EMSC second-quarter net revenue increases 11.2% to $708.8 million

Aug 3 2010

Emergency Medical Services Corporation (NYSE: EMS) (EMSC or the Company) today announces results for the second quarter ended June 30, 2010.

“EMSC delivered another quarter of revenue and earnings growth. We are especially pleased with the improvement in performance at AMR and continued growth at EmCare. Our recently completed acquisitions strengthen our footprint and, coupled with our successful debt refinancing, further position us to execute on our strategic initiatives.”

William A. Sanger, Chairman and Chief Executive Officer, said, "EMSC delivered another quarter of revenue and earnings growth. We are especially pleased with the improvement in performance at AMR and continued growth at EmCare. Our recently completed acquisitions strengthen our footprint and, coupled with our successful debt refinancing, further position us to execute on our strategic initiatives."

Results of Operations for the Second Quarter 2010

For the quarter ended June 30, 2010, EMSC generated net revenue of $708.8 million, an increase of 11.2% compared to the same period last year.

During the quarter, EMSC incurred charges related to two non-recurring events. In April the Company recorded a $19 million expense for early debt extinguishment in connection with our credit refinancing. The Company also accrued $3.1 million for a tentative settlement regarding a previously disclosed investigation into billing matters during 2001-2005 for certain AMR affiliates in the state of New York ("NY Accrual"). Excluding these items, EMSC generated $0.84 per diluted share compared to $0.67 per diluted share in the second quarter of 2009, an increase of 25.6%. Including these items, the Company generated net income of $24.0 million, or $0.54 per diluted share, for the second quarter of 2010. Net income was positively impacted by a reduction in interest expense due to entering into our new credit facility in April 2010.

Adjusted EBITDA was $81.5 million in the second quarter ($78.4 million including the NY Accrual), an increase of 11.7% compared to the same quarter last year. This increase is attributable primarily to the impact of increased volume from net new contracts and acquisitions, increased revenue from existing contracts, and a decrease in operating and insurance expenses as a percentage of revenue, offset in part by increased compensation and general and administrative expenses. Both segments' results include unfavorable prior year insurance development totaling $1.5 million in the quarter, compared to a $4.4 million unfavorable prior year insurance development in the same period in 2009.

Cash provided by operating activities was $40.2 million in the second quarter of 2010, compared to $99.0 million for the same quarter last year. Cash tax payments increased $16.4 million as the Company utilized most of its net operating loss carry-forwards in 2009. Accounts receivable increased $21.8 million during the second quarter 2010, primarily as a result of revenue growth. Days Sales Outstanding (DSO) increased one day sequentially to 62 days due to temporary Medicare payment delays and a system conversion at AMR in one region. Changes in insurance accruals and other assets and liabilities were related to changes in the timing of payments.

Net cash used in investing activities was $53.2 million for the quarter ended June 30, 2010, compared to $28.2 million for the same period in 2009. Acquisition related funding increased by $47.5 million compared to the second quarter 2009. Insurance collateral funding decreased by $7.6 million compared to the second quarter 2009 due to timing differences in insurance funding. Cash provided by other investing activities increased $10.6 million primarily due to a reduction in performance bond collateral.

For the quarter ended June 30, 2010, net cash used in financing activities was $54.9 million compared to net cash provided by financing activities of $2.2 million for the second quarter of 2009. The changes were related primarily to our debt refinancing during the quarter. At June 30, 2010, there were no amounts outstanding under our revolving credit facility.

Free Cash Flow was $34.6 million in the second quarter of 2010 compared to $70.9 million in the second quarter of 2009. The difference is primarily attributable to the aforementioned changes in operating and non-acquisition related investing activities.

A description of the non-GAAP measures, Adjusted EBITDA and Free Cash Flow, and a reconciliation of non-GAAP to GAAP financial measures are included in this news release.

Results of Operations for the Six Months Ended June 30, 2010

EMSC's net revenue was $1.39 billion for the six months ended June 30, 2010, an increase of 11.0% compared to the same period last year.

EMSC generated $1.54 per diluted share (excluding the loss on early debt extinguishment and NY Accrual), for an increase of 25.2% over the same period last year. Including the loss on early debt extinguishment and NY Accrual, EMSC's net income for the six months ended June 30, 2010 was $55.0 million, or $1.23 per diluted share.

