Emergency Medical Services Announces EPS of $0.24 for Third Quarter

Emergency Medical Services Corporation (NYSE:EMS) (EMSC or the Company) today announced results for the third quarter ended September 30, 2006. Results of Operations for the Third Quarter 2006 For the third quarter ended September 30, 2006, EMSC generated net revenue of $485.7 million, an increase of 6.5% compared to the same quarter last year. The Company generated EBITDA of $44.7 million (including a $0.3 million restructuring charge), an increase of 31.2% compared to the same quarter last year. A reconciliation of EBITDA to GAAP financial measures is included in this news release. EMSC generated net income of $10.3 million, or $0.24 per diluted share, on 42.5 million average diluted weighted shares outstanding ($0.25 per diluted share excluding stock option expense), for the third quarter of 2006, compared to net income of $3.0 million, or $0.11 per diluted share, on 34.2 million average diluted weighted shares outstanding, for the same quarter last year. The improvement in earnings is primarily due to revenue increases from new contracts, higher net revenue per encounter, new business lines, favorable results from our risk mitigation programs and expense reductions. Operating cash flows for the quarter ended September 30, 2006, were $11.2 million, compared to $9.9 million for the same quarter last year. Changes in operating assets and liabilities during the quarter included an increase in accounts receivable of $27.1 million, primarily due to Medicare reimbursement delays and quarterly collection trends. Changes in other operating assets and liabilities included a net payment of $6.1 million related to the previously announced settlement with the United States Government. Net cash used in investing activities was $45.8 million for the quarter ended September 30, 2006, compared to $42.0 million for the same quarter last year. Investing activities during the quarter related primarily to a net increase in insurance collateral of $19.3 million and net capital expenditures of $14.1 million. We also used $10.7 million of available cash to fund acquisitions. Net cash used in financing activities was $12.6 million for the quarter ended September 30, 2006, compared to $10.9 million provided by financing activities for the same quarter last year. Financing activities during the quarter included an unscheduled payment on our senior secured term loan of $9.4 million. William A. Sanger, Chairman and Chief Executive Officer, said, "We are pleased with the overall performance of EMSC in the third quarter and the recent upgrade of the Company’s debt ratings. At EmCare we continue to see exceptional revenue growth and margin expansion. At AMR, the quarter was highlighted by new market entries, product line expansion, and continued favorable results from our risk mitigation programs. The quarter was also impacted by the previously announced loss of four 9-1-1 zones in LA County. However, we are encouraged with our progress in mitigating the impact of the reduced transports through expense reductions and the growth of our non-emergency transport volume. "Lastly, we recently began the next phase of our consolidation initiative, focusing on regional operations. The first phase, which was substantially completed in the first quarter of 2006, was the consolidation of the corporate support functions between AMR and EmCare. Under the current initiative, we are streamlining AMR operations, and anticipate initial annual savings of approximately $7 million in 2007, with an estimated one-time restructuring charge of $ 4.0-5.0 million in the fourth quarter ended December 31, 2006,” Sanger concluded. Results of Operations for the Nine Months Ended September 30, 2006 For the nine months ended September 30, 2006, EMSC generated net revenue of $1.43 billion, an increase of 7.7% compared to the same period last year. EBITDA was $128.6 million, including a $1.2 million restructuring charge, an increase of 20.1% compared to the same period last year (excluding Laidlaw International, Inc. acquisition-related compensation charges in January, 2005). EMSC generated net income of $28.3 million, or $0.67 per diluted share, on 42.4 million average diluted weighted shares outstanding ($0.68 per diluted share excluding stock option expense), for the nine months ended September 30, 2006, compared to net income of $7.9 million for the same period last year. Operating cash flows for the nine months ended September 30, 2006, were $123.6 million, compared to $96.0 million for the same period last year. Changes in operating assets and liabilities included a decrease in accounts receivable of $4.8 million, an increase in insurance accruals