Emergency Medical Services Announces $0.43 Diluted EPS and Increases 2008 Guidance

Emergency Medical Services Corporation (NYSE: EMS) (EMSC or the Company) today announces results for the second quarter ended June 30, 2008. William A. Sanger, Chairman and Chief Executive Officer, said, "EMSC continues to produce strong revenue and earnings growth, both sequentially and year over year. We had excellent cash flow in the quarter driven by improvements in our DSO and reductions in insurance collateral requirements. We again demonstrated our ability to leverage our unique market position by signing another national agreement offering both medical transportation and hospital-based physician services. We continue to expand our scope of services, as evidenced by yesterday’s announcement of our entry into the outsourced anesthesiology services market.” Results of Operations for the Second Quarter 2008 For the quarter ended June 30, 2008, EMSC generated net revenue of $571.1 million, an increase of 10.5% compared to the same quarter last year. Adjusted EBITDA was $55.5 million, an increase quarter over quarter of 5.9%. The three months ended June 30, 2007 included incremental revenue adjustments of approximately $4 million, with a positive Adjusted EBITDA impact of approximately $1.9 million. A reconciliation of non-GAAP to GAAP financial measures is included in this news release. EMSC generated net income of $18.3 million, or $0.43 per diluted share, for the second quarter of 2008, compared to net income of $15.1 million, or $0.35 per diluted share, in the second quarter of last year, an increase of 22.0%. The increase in earnings is attributable primarily to the net impact of higher rates and volumes on existing contracts, increased volume from net new contracts and acquisitions, gains on insurance collateral investments and lower interest expense, partially offset by higher provider compensation, fuel costs and income tax expense. Free cash flow was $65.4 million in the second quarter 2008 compared to $6.4 million in the same quarter last year. Cash provided by operating activities was $58.2 million in the second quarter 2008, compared to $23.1 million for the same quarter last year, primarily from an improvement in accounts receivable. Cash provided by operating activities in the second quarter 2008 was positively impacted by improved collections in both segments. EMSC’s DSO decreased 2 days in the second quarter of 2008. Net cash provided by investing activities was $0.5 million for the quarter ended June 30, 2008, compared to cash used in investing activities of $17.2 million for the same period in 2007. The change is due to a $14.9 million reduction in net insurance collateral requirements and reduced net capital spending of $6.8 million compared to the same period last year, offset by an acquisition of $6.7 million during the second quarter 2008. For the quarter ended June 30, 2008, net cash used in financing activities was $1.8 million compared to $6.3 million for the same quarter last year primarily due to changes in the amount of outstanding checks. Results of Operations for the Six Months Ended June 30, 2008 EMSC’s net revenue was $1.14 billion for the six months ended June 30, 2008, an increase of 9.3% compared to the same period last year. Adjusted EBITDA was $109.9 million, an increase of 3.0% from the same period last year. The six months ended June 30, 2007 included incremental revenue adjustments of approximately $13 million, with a positive Adjusted EBITDA impact of approximately $10 million. EMSC’s net income for the six months ended June 30, 2008 was $35.4 million, or $0.82 per diluted share, compared to net income of $31.7 million or $0.74 per diluted share, an increase of 11.6% over the same period last year. The increase in earnings is attributable primarily to the net impact of higher rates and volumes on existing contracts, increased volume from net new contracts and acquisitions, gains on insurance collateral investments and lower interest expense, partially offset by higher provider compensation, fuel costs and income tax expense. Free cash flow was $62.9 million for the