executive Officer, said, "EMSC had an excellent third quarter. We produced diluted EPS of $0.66 and improved operating margins. This improvement is a result of the signing of new contracts, increased volumes at our emergency departments, expansion of our new service lines and improved resource utilization. I am particularly pleased that we were able to produce comparable results to the same quarter last year despite the more than $100 million of FEMA hurricane revenues in the third quarter of 2008. Finally, we continue to supplement our balance sheet by generating strong free cash flow, enhancing our ability to capitalize on market opportunities."
Results of Operations for the Third Quarter 2009
For the quarter ended September 30, 2009, EMSC generated net revenue of $665.1 million, a decrease of 2.1% compared to the same period last year, or a 15.0% increase excluding third quarter 2008 FEMA hurricane deployment revenue of $101.1 million. There was no FEMA hurricane deployment revenue in 2009.
EMSC generated net income of $28.9 million, or $0.66 per diluted share, for the third quarter of 2009, compared to net income of $28.6 million, or $0.66 per diluted share, in the third quarter of 2008. Adjusted EBITDA was $72.3 million, a decrease of 1.6% compared to the same quarter last year. Adjusted EBITDA in 2008 was favorably impacted by the FEMA hurricane deployment. Adjusted EBITDA was positively impacted in 2009 by the net impact of increased volume from net new contracts, higher rates and volumes from existing contracts, improvement in compensation and benefits expenses as a percentage of net revenue and lower fuel costs. A description of the non-GAAP measures, Adjusted EBITDA and Free Cash Flow, and a reconciliation of non-GAAP to GAAP financial measures are included in this news release.
Cash provided by operating activities was $68.9 million in the third quarter of 2009, compared to $75.0 million for the same quarter last year. Working capital changes in the third quarter 2008 were significantly impacted by the FEMA hurricane deployment. During the third quarter of 2009, accounts receivable decreased $7.6 million, and Days Sales Outstanding (DSO) decreased 3 days sequentially. Free cash flow was $61.2 million in the third quarter of 2009 compared to $65.5 million in the same quarter last year.
Net cash used in investing activities was $8.9 million for the quarter ended September 30, 2009, compared to $17.9 million for the same period in 2008. Third quarter 2009 was positively impacted by a decrease in insurance collateral of $6.0 million. Acquisition related funding was $1.2 million in the third quarter 2009 compared to $8.4 million in the same period last year.
For the quarter ended September 30, 2009, net cash provided by financing activities was $4.0 million compared to $5.5 million for the same quarter last year. At September 30, 2009, there were no amounts outstanding under our revolving credit facility.
Results of Operations for the Nine Months Ended September 30, 2009
EMSC's net revenue was $1.92 billion for the nine months ended September 30, 2009, an increase of 5.5% compared to the same period last year, or an 11.7% increase excluding the third quarter 2008 impact of the FEMA hurricane deployment.
EMSC's net income for the nine months ended September 30, 2009 was $82.0 million, or $1.89 per diluted share, compared to net income of $64.0 million, or $1.49 per diluted share, an increase of 27.1% over the same period last year. Adjusted EBITDA was $210.8 million, an increase of 14.9% compared to the same period last year. The increase in earnings is attributable primarily to the net impact of increased volume from net new contracts, higher rates and volumes on existing contracts, improvement in compensation and benefits expenses as a percentage of net revenue and lower fuel costs, partially offset by higher insurance expense and the favorable impact of the FEMA hurricane deployment in 2008.
Cash provided by operating activities for the nine months ended September 30, 2009 was $209.8 million compared to $130.4 million for the same period in 2008. The increase in operating cash flow relates primarily to an increase in net income, further reductions in DSO, and changes in accounts payable and accrued liabilities. Working capital changes for the nine months ended September 30, 2008 were significantly impacted by the FEMA hurricane deployment. Changes in accounts payable and accrued liabilities increased $10.6 million during the nine months ended September 30, 2009. Accounts receivable decreased $8.4 million for the nine months ended September 30, 2009, primarily due to a decrease in DSO of 10 days during the same period. Free cash flow was $179.5 million for the nine months ended September 30, 2009, an increase of $51.1 million over the nine months ended September 30, 2008.