Adjusted EBITDA was $155.9 million ($152.8 million including the NY Accrual), an increase of 12.6% compared to the same period last year. This increase is attributable primarily to the impact of increased volume from net new contracts and acquisitions, increased revenue from existing contracts, and a decrease in operating and insurance expenses as a percentage of revenue, offset in part by increased compensation and general and administrative expenses.

Cash provided by operating activities was $84.7 million for the six months ended June 30, 2010, compared to $140.9 million for the same period last year. The change in operating cash flows was affected primarily by cash paid for income taxes in 2010, increases in accounts receivable in the second quarter 2010, timing differences in prepaid expenses and the cash flow benefit related to tax deductions from stock-based compensation.

Net cash used in investing activities was $60.4 million for the six months ended June 30, 2010, compared to $22.7 million for the same period in 2009. The increase in cash flows used in investing activities is related primarily to an increase in acquisition funding.

For the six months ended June 30, 2010, net cash used by financing activities was $44.2 million compared to net cash provided by financing activities of $2.8 million for the same period in 2009. The increase in cash used by financing activities is related primarily to our debt refinancing in the second quarter of 2010.

Free Cash Flow was $75.4 million in the six months ended June 30, 2010 compared to $118.3 million for the same period in 2009. The difference is primarily attributable to the aforementioned changes in operating and non-acquisition related investing activities. Free Cash Flow for the six months ended June 30, 2010 does not include a $13.5 million cash flow benefit related to tax deductions for stock-based compensation.

Segment Results

EMSC operates two business segments: American Medical Response, Inc. (AMR), the Company's healthcare transportation services segment, and EmCare Holdings Inc. (EmCare), the Company's facility-based physician services segment.

American Medical Response (AMR)

For the quarter ended June 30, 2010, AMR generated net revenue of $344.2 million, an increase of 2.6% compared to the same quarter last year. The increase in net revenue was from an improvement in revenue per transport and growth in our managed transportation business, offset by a decrease in interfacility transports.

AMR's Adjusted EBITDA was $34.9 million ($31.8 million including the NY Accrual), an increase of 7.5% compared to the same quarter last year. The increase in Adjusted EBITDA is attributable primarily to revenue per transport growth and a decrease in compensation and benefits and insurance as a percentage of net revenue, offset by higher fuel costs and general and administrative expenses. Income from operations, including the NY Accrual, was $20.3 million, an increase of 3.0% compared to the same quarter in 2009.

For the six months ended June 30, 2010, AMR's net revenue was $681.1 million, an increase of 1.4% compared to the same period last year. Adjusted EBITDA was $67.3 million ($64.2 million including the NY Accrual), an increase of 1.4% compared to the same period last year. Income from operations, including the NY Accrual, was $41.2 million, an increase of 2.0% compared to the same period in 2009.

EmCare

For the quarter ended June 30, 2010, EmCare generated net revenue of $364.6 million, an increase of 20.8% compared to the same quarter last year. The increase in revenue is attributable primarily to the addition of 54 net new contracts since March 31, 2009, and revenue increases at existing contracts. Revenue at existing contracts grew 4.5% notwithstanding a 1.2% decline in same store patient encounters. 2009 patient encounters were positively impacted by increased visits related to the H1N1 virus.

Adjusted EBITDA was $46.6 million for the quarter compared to $40.6 million in the same quarter last year, an increase of 15.0%. The increase in Adjusted EBITDA was driven primarily by the net impact of revenue and volume increases from new contracts in addition to a decrease in insurance expense as a percentage of net revenue. 2009 Adjusted EBITDA margins were positively impacted by increased visits related to the H1N1 virus. Income from operations was $41.5 million, an increase of 15.4% over the same period in 2009.

For the six months ended June 30, 2010, EmCare's net revenue was $707.0 million, an increase of 22.2% compared to the same period last year. Adjusted EBITDA was $88.7 million, an increase of 22.8% compared to the same period last year. Income from operations was $78.1 million, an increase of 24.3% compared to the same period in 2009.

Guidance

Adjusted EBITDA guidance is increased from our previously announced range of $313 million to $320 million to an expected range of $321 million to $328 million (excluding the NY Accrual). Diluted 2010 EPS guidance is updated from $3.10-$3.20 to an expected range of $3.20-$3.30 (excluding $0.30 of non-recurring charges related to our loss on early debt extinguishment and the NY Accrual). Adjusted EBITDA and Diluted EPS, including the loss on early debt extinguishment and the NY Accrual, are expected to be between $318 million to $325 million and $2.90 - $3.00, respectively.