six months ended June 30, 2008, an increase of $66.4 million over the six months ended last year. Cash provided by operating activities for the six months ended June 30, 2008 was $55.4 million, compared to $19.3 million for the same period last year, driven primarily from improvements in collections and reduced insurance collateral. EMSC’s DSO improved 3 days in the six months ended June 30, 2008. Net cash used in investing activities was $12.4 million for the six months ended June 30, 2008 compared to $23.2 million for the same period in 2007. The change in investing cash flows was affected by reduced insurance collateral requirements of $17.9 million, reduced capital expenditures of $12.5 million, offset by additional acquisition costs of $19.5 million. For the six months ended June 30, 2008, net cash provided by financing activities was $1.2 million compared to cash used in financing activities of $5.9 million for the six months ended June 30, 2007 primarily from changes in the amount of outstanding checks. 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 emergency department and hospital-based physician services segment. American Medical Response (AMR) For the quarter ended June 30, 2008, AMR generated net revenue of $323.7 million, an increase of 9.6% compared to the same quarter last year. Adjusted EBITDA was $26.0 million, an increase of 11.2% compared to the same quarter last year. The increase in Adjusted EBITDA is attributable primarily to the net impact of higher revenue in existing markets and acquisitions partially offset by higher fuel costs of $4.3 million and a reduction in favorable prior period insurance adjustments of $2.4 million compared to the same quarter last year. For the six months ended June 30, 2008, AMR’s net revenue totaled $650.0 million, an increase of 7.7% compared to the same period last year. Adjusted EBITDA was $54.4 million, an increase of 12.6% compared to the same period last year, or 7.6% excluding restructuring charges of $2.2 million recorded during the same period in 2007. EmCare For the quarter ended June 30, 2008, EmCare generated net revenue of $247.4 million, an increase of 11.7% compared to the same quarter last year. The increase in revenue is primarily driven by volume increases at existing contracts and 37 net new contracts added since March 31, 2007. Adjusted EBITDA was $29.5 million compared to $29.1 million last year, an increase of 1.7%. The three months ended June 30, 2007 included incremental positive revenue adjustments of approximately $4 million, with an Adjusted EBITDA impact of approximately $1.9 million. Insurance expense in the second quarter 2008 included a reduction in favorable prior period adjustments of $2.9 million compared to the same period last year. Compensation increased as a percent of net revenue due to increased provider costs in both new and existing contracts offset by lower operating costs. For the six months ended June 30, 2008, EmCare’s net revenue was $486.9 million, an increase of 11.5% compared to the same period last year. Adjusted EBITDA was $55.6 million compared to $58.4 million last year. The six months ended June 30, 2007 included incremental positive revenue adjustments of approximately $13 million, with an Adjusted EBITDA impact of approximately $10 million. Guidance EPS guidance is updated to an expected range of $1.70 to $1.75 per diluted share from previously announced guidance of $1.57 to $1.63 per diluted share, and Adjusted EBITDA guidance is updated to an expected range of $227 million to $232 million from previously announced guidance of $225 million to $230 million. Conference Call EMSC management will host a conference call and live audio webcast on Tuesday, August 5, 2008, at 11:00 a.m. EDT, to discuss the Company’s financial results. A 30-day online replay will be available approximately one hour following the conclusion of the live broadcast. A link to the live broadcast and online replay is available on the Investor Relations section of the Company’s website at www.emsc.net. About Emergency Medical Services Corporation 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 