Net cash used in investing activities was $31.7 million for the nine months ended September 30, 2009 compared to $30.4 million for the same period in 2008. Reductions in net insurance collateral were $4.1 million during 2009 compared to $16.0 million during 2008. Net capital expenditures were $33.6 million during the nine months ended September 30, 2009 compared to $21.4 million during the same period in 2008 due primarily to the timing of capital purchases. The quarter ended September 30, 2009 included $1.4 million used in the acquisition of businesses compared to $28.3 million in the same period in 2008.
For the nine months ended September 30, 2009 net cash provided by financing activities was $6.8 million compared to $6.7 million for the nine months ended September 30, 2008.
Segment Results
EMSC operates two business segments: American Medical Response, Inc. (AMR), the Company's healthcare transportation services segment, and EmCare Holdings Inc. (EmCare), the Company's outsourced hospital-based physician services segment.
American Medical Response (AMR)
Comparisons of AMR's results for the quarter and nine months ended September 30, 2009 to the same periods last year are significantly impacted by our FEMA hurricane deployment during the third quarter of last year. Notwithstanding the difficulty in comparing the 2009 to the 2008 periods, performance in our core business has improved in 2009.
For the quarter ended September 30, 2009, AMR generated net revenue of $338.8 million, a decrease of 20.4% compared to the third quarter last year, or a 4.5% increase excluding third quarter 2008 FEMA hurricane deployment revenue of $101.1 million. The 4.5% increase in net revenue was from an improvement in revenue per transport and growth in our managed transportation business, offset by lower transports from our exit of underperforming markets.
Adjusted EBITDA was $31.8 million, a decrease of 32.5% compared to the same quarter last year. The decrease in Adjusted EBITDA is attributable primarily to the favorable impact of the FEMA hurricane deployment in 2008. Adjusted EBITDA in 2009 was positively impacted by revenue growth coupled with improvements in our resource utilization and lower fuel costs. Insurance expense for the quarter ended September 30, 2009 included a favorable prior period insurance adjustment of $2.1 million compared to a favorable prior period adjustment of $1.7 million in the same period last year. Income from operations was $19.1 million, a decrease of 42.0% compared to the same quarter in 2008. Income from operations in 2008 was favorably impacted by the FEMA hurricane deployment.
For the nine months ended September 30, 2009, AMR's net revenue was $1.01 billion, a decrease of 6.0% compared to the same period last year, or a 3.7% increase excluding the third quarter 2008 FEMA hurricane deployment revenue. Adjusted EBITDA was $98.2 million, a decrease of 3.4% compared to the same period last year. Insurance expense in the nine months ended September 30, 2009 included a favorable prior period adjustment of $0.2 million compared to a favorable prior period adjustment of $5.3 million in the same period last year. Income from operations was $59.5 million, an increase of 3.4% compared to the same period in 2008.
EmCare
For the quarter ended September 30, 2009, EmCare generated net revenue of $326.3 million, an increase of 28.5% compared to the same quarter last year. The increase in revenue is attributable primarily to the addition of 87 net new contracts since June 30, 2008 (of which 45 were a part of our acquisition of Clinical Partners in August 2008 with related management fee revenue of $2.3 million during the quarter) and revenue increases at existing contracts. Adjusted EBITDA was $40.4 million for the quarter compared to $26.3 million last year, an increase of 53.8%. The increase in Adjusted EBITDA was driven primarily by revenue increases and a reduction of compensation and benefits expenses as a percentage of net revenue. Insurance expense in the third quarter 2009 included an unfavorable prior period insurance adjustment of $1.3 million compared to an unfavorable prior period adjustment of $3.9 million in the same period last year. Income from operations was $36.3 million, an increase of 66.3% over the same period in 2008.
For the nine months ended September 30, 2009, EmCare's net revenue was $904.7 million, an increase of 22.1% compared to the same period last year. Adjusted EBITDA was $112.7 million compared to $81.9 million, an increase of 37.6% compared to the same period last year. Insurance expense in the nine months ended September 30, 2009 included unfavorable prior period adjustments of $4.5 million compared to unfavorable prior period adjustments of $1.3 million in the same period last year. Income from operations was $99.2 million, an increase of 44.5% over the same period in 2008.
Guidance
The Company expects full year 2009 EPS and Adjusted EBITDA to be at the high end of its existing guidance ranges. Our existing guidance range for EPS is an expected $2.38 - $2.48, and $268 million to $275 million for Adjusted EBITDA.
