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 September 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 October 29, 2010 30,315,886; shares of class
B common stock outstanding at October 29, 2010 65,052; LP
exchangeable units outstanding at October 29, 2010 13,724,676.
Table of Contents
EMERGENCY MEDICAL SERVICES CORPORATION
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2010
Table of Contents
EMERGENCY MEDICAL SERVICES CORPORATION
PART I. FINANCIAL INFORMATION
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 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
|
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Nine months ended
|
|
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September 30,
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September 30,
|
|
|
|
2010
|
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2009
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|
2010
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|
2009
|
|
Net revenue
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$
|
737,180
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|
$
|
665,056
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|
$
|
2,125,338
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|
$
|
1,915,369
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|
Compensation and benefits
|
|
523,263
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|
467,625
|
|
1,500,023
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|
1,332,787
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|
Operating expenses
|
|
91,023
|
|
85,510
|
|
268,138
|
|
252,355
|
|
Insurance expense
|
|
25,793
|
|
24,845
|
|
73,805
|
|
75,706
|
|
Selling, general and administrative expenses
|
|
17,742
|
|
15,871
|
|
52,898
|
|
47,186
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|
Depreciation and amortization expense
|
|
16,528
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|
15,733
|
|
48,400
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|
48,658
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|
Income from operations
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|
62,831
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|
55,472
|
|
182,074
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|
158,677
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|
Interest income from restricted assets
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|
717
|
|
1,082
|
|
2,431
|
|
3,468
|
|
Interest expense
|
|
(4,856
|
)
|
(10,280
|
)
|
(18,182
|
)
|
(30,749
|
)
|
Realized gain on investments
|
|
730
|
|
544
|
|
879
|
|
2,030
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|
Interest and other income
|
|
277
|
|
502
|
|
748
|
|
1,442
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|
Loss on early debt extinguishment
|
|
|
|
|
|
(19,091
|
)
|
|
|
Income before income taxes and equity in earnings
of unconsolidated subsidiary
|
|
59,699
|
|
47,320
|
|
148,859
|
|
134,868
|
|
Income tax expense
|
|
(22,990
|
)
|
(18,533
|
)
|
(57,355
|
)
|
(53,144
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)
|
Income before equity in earnings of unconsolidated
subsidiary
|
|
36,709
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|
28,787
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|
91,504
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|
81,724
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|
Equity in earnings of unconsolidated subsidiary
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53
|
|
91
|
|
252
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|
244
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|
Net income
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|
36,762
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|
28,878
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|
91,756
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81,968
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|
Other comprehensive income (loss), net of tax:
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|
|
|
|
|
|
|
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Unrealized holding gains (losses) during the period
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364
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761
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1,907
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(1,773
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)
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Unrealized gains on derivative financial instruments
|
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330
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1,105
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|
245
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|
2,372
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|
Comprehensive income
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$
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37,456
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$
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30,744
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$
|
93,908
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$
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82,567
|
|
|
|
|
|
|
|
|
|
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|
Basic earnings per common share
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|
$
|
0.83
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|
$
|
0.67
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|
$
|
2.09
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|
$
|
1.93
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|
Diluted earnings per common share