emergency department and hospital-based physician 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 and hospital-based physician services. In 2007, EMSC provided services to 10.6 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 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 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. Non-GAAP Financial Measures 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. Adjusted EBITDA is commonly used by management and investors as a performance measure and a liquidity indicator. Adjusted EBITDA is not considered a measure of financial performance under U.S. generally accepted accounting principles (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 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 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. EMERGENCY MEDICAL SERVICES CORPORATIONConsolidated Statements of Operations and Other InformationIncluding a Reconciliation of Income from Operations to Adjusted EBITDA1(unaudited; in thousands, except shares, per share data and other information)   Quarter ended June 30,   Six months ended June 30,   2008       2007     2008       2007     Net revenue $ 571,079   $ 516,712   $ 1,136,865   $ 1,040,031   Compensation and benefits 400,501 357,309 794,852 712,241 Operating expenses 83,704 76,262 166,927 156,258 Insurance expense 17,568 17,476 38,531 37,777 Selling, general and administrative expenses 15,520 14,901 30,112 28,206 Depreciation and amortization expense 17,446 17,577 35,163 34,356 Restructuring charges   -     -     -     2,242   Income from operations 36,340 33,187 71,280 68,951 Interest income from restricted assets 1,735 1,660 3,490 3,375 Interest expense (10,354 ) (11,395 ) (20,270 ) (22,629 ) Realized gain on investments 1,571 22 2,243 59 Interest and other income   287     532     589     1,189   Income before income taxes and equity in earnings of unconsolidated subsidiary 29,579 24,006 57,332 50,945 Income tax expense (11,348 ) (9,012 ) (22,032 ) (19,474 ) Equity in earnings of unconsolidated subsidiary   104     101     54     255   Net income $ 18,335   $ 15,095   $ 35,354   $ 31,726       Basic earnings per common share $ 0.44 $ 0.36 $ 0.85 $ 0.76 Diluted earnings per common share $ 0.43 $ 0.35 $ 0.82 $ 0.74 Weighted average common shares outstanding, basic 41,573,893 41,544,901 41,572,162 41,533,093 Weighted average common shares outstanding, diluted 43,022,034 43,211,661 43,052,668 43,120,416   Other Information EmCare patient encounters 2,019,145 1,821,307 3,984,660 3,565,328 AMR ambulance transports 737,200 702,621 1,488,840 1,430,028 AMR weighted transports 748,606 715,462 1,512,120 1,457,132     Reconciliation of income from operations to Adjusted EBITDA Income from operations $ 36,340 $ 33,187 $ 71,280 $ 68,951 Depreciation and amortization expense 17,446 17,577 35,163 34,356 Interest income from restricted assets   1,735     1,660     3,490     3,375   Adjusted EBITDA $ 55,521   $ 52,424   $ 109,933   $ 106,682     (1) These statements provide a reconciliation of Adjusted EBITDA to income from operations; and a reconciliation of income from operations to net income. EMERGENCY MEDICAL SERVICES CORPORATIONReconciliation of Adjusted EBITDA to Cash Flows Provided by Operating Activities(unaudited; in thousands)   Quarter ended June 30,   Six months ended June 30,   2008       2007     2008       2007     Adjusted EBITDA $ 55,521 $ 52,424 $ 109,933 $ 106,682 Interest paid (9,827 ) (10,864 ) (19,164 ) (21,609 ) Change in accounts receivable 12,556 (35,783 ) (13,752 ) (63,934 ) Change in other operating assets/liabilities 659 17,164 (22,081 ) (3,718 ) Equity based compensation 562 400 1,124 800 Other   (1,314 )   (215 )   (681 )   1,059   Net cash provided by operating activities $ 58,157   $ 23,126   $ 55,379   $ 19,280   EMERGENCY MEDICAL SERVICES CORPORATIONReconciliation of Segment Income from Operations to Adjusted EBITDA (unaudited; in thousands)   Quarter ended June 30,   Six months ended June 30, 2008   2007 2008   2007 AMR Income from operations $ 11,176 $ 8,934 $ 24,506 $ 19,408 Depreciation and amortization expense 14,118 13,711 28,504 27,461 Interest