of $10.4 million, and a net contribution of $11.6 million from other operating assets and liabilities. Net cash used in investing activities was $87.6 million for the nine months ended September 30, 2006, compared to $902.8 million (including $828.8 million related to the acquisition of AMR and EmCare from Laidlaw in February 2005) for the same period in 2005. Net cash used in investing activities during the nine months ended September 30, 2006, relates primarily to net capital expenditures of $42.4 million for the purchase of new vehicles, medical equipment and technology-related assets, a net change in insurance collateral of $31.8 million and business acquisitions of $11.6 million. For the nine months ended September 30, 2006, net cash used in financing activities was $31.6 million, compared to net cash provided by financing activities of $813.1 million (including $822.7 million related to the acquisition of AMR and EmCare from Laidlaw in February 2005) for the nine months ended September 30, 2005. Financing activities during the period included unscheduled payments on our senior secured term loan of $19.4 million. Segment Results EMSC operates two business segments: American Medical Response, Inc. (AMR), the Company’s healthcare transportation services segment, and EmCare Holdings, Inc. (EmCare), the Company’s emergency department and hospital-based management services segment. American Medical Response (AMR) For the third quarter ended September 30, 2006, AMR generated net revenue of $299.3 million, an increase of 2.5% (4.2% excluding 2005 hurricane-related revenues) compared to the same quarter last year. EBITDA was $24.6 million (excluding a $0.3 million restructuring charge), an increase of 8.5% compared to the same quarter last year. The increase in EBITDA resulted primarily from the net impact of revenue growth during the period, lower insurance costs as a result of our risk mitigation programs, and lower support costs, partially offset by the loss of a portion of the LA County 9-1-1 contract in June 2006. For the nine months ended September 30, 2006, AMR generated net revenue of $888.5 million, an increase of 3.9% (4.4% excluding 2005 hurricane-related revenues) compared to the same period last year. EBITDA was $73.1 million (excluding a $1.2 million restructuring charge), a decrease of 2.2% compared to the same period last year (excluding Laidlaw acquisition-related compensation charges in January, 2005). EmCare For the third quarter ended September 30, 2006, EmCare generated net revenue of $186.4 million, an increase of 13.4% compared to the same quarter last year. EBITDA was $20.4 million, an increase of 78.7% compared to the same quarter last year. The increase in EBITDA resulted primarily from revenue increases from existing contracts, new contracts and reduced insurance expense. For the nine months ended September 30, 2006, EmCare generated net revenue of $544.8 million, an increase of 14.6% compared to the same period last year. EBITDA was $56.7 million, an increase of 75.4% compared to the same period last year (excluding Laidlaw acquisition-related compensation charges in January, 2005). Guidance The Company previously provided annual guidance in the range of $168.0 million to $172.0 million in EBITDA, and diluted EPS of $0.85 to $0.90. We expect results for the year ended December 31, 2006 to be slightly better than the high end of these ranges. Conference Call EMSC management will host a conference call and live audio webcast on Thursday, November 2, 2006, 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 emergency department and hospital-based management services segment. AMR is the leading provider of ambulance services in the United States. EmCare is the nation’s leading provider of outsourced emergency department staffing and related management services. In 2005, EMSC provided services to nearly 9 million patients in more than 2,000 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 quarterly reports on Form 10-Q. Among the factors that could cause future results to differ materially from those provided in this press release are: the impact on our revenue of changes in transport volume, mix of insured and uninsured patients, and third party reimbursement rates and methods; the adequacy of our insurance coverage and insurance reserves; potential penalties or changes to our operations if we fail to comply with extensive and complex government regulation of our industry, both as it exists now and as it may change in the future; our ability to recruit and retain qualified physicians and other healthcare professionals, and enforce our non-compete agreements with our physicians; the loss of one or more members of our senior