|
|
$
|
0.82
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|
$
|
0.66
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|
$
|
2.06
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|
$
|
1.89
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|
Weighted average common shares outstanding, basic
|
|
44,100,239
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|
42,809,582
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43,896,524
|
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42,366,065
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|
Weighted average common shares outstanding,
diluted
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44,699,169
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43,769,788
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44,648,135
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43,402,818
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|
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)
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September 30,
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December 31,
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|
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2010
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2009
|
|
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(Unaudited)
|
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|
Assets
|
|
|
|
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|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
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|
$
|
345,716
|
|
$
|
332,888
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|
Insurance
collateral
|
|
28,231
|
|
24,986
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|
Trade
and other accounts receivable, net
|
|
492,723
|
|
459,088
|
|
Parts
and supplies inventory
|
|
22,759
|
|
22,270
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|
Prepaids
and other current assets
|
|
17,251
|
|
19,662
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|
Current
deferred tax assets
|
|
|
|
6,323
|
|
Total
current assets
|
|
906,680
|
|
865,217
|
|
Non-current
assets:
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
126,759
|
|
125,855
|
|
Intangible
assets, net
|
|
138,641
|
|
102,654
|
|
Non-current
deferred tax assets
|
|
6,723
|
|
13,468
|
|
Insurance
collateral
|
|
151,949
|
|
143,886
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|
Goodwill
|
|
388,506
|
|
381,951
|
|
Other
long-term assets
|
|
18,748
|
|
21,676
|
|
Total
assets
|
|
$
|
1,738,006
|
|
$
|
1,654,707
|
|
Liabilities and Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
68,239
|
|
$
|
70,759
|
|
Accrued
liabilities
|
|
264,603
|
|
273,704
|
|
Current
deferred tax liability
|
|
11,068
|
|
|
|
Current
portion of long-term debt
|
|
13,953
|
|
4,676
|
|
Total
current liabilities
|
|
357,863
|
|
349,139
|
|
Long-term
debt
|
|
410,307
|
|
449,254
|
|
Insurance
reserves and other long-term liabilities
|
|
166,152
|
|
170,227
|
|
Total
liabilities
|
|
934,322
|
|
968,620
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|
Equity:
|
|
|
|
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Preferred
stock ($0.01 par value; 20,000,000 shares authorized, 0 issued and
outstanding)
|
|
|
|
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|
Class A
common stock ($0.01 par value; 100,000,000 shares authorized, 30,294,976
and 29,541,411 issued and outstanding in 2010 and 2009,
respectively)
|
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303
|
|
295
|
|
Class B
common stock ($0.01 par value; 40,000,000 shares authorized and 65,052 issued
and outstanding in 2010 and 2009, respectively)
|
|
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,
respectively)
|
|
90,776
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|
90,776
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|
Treasury
stock at cost (23,437 shares in 2010)
|
|
(1,289
|
)
|
|
|
Additional
paid-in capital
|
|
300,286
|
|
275,316
|
|
Retained
earnings
|
|
410,798
|
|
319,042
|
|
Accumulated
other comprehensive income
|
|
2,809
|
|
657
|
|
Total
equity
|
|
803,684
|
|
686,087
|
|
Total
liabilities and equity
|
|
$
|
1,738,006
|
|
$
|
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)
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Quarter ended September 30,
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Nine months ended September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
36,762
|
|
$
|
28,878
|
|
$
|
91,756
|
|
$
|
81,968
|
|
Adjustments
to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
17,165
|
|
16,242
|
|
50,173
|
|
49,983
|
|
Loss
on disposal of property, plant and equipment
|
|
6
|
|
33
|
|
95
|
|
69
|
|
Equity-based
compensation expense
|
|
2,042
|
|
1,121
|
|
4,587
|
|
2,875
|
|
Excess
tax benefits from stock-based compensation
|
|
(479
|
)
|
|
|
(13,977
|
)
|
|
|
Loss
on early debt extinguishment
|
|
|
|
|
|
19,091
|
|
|
|
Equity
in earnings of unconsolidated subsidiary
|
|
(53
|
)
|
(91
|
)
|
(252
|
)
|
(244
|
)
|
Dividends
received
|
|
|
|
|
|
403
|
|
713
|
|
Deferred
income taxes
|
|
(1,102
|
)
|
18,061
|
|
(262
|
)
|
49,989
|
|
Changes
in operating assets/liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
Trade
and other accounts receivable
|
|
(10,882
|
)
|
7,574
|
|
(30,441
|
)
|
8,448
|
|
Parts
and supplies inventory
|
|
(231
|
)
|
41
|
|
(318
|
)
|
(66
|
)
|
Prepaids
and other current assets
|
|
14,487
|
|
(6,270
|
)
|
2,271
|
|
(1,580
|
)
|
Accounts
payable and accrued liabilities
|
|
799
|
|
(1,007
|
)
|
13,898
|
|
10,613
|
|
Insurance
accruals
|
|
(3,891
|
)
|
4,280
|
|
2,341
|
|
7,033
|
|
Net
cash provided by operating activities
|
|
54,623
|
|
68,862
|
|
139,365
|
|
209,801