income from restricted assets 682 719 1,364 1,440 Adjusted EBITDA (1) 25,976 23,364 54,374 48,309   EmCare Income from operations 25,164 24,253 46,774 49,543 Depreciation and amortization expense 3,328 3,866 6,659 6,895 Interest income from restricted assets 1,053 941 2,126 1,935 Adjusted EBITDA (2) 29,545 29,060 55,559 58,373   Total Income from operations 36,340 33,187 71,280 68,951 Depreciation and amortization expense 17,446 17,577 35,163 34,356 Interest income from restricted assets 1,735 1,660 3,490 3,375 Adjusted EBITDA $ 55,521 $ 52,424 $ 109,933 $ 106,682   (1) AMR Adjusted EBITDA includes $2.2 million of restructuring charges for the six months ended June 30, 2007. (2) EmCare Adjusted EBITDA includes the net impact of approximately $1.9 million of positive revenue adjustments for the quarter ended June 30, 2007 and approximately $10 million of positive revenue adjustments for the six months ended June 30, 2007. EMERGENCY MEDICAL SERVICES CORPORATIONCondensed Consolidated Balance Sheets(in thousands)   June 30,2008   December 31,2007 (Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $ 73,019 $ 28,914 Trade and other accounts receivable, net 512,027 495,348 Other current assets   156,314   146,498 Total current assets 741,360 670,760 Non-current assets: Property, plant and equipment, net 127,745 143,342 Goodwill and other intangible assets, net 405,412 394,841 Other long-term assets   227,667   270,620 Total assets $ 1,502,184 $ 1,479,563   Liabilities and Equity Current liabilities $ 301,490 $ 306,891 Long-term debt 476,186 478,166 Insurance reserves and other long-term liabilities   240,945   245,010 Total liabilities 1,018,621 1,030,067 Total equity   483,563   449,496 Total liabilities and equity $ 1,502,184 $ 1,479,563 EMERGENCY MEDICAL SERVICES CORPORATIONCondensed Consolidated Statements of Cash Flows(unaudited; in thousands)   Quarter ended June 30,   Six months ended June 30,   2008       2007     2008       2007   Cash Flows from Operating Activities Net income $ 18,335 $ 15,095 $ 35,354 $ 31,726 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, deferred taxes and other 26,607 26,650 55,858 55,206 Changes in operating assets/liabilities, net of acquisitions: Trade and other accounts receivable 12,556 (35,783 ) (13,752 ) (63,934 ) Insurance accruals (3,741 ) (5,020 ) (7,140 ) 4 Other assets and liabilities   4,400     22,184     (14,941 )   (3,722 ) Net cash provided by operating activities   58,157     23,126     55,379     19,280     Cash Flows from Investing Activities Purchases of property, plant and equipment, net (7,496 ) (14,256 ) (9,960 ) (22,452 ) Acquisition of businesses, net of cash received (6,679 ) (477 ) (19,957 ) (477 ) Net change in insurance collateral 12,731 (2,123 ) 14,856 (3,033 ) Other investing activities   1,975     (306 )   2,628     2,715   Net cash provided by (used in) investing activities   531     (17,162 )   (12,433 )   (23,247 )   Cash Flows from Financing Activities EMSC issuance of class A common stock 33 76 45 249 Borrowings under revolving credit facility - - 14,000 - Repayments of capital lease obligations and other debt (1,570 ) (1,058 ) (16,721 ) (3,391 ) Increase (decrease) in bank overdrafts   (287 )   (5,330 )   3,835     (2,743 ) Net cash provided by (used in) financing activities   (1,824 )   (6,312 )   1,159     (5,885 )   Change in cash and cash equivalents 56,864 (348 ) 44,105 (9,852 ) Cash and cash equivalents, beginning of period   16,155     29,832     28,914     39,336   Cash and cash equivalents, end of period $ 73,019   $ 29,484   $ 73,019   $ 29,484     Non-cash Activities Capital lease obligations incurred $ 682   $ -   $ 682   $ 8,038     Free Cash Flow $ 65,367 $ 6,441 $ 62,903 $ (3,490 )     Reconciliation of free cash flow to net cash provided by operating activities Free cash flow $ 65,367 $ 6,441 $ 62,903 $ (3,490 ) Purchase of property, plant and equipment, net 7,496 14,256 9,960 22,452 Net change in insurance collateral (12,731 ) 2,123 (14,856 ) 3,033 Other investing activities   (1,975 )   306     (2,628 )   (2,715 ) Net cash provided by operating activities $ 58,157   $ 23,126   $ 55,379   $ 19,280