management team; the outcome of government investigations of certain of our business practices; our ability to generate cash flow to service our debt obligations and fund the cost of capital expenditures to maintain and upgrade our vehicle fleet and medical equipment; and the loss of existing contracts and the accuracy of our assessment of costs under new contracts. Comparability of Historical Financial Data The comparability of our financial information has been affected by a number of significant events and transactions. In February 2005, AMR and EmCare were acquired by Emergency Medical Services L.P. For the month ended January 31, 2005, prior to the acquisition, the AMR and EmCare businesses formerly owned by Laidlaw International, Inc., are referred to as the "Predecessor.” In addition, EMSC completed an IPO in December 2005 and used net proceeds from this offering to pay down a portion of a senior secured credit facility entered into as part of the acquisition. Generally the results of operations of our segments are comparable from quarter to quarter except for certain capital costs, such as interest and amortization, and Laidlaw acquisition-related compensation charges. Non-GAAP Financial Measures Reconciliation This press release includes presentations of EBITDA, which is defined as operating income plus depreciation and amortization expense. EBITDA is commonly used by management and investors as a measure of leverage capacity, debt service ability and liquidity. EBITDA is not considered a measure of financial performance under U.S. generally accepted accounting principles (GAAP), and the items excluded from EBITDA are significant components in understanding and assessing our financial performance. EBITDA should not be considered in isolation or as an alternative to such GAAP measures as net income, cash flows provided by or used in operating, investing or financing activities or other financial statement data presented in our consolidated financial statements as an indicator of financial performance or liquidity. Reconciliations of non-GAAP financial measures are provided in this news release. Since EBITDA is not a measure determined in accordance with GAAP and is susceptible to varying calculations, EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. EMERGENCY MEDICAL SERVICES CORPORATIONUnaudited Condensed Statements of Operations and Other InformationIncluding a Reconciliation of EBITDA to Net Income(in thousands, except shares, per share data and other information)     Consolidatedthree monthsendedSeptember30, 2006 Consolidatedthree monthsendedSeptember30, 2005 Consolidatednine monthsendedSeptember30, 2006 Consolidatedeight monthsendedSeptember30, 2005 Predecessorcombinedone monthendedJanuary31, 2005 Pro formanine monthsendedSeptember30, 20051 Net revenue $ 485,697  $ 456,245  $ 1,433,272  $ 1,187,653  $ 143,069  $ 1,330,722  Compensation and benefits 333,406  319,292  990,380  822,595  103,191  925,786  Operating expenses 80,513  66,156  216,170  168,700  18,469  187,169  Insurance expense 12,111  21,048  54,222  60,382  7,768  68,150  Selling, general and administrative expenses 14,660  15,654  42,669  38,248  4,283  42,531  Restructuring charges 267  -  1,186  -  -  -  Laidlaw compensation charges   -    -    -    -    14,440    14,440  EBITDA $ 44,740  $ 34,095  $ 128,645  $ 97,728  $ (5,082) $ 92,646    Reconciliation of EBITDA to net income (loss) EBITDA $ 44,740  $ 34,095  $ 128,645  $ 97,728  $ (5,082) $ 92,646  Depreciation and amortization expense   (16,841)   (14,843)   (49,045)   (38,811)   (3,894)   (42,705) Income (loss) from operations 27,899  19,252  79,600  58,917  (8,976) 49,941  Interest expense (11,532) (12,824) (34,269) (34,407) (1,169) (35,576) Realized gain (loss) on investments 88  (34) (437) (40) 13  (27) Interest and other income (expense) 532  91  1,664  189  (4) 185  Loss on early debt extinguishment (184) -  (377) -  -  -  Income tax (expense) benefit (6,540) (3,479) (17,956) (10,657) 4,060  (6,597)   Equity in earnings of unconsolidated subsidiary   21    -    38    -    -    -  Net income (loss) $ 10,284  $ 3,006  $ 28,263  $ 14,002  $ (6,076) $ 7,926    Basic net income per common share $ 0.25  $ 0.11  $ 0.68  $ 0.39  N/A  N/A  Diluted net income per common share $ 0.24  $ 0.11  $ 0.67  $ 0.38  N/A  N/A  Average common shares outstanding, basic 41,502,978  33,319,242  41,499,172  33,171,280  N/A  N/A  Average common shares outstanding, diluted 42,525,620  34,233,022  42,431,108  33,705,808  N/A  N/A    Other Information EmCare patient visits 1,620,587  1,543,156  4,799,897  4,059,846  464,500  4,524,346  AMR ambulance transports 717,737  720,727  2,175,352  1,923,047  243,700  2,166,747  AMR weighted transports 