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment
|
|
(16,199
|
)
|
(13,576
|
)
|
(31,367
|
)
|
(33,661
|
)
|
Proceeds
from sale of property, plant and equipment
|
|
12
|
|
41
|
|
120
|
|
101
|
|
Acquisition
of businesses, net of cash received
|
|
(183
|
)
|
(1,241
|
)
|
(51,158
|
)
|
(1,374
|
)
|
Net
change in insurance collateral
|
|
(4,140
|
)
|
6,002
|
|
(9,401
|
)
|
4,069
|
|
Other
investing activities
|
|
83
|
|
(166
|
)
|
11,021
|
|
(809
|
)
|
Net
cash used in investing activities
|
|
(20,427
|
)
|
(8,940
|
)
|
(80,785
|
)
|
(31,674
|
)
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
EMSC
issuance of class A common stock
|
|
221
|
|
2,437
|
|
6,414
|
|
7,160
|
|
Class A
common stock repurchased as treasury stock
|
|
(1,289
|
)
|
|
|
(1,289
|
)
|
|
|
Repayments
of capital lease obligations and other debt
|
|
(3,275
|
)
|
(1,214
|
)
|
(455,902
|
)
|
(3,826
|
)
|
Borrowings
under credit facility
|
|
|
|
|
|
425,000
|
|
|
|
Debt
issue costs
|
|
(219
|
)
|
|
|
(11,968
|
)
|
|
|
Payment
for debt extinguishment premiums
|
|
|
|
|
|
(14,513
|
)
|
|
|
Excess
tax benefits from stock-based compensation
|
|
479
|
|
|
|
13,977
|
|
|
|
Net
change in bank overdrafts
|
|
2,570
|
|
2,821
|
|
(7,471
|
)
|
3,471
|
|
Net
cash (used in) provided by financing activities
|
|
(1,513
|
)
|
4,044
|
|
(45,752
|
)
|
6,805
|
|
Change
in cash and cash equivalents
|
|
32,683
|
|
63,966
|
|
12,828
|
|
184,932
|
|
Cash
and cash equivalents, beginning of period
|
|
313,033
|
|
267,139
|
|
332,888
|
|
146,173
|
|
Cash
and cash equivalents, end of period
|
|
$
|
345,716
|
|
$
|
331,105
|
|
$
|
345,716
|
|
$
|
331,105
|
|
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 a fair presentation have been included. All such
adjustments are of a normal, recurring nature. Operating results for the three
and nine month periods ended September 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 nine months ended September 30, 2010 and 2009, the Company
expensed $250 and $750, 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 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), 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 September 2010. As a
result of this actuarial valuation, the Company recorded an increase of $0.1
million in its provision for insurance liabilities related to reserves for
losses in prior years during the three months ended September 30, 2010. A
total increase of $0.2 million was recorded during the nine
6
Table of Contents
months ended September 30,
2010. As a result of the actuarial
valuation completed in September 2009, the Company recorded a decrease of $0.9
million in its provision for insurance liabilities during the three months
ended September 30, 2009. A total
increase of $4.3 million was recorded during the nine months ended September
30, 2009.
The
long-term portion of insurance reserves was $155.2 million and $143.6 million
as of September 30, 2010 and December 31, 2009, respectively.
Trade and Other Accounts Receivable, net
The
Company determines its allowances based on payor reimbursement schedules,
historical 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:
|
|
September 30,
2010
|
|
December 31,
2009
|
|
Gross
trade accounts receivable
|
|
$
|
2,068,202
|
|
$
|
1,955,152
|
|
Allowance
for contractual discounts
|
|
1,088,277
|
|
1,001,285
|
|
Allowance
for uncompensated care
|
|
576,683
|
|
572,015
|
|
Net
trade accounts receivable
|
|
403,242
|
|
381,852
|
|
Other
receivables, net
|
|
89,481
|
|
77,236
|
|
Net
accounts receivable
|
|
$
|
492,723
|
|
$
|
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 percentage of gross
revenue and as a percentage of gross revenue less provision for contractual
discounts are as follows:
|
|
Quarter ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Gross revenue
|
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
Provision for contractual discounts
|
|
52.3
|
%
|
49.2
|
%
|
52.5
|
%
|
48.9
|
%
|
Revenue net of contractual discounts
|
|
47.7
|
%
|
50.8
|
%
|
47.5
|
%
|
51.1
|
%
|
Provision for uncompensated care as a percentage
of gross revenue
|
|
19.0
|
%
|
20.3
|
%
|
18.7
|
%
|
20.1
|
%
|
Provision
for uncompensated care as a percentage of gross revenue less contractual
discounts
|
|
39.9
|
%
|
39.9
|
%
|
39.3
|
%
|
39.3
|
%
|
7
Table of Contents
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 nine month periods ending September 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 September 30, 2010, the Company holds 68.8% 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 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 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
8
Table of Contents
fair value of the asset or
liability.
The
following table summarizes the valuation of EMSCs financial instruments by the
above fair value hierarchy levels as of September 30, 2010:
Description
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Securities
|
|
$
|
62,152
|
|
$
|
49,608
|
|
$
|
12,544
|
|
$
|
|
|
Derivatives
|
|
$
|
571
|
|
$
|
|
|
$
|
571
|
|
$
|
|
|
Recent Accounting Pronouncements
In
August 2010, the FASB further defined the requirements for measurement and
disclosure of charity care provided. The
amendments require that cost, both direct and indirect, be used as the
measurement basis for charity care disclosure purposes. These amendments will be effective for the
Company beginning January 1, 2011.
Management does not expect the adoption of this guidance to have a
material effect on the Companys consolidated financial statements and related
disclosures.
Also
in August 2010, the FASB clarified that healthcare entities should not net
insurance recoveries against a related claim liability. These amendments will be effective for the
Company beginning January 1, 2011.