Conference Call
EMSC management will host a conference call and live audio webcast on Tuesday, November 3, 2009, at 11:00 a.m. EST, to discuss the Company's financial results. A 30-day online replay will be available approximately one hour following the conclusion of the live broadcast. A link to the live broadcast and online replay is available on the Investor Relations section of the Company's website at www.emsc.net.
About Emergency Medical Services Corporation
Emergency Medical Services Corporation (EMSC) is a leading provider of emergency medical services in the United States. EMSC operates two business segments: American Medical Response, Inc. (AMR), the Company's healthcare transportation services segment, and EmCare Holdings Inc. (EmCare), the Company's outsourced hospital-based physician services segment. AMR is the leading provider of ambulance services in the United States. EmCare is a leading provider of outsourced emergency department and hospital-based physician services. In 2008, EMSC provided services to 11.4 million patients in nearly 2,100 communities nationwide. EMSC is headquartered in Greenwood Village, Colorado. For additional information visit www.emsc.net.
Forward-Looking Statements
Certain statements and information herein may be deemed to be "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. Any forward-looking statements herein are made as of the date of this press release, and EMSC undertakes no duty to update or revise any such statements. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in EMSC's filings with the SEC from time to time, including in the section entitled "Risk Factors" in the Company's most recent Annual Report on Form 10-K and subsequent periodic reports. Among the factors that could cause future results to differ materially from those provided in this press release are: the impact on our revenue of changes in transport volume, mix of insured and uninsured patients, and third party reimbursement rates and methods; the adequacy of our insurance coverage and insurance reserves; potential penalties or changes to our operations if we fail to comply with extensive and complex government regulation of our industry, both; the impact of potential changes in the healthcare industry generally resulting from legislation currently under consideration; our ability to recruit and retain qualified physicians and other healthcare professionals, and enforce our non-compete agreements with our physicians; our ability to generate cash flow to service our debt obligations; the cost of capital expenditures to maintain and upgrade our vehicle fleet and medical equipment; the loss of one or more members of our senior management team; the outcome of government investigations of certain of our business practices; our ability to successfully restructure our operations to comply with future changes in government regulation; the loss of existing contracts and the accuracy of our assessment of costs under new contracts; the high level of competition in our industry; our ability to implement our business strategy; our ability to successfully integrate strategic acquisitions; and our ability to comply with the terms of our settlement agreements with the government.
Non-GAAP Financial Measures Description and Reconciliation
This press release includes presentations of Adjusted EBITDA, which is defined as net income before equity in earnings of unconsolidated subsidiary, income tax expense, interest and other income, realized gain on investments, interest expense, and depreciation and amortization. It also includes presentations of free cash flow, which is defined as cash flow from operations adjusted for cash used in non-acquisition related investment activities. Adjusted EBITDA and free cash flow are commonly used by management and investors as performance measures and liquidity indicators. Adjusted EBITDA and free cash flow are not considered measures of financial performance under U.S. generally accepted accounting principles (GAAP), and the items excluded therefrom are significant components in understanding and assessing our financial performance. Adjusted EBITDA and free cash flow should not be considered in isolation or as an alternative to GAAP measures such as net income, cash flows provided by or used in operating, investing or financing activities or other financial statement data presented in our consolidated financial statements as an indicator of financial performance or liquidity. Reconciliations of non-GAAP financial measures are provided in this news release. Reconciliation for the forward-looking Adjusted EBITDA projections presented herein is not being provided due to the number of variables in the projected Adjusted EBITDA range. Since Adjusted EBITDA and free cash flow are not measures determined in accordance with GAAP and are susceptible to varying calculations, these measures, as presented, may not be comparable to other similarly titled measures of other companies.