732,506  735,441  2,221,382  1,965,879  249,421  2,215,300    1 Pro forma combined one-month Predecessor with eight-month Successor. EMERGENCY MEDICAL SERVICES CORPORATIONUnaudited Reconciliation of Segment EBITDA to Income from Operations(in thousands)     Consolidatedthree monthsendedSeptember 30, 2006 Consolidatedthree monthsendedSeptember 30, 2005 Consolidatednine monthsendedSeptember 30, 2006 Consolidatedeight monthsendedSeptember 30, 2005 Predecessorcombinedone monthendedJanuary 31, 20051 Pro formanine monthsendedSeptember30, 20052 AMR EBITDA $ 24,317  $ 22,665  $ 71,920  $ 67,813  $ 1,074  $ 68,887  Depreciation and amortization expense   (13,571)   (12,082)   (39,232)   (31,527)   (3,418)   (34,945) Income (loss) from operations   10,746    10,583    32,688    36,286    (2,344)   33,942    EmCare EBITDA 20,423  11,430  56,725  29,915  (6,156) 23,759  Depreciation and amortization expense   (3,270)   (2,761)   (9,813)   (7,284)   (476)   (7,760) Income (loss) from operations   17,153    8,669    46,912    22,631    (6,632)   15,999    Total EBITDA 44,740  34,095  128,645  97,728  (5,082) 92,646  Depreciation and amortization expense   (16,841)   (14,843)   (49,045)   (38,811)   (3,894)   (42,705) Income (loss) from operations $ 27,899  $ 19,252  $ 79,600  $ 58,917  $ (8,976) $ 49,941    1 Loss from operations includes Laidlaw compensation charges of $5.8 million at AMR and $8.6 million at EmCare in connection with the acquisition from Laidlaw. 2 Pro forma combined one-month Predecessor with eight-month Successor. EMERGENCY MEDICAL SERVICES CORPORATION Condensed Balance Sheets (in thousands)     UnauditedConsolidatedSeptember 30,2006 ConsolidatedDecember 31,2005 Assets Current assets: Cash and cash equivalents $ 22,464  $ 18,048  Trade and other accounts receivable, net 403,814  411,184  Other current assets   80,751    86,064  Total current assets 507,029  515,296  Non-current assets: Property, plant and equipment, net 143,654  138,037  Goodwill and other intangible assets, net 330,330  329,351  Other long-term assets   313,892    284,344  Total assets $ 1,294,905  $ 1,267,028    Liabilities and Equity Current liabilities $ 281,082  $ 277,435  Long-term debt 476,218  495,520  Other long-term liabilities   162,114    149,089  Total liabilities 919,414  922,044  Total equity   375,491    344,984  Total liabilities and equity $ 1,294,905  $ 1,267,028  EMERGENCY MEDICAL SERVICES CORPORATION Unaudited Condensed Statements of Cash Flows (in thousands)     Consolidatedthree monthsendedSeptember30, 2006 Consolidatedthree monthsendedSeptember30, 2005 Consolidatednine monthsendedSeptember30, 2006 Consolidatedeight monthsendedSeptember30, 2005 Predecessorcombinedone monthendedJanuary31, 2005 Pro formanine monthsendedSeptember30, 20051 Cash Flows from Operating Activities Net income (loss) $ 10,284  $ 3,006  $ 28,263  $ 14,002  $ (6,076) $ 7,926    Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation, amortization, deferred taxes and other 24,200  19,450  68,591  43,841  (209) 43,632  Non-cash Laidlaw allocated compensation expense 14,440  14,440  Changes in operating assets/ liabilities: Trade and other accounts receivable (27,088) (18,475) 4,793  4,801  (20,771) (15,970) Insurance accruals 1,364  8,777  10,351  17,003  1,772  18,775  Other assets and liabilities 2,419  (2,893) 11,596  21,028  6,164  27,192  Net cash provided by (used in) operating activities 11,179  9,865  123,594  100,675  (4,680) 95,995    Cash Flows from Investing Activities Purchase of property, plant and equipment, net (14,098) (14,806) (42,394) (34,382) (3,890) (38,272) Acquisition of business, net of cash received (10,747) -  (11,587) -  -  -  Insurance collateral (19,258) (23,580) (31,773) (46,014) 12,534  (33,480) Other investing activities (1,666) (3,593) (1,860) (464) (1,828) (2,292) EMS LP purchase of AMR and EmCare -  -  -  (828,775) -  (828,775) Net cash (used in) provided by investing activities (45,769) (41,979) (87,614) (909,635) 6,816  (902,819)   Cash Flows from Financing Activities EMS LP purchase of AMR and EmCare -  1,795  -  822,733  -  822,733  Repayments of capital lease obligations and other debt (11,466) (2,317) (25,389) (25,922) (2,021) (27,943) Other financing activities (1,140) 11,384  (6,175) 7,631  10,653  18,284  Net cash (used in) provided by financing activities (12,606) 10,862  (31,564) 804,442  8,632  813,074    Change in cash and cash equivalents (47,196) (21,252) 4,416  (4,518) 10,768  6,250  Cash and cash equivalents, beginning of period 69,660  31,365  18,048  14,631  3,863  3,863  Cash and cash equivalents, end of period $ 22,464  $ 10,113  $ 22,464  $ 10,113  $ 14,631  $ 10,113    1 Pro forma combined one-month Predecessor with eight-month Successor.