EMERGENCY MEDICAL SERVICES CORPORATION
Consolidated Statements of Operations and Other Information
(unaudited; in thousands, except shares, per share data and other information)
Quarter ended September 30, Nine months ended September 30,
2009 2008 2009 2008
Net revenue $ 665,056 $ 679,328 $ 1,915,369 $ 1,816,193
Compensation 467,625 426,755 1,332,787 1,221,607
and benefits
Operating 85,510 135,087 252,355 302,014
expenses
Insurance 24,845 25,109 75,706 63,640
expense
Selling,
general and 15,871 20,509 47,186 50,621
administrative
expenses
Depreciation
and 15,733 16,993 48,658 52,156
amortization
expense
Income from 55,472 54,875 158,677 126,155
operations
Interest income
from restricted 1,082 1,623 3,468 5,113
assets
Interest (10,280 ) (11,117 ) (30,749 ) (31,387 )
expense
Realized gain 544 768 2,030 3,011
on investments
Interest and 502 508 1,442 1,097
other income
Income before
income taxes
and equity in 47,320 46,657 134,868 103,989
earnings of
unconsolidated
subsidiary
Income tax (18,533 ) (18,138 ) (53,144 ) (40,170 )
expense
Equity in
earnings of 91 98 244 152
unconsolidated
subsidiary
Net income $ 28,878 $ 28,617 $ 81,968 $ 63,971
Basic earnings
per common $ 0.67 $ 0.69 $ 1.93 $ 1.54
share
Diluted
earnings per $ 0.66 $ 0.66 $ 1.89 $ 1.49
common share
Weighted
average common
shares 42,809,582 41,637,765 42,366,065 41,594,270
outstanding,
basic
Weighted
average common
shares 43,769,788 43,062,364 43,402,818 43,058,904
outstanding,
diluted
Other
Information
EmCare patient 2,553,676 1,999,161 7,126,651 5,983,821
encounters
EmCare weighted
patient 2,234,676 1,831,485 6,306,727 5,456,834
encounters (1)
AMR ambulance 719,013 732,005 2,177,241 2,220,845
transports
AMR weighted 726,353 742,574 2,200,139 2,254,694
transports (2)
(1) EmCare weighted encounters include a weighting of Radiology and Anesthesia
encounters due to the differences in reimbursement for these services.
(2) AMR weighted transports include a weighting of wheelchair transports due to
the differences in reimbursement for these services.
EMERGENCY MEDICAL SERVICES CORPORATION
Reconciliation of Adjusted EBITDA to Net Income
(unaudited; in thousands)
Quarter ended September 30, Nine months ended September 30,
2009 2008 2009 2008
Adjusted EBITDA $ 72,287 $ 73,491 $ 210,803 $ 183,424
Depreciation and
amortization (15,733 ) (16,993 ) (48,658 ) (52,156 )
expense
Interest income
from restricted (1,082 ) (1,623 ) (3,468 ) (5,113 )
assets
Income from 55,472 54,875 158,677 126,155
operations
Interest income
from restricted 1,082 1,623 3,468 5,113
assets
Interest expense (10,280 ) (11,117 ) (30,749 ) (31,387 )
Realized gain on 544 768 2,030 3,011
investments
Interest and other 502 508 1,442 1,097
income
Income before
income taxes and
equity in earnings 47,320 46,657 134,868 103,989
of unconsolidated
subsidiary
Income tax expense (18,533 ) (18,138 ) (53,144 ) (40,170 )
Equity in earnings
of unconsolidated 91 98 244 152
subsidiary
Net income $ 28,878 $ 28,617 $ 81,968 $ 63,971
EMERGENCY MEDICAL SERVICES CORPORATION
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
(unaudited; in thousands)
Quarter ended September 30, Nine months ended September 30,
2009 2008 2009 2008
Adjusted EBITDA $ 72,287 $ 73,491 $ 210,803 $ 183,424
Interest paid (9,773 ) (10,644 ) (29,424 ) (29,808 )
Change in accounts 7,574 (40,747 ) 8,448 (54,499 )
receivable
Change in other
operating (2,956 ) 51,307 16,000 29,226
assets/liabilities
Equity based 1,121 717 2,875 1,841
compensation
Other 609 923 1,099 242
Net cash provided
by operating $ 68,862 $ 75,047 $ 209,801 $ 130,426
activities
EMERGENCY MEDICAL SERVICES CORPORATION
Reconciliation of Segment Adjusted EBITDA to Income from Operations
(unaudited; in thousands)
Quarter ended September 30, Nine months ended September 30,
2009 2008 2009 2008
AMR
Adjusted EBITDA $ 31,838 $ 47,184 $ 98,151 $ 101,558
Depreciation and
amortization (12,199 ) (13,447 ) (37,147 ) (41,951 )
expense
Interest income
from restricted (495 ) (705 ) (1,485 ) (2,069 )
assets
Income from 19,144 33,032 59,519 57,538
operations
EmCare
Adjusted EBITDA 40,449 26,307 112,652 81,866
Depreciation and
amortization (3,534 ) (3,546 ) (11,511 ) (10,205 )
expense
Interest income
from restricted (587 ) (918 ) (1,983 ) (3,044 )
assets
Income from 36,328 21,843 99,158 68,617
operations
Total
Adjusted EBITDA 72,287 73,491 210,803 183,424
Depreciation and
amortization (15,733 ) (16,993 ) (48,658 ) (52,156 )
expense
Interest income
from restricted (1,082 ) (1,623 ) (3,468 ) (5,113 )
assets
Income from $ 55,472 $ 54,875 $ 158,677 $ 126,155
operations
EMERGENCY MEDICAL SERVICES CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2009 2008
(Unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents $ 331,105 $ 146,173
Trade and other accounts receivable, net 464,241 472,501
Other current assets 109,949 196,500
Total current assets 905,295 815,174
Non-current assets:
Property, plant and equipment, net 123,520 124,869
Goodwill and other intangible assets, net 410,467 422,154
Other long-term assets 160,729 179,022
Total assets $ 1,600,011 $ 1,541,219
Liabilities and Equity
Current liabilities $ 334,172 $ 320,141
Long-term debt 451,751 453,600
Non-current deferred tax liability 5,673 -
Insurance reserves and other long-term liabilities 167,013 228,439
Total liabilities 958,609 1,002,180
Total equity 641,402 539,039
Total liabilities and equity $ 1,600,011 $ 1,541,219
EMERGENCY MEDICAL SERVICES CORPORATION
Condensed Consolidated Statements of Cash Flows
(unaudited; in thousands)
Quarter ended September 30, Nine months ended September
30,
2009 2008 2009 2008
Cash Flows from
Operating
Activities
Net income $ 28,878 $ 28,617 $ 81,968 $ 63,971
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation,
amortization, 35,366 35,870 103,385 91,728
deferred taxes and
other
Changes in
operating
assets/liabilities,
net of
acquisitions:
Trade and other 7,574 (40,747 ) 8,448 (54,499 )
accounts receivable
Insurance accruals 4,280 1,807 7,033 (5,333 )
Other assets and (7,236 ) 49,500 8,967 34,559
liabilities
Net cash provided
by operating 68,862 75,047 209,801 130,426
activities
Cash Flows from
Investing
Activities
Purchases of
property, plant and (13,535 ) (11,447 ) (33,560 ) (21,407 )
equipment, net
Acquisition of
businesses, net of (1,241 ) (8,368 ) (1,374 ) (28,325 )
cash received
Net change in
insurance 6,002 1,127 4,069 15,983
collateral
Other investing (166 ) 764 (809 ) 3,392
activities
Net cash used in
investing (8,940 ) (17,924 ) (31,674 ) (30,357 )
activities
Cash Flows from
Financing
Activities
EMSC issuance of
class A common 2,437 1,875 7,160 1,920
stock
Borrowings under
revolving credit - - - 14,000
facility
Repayments of
capital lease (1,214 ) (1,285 ) (3,826 ) (18,006 )
obligations and
other debt
Increase in bank 2,821 4,950 3,471 8,785
overdrafts
Net cash provided
by financing 4,044 5,540 6,805 6,699
activities
Change in cash and 63,966 62,663 184,932 106,768
cash equivalents
Cash and cash
equivalents, 267,139 73,019 146,173 28,914
beginning of period
Cash and cash
equivalents, end of $ 331,105 $ 135,682 $ 331,105 $ 135,682
period
Free cash flow $ 61,163 $ 65,491 $ 179,501 $ 128,394
EMERGENCY MEDICAL SERVICES CORPORATION
Reconcilation of Free Cash Flow to Net Cash Provided by Operating Activities
(unaudited; in thousands)
Quarter ended September 30, Nine months ended September 30,
2009 2008 2009 2008
Free cash flow $ 61,163 $ 65,491 $ 179,501 $ 128,394
Purchase of
property, plant 13,535 11,447 33,560 21,407
and equipment, net
Net change in
insurance (6,002 ) (1,127 ) (4,069 ) (15,983 )
collateral
Other investing 166 (764 ) 809 (3,392 )
activities
Net cash provided
by operating $ 68,862 $ 75,047 $ 209,801 $ 130,426
activities
Source: Emergency Medical Services Corporation
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