Management does not expect the adoption of this guidance to have a
material effect on the Companys consolidated financial statements and related
disclosures.
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 completed during the first quarter of 2010, $31.1 million
was reclassified from goodwill to intangible assets, and amortized accordingly.
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 $51.2 million and the Company has recorded $35.7 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 September 30, 2010 and December 31, 2009:
|
|
September 30,
2010
|
|
December 31,
2009
|
|
Accrued
wages and benefits
|
|
$
|
113,355
|
|
$
|
92,721
|
|
Accrued
paid time-off
|
|
27,422
|
|
24,290
|
|
Current
portion of self-insurance reserves
|
|
53,593
|
|
62,832
|
|
Accrued
restructuring
|
|
165
|
|
181
|
|
Current
portion of compliance and legal
|
|
7,253
|
|
2,814
|
|
Accrued
billing and collection fees
|
|
3,800
|
|
4,093
|
|
Accrued
incentive compensation
|
|
20,253
|
|
34,000
|
|
Accrued
interest
|
|
1,003
|
|
9,773
|
|
Accrued
income taxes payable
|
|
|
|
5,454
|
|
Other
|
|
37,759
|
|
37,546
|
|
Total
accrued liabilities
|
|
$
|
264,603
|
|
$
|
273,704
|
|
9
Table of Contents
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 September 30, 2010 and December 31,
2009:
|
|
September 30,
2010
|
|
December 31,
2009
|
|
Senior
subordinated notes
|
|
$
|
|
|
$
|
250,000
|
|
Senior
secured term loan due 2015 (3.28% at September 30, 2010)
|
|
422,344
|
|
199,765
|
|
Notes
due at various dates from 2010 to 2022 with interest rates from 6% to 10%
|
|
1,115
|
|
1,249
|
|
Capital
lease obligations due at various dates from 2010 to 2018 (see note 7)
|
|
801
|
|
2,916
|
|
|
|
424,260
|
|
453,930
|
|
Less
current portion
|
|
(13,953
|
)
|
(4,676
|
)
|
Total
long-term debt
|
|
$
|
410,307
|
|
$
|
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
September 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 $3.00 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 5.9 million gallons, which represent approximately
32% of the Companys total estimated usage over the hedge period, and are
spread over periods from October 2010 through June 2012. As of September 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 $0.6
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 nine months ended September 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.
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 qualify as
derivatives. There was no material
impact to operating expenses related to
10
Table of Contents
these contracts during the
three and nine month periods ended September 30, 2010 and 2009.
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 alleged 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. In September
2010, the Company and class representatives reached an agreement to resolve the
claims for approximately $1.1 million, which amount includes all remaining
refunds due to class members and attorneys fees for the plaintiffs
counsel. The settlement is expected to be approved and finalized by the
court by the end of January 2011.
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
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 model 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
11
Table of Contents
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 nine months ended September 30, 2010 as well as during the three
months ended September 30, 2009. A
compensation charge of $97 was recorded for the nine months ended September 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 also grants shares of restricted stock under the Plan, which
currently lapse ratably over a period of three years from the date of
grant. In addition, with respect to
grants of restricted stock in May 2010 to the Companys named executive
officers and persons deemed covered employees under section 162(m) of the
Internal Revenue Code of 1986, as amended, certain profitability-based
performance measures must be met within that three-year period for restricted
stock grants to lapse.
The
Company recorded a compensation charge of $1,859 and $996 during the three
months ended September 30, 2010 and 2009, respectively, and $4,135 and $2,403
during the nine months ended September 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 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 after the Companys 2010 annual stockholder
meeting, plus an additional prorated amount of 1,854 RSUs to a director upon
his election to the board of directors in July 2010. The Company granted 3,018 RSUs per director
in 2009. The Company expensed $183 and
$125 during the three month periods ended September 30, 2010 and 2009,
respectively, and $452 and $375 during the nine month periods ended September 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 the Companys Stock Purchase Plan
and Employee Stock Purchase Plan (together, the SPPs). The purchases of
stock under the SPPs occurred 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 was recorded for these plans during the nine
months ended September 30, 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, loss on early debt extinguishment, interest and other income, realized
gain on investments, interest expense and depreciation and amortization (Adjusted
12
Table of Contents
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 September 30,
|
|
Nine months ended September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Healthcare Transportation
Services
|
|
|
|
|
|
|
|
|
|
Net Revenue
|
|
$
|
352,226
|
|
$
|
338,768
|
|
$
|
1,033,347
|
|
$
|
1,010,718
|
|
Segment Adjusted EBITDA
|
|
31,449
|
|
31,838
|
|
95,611
|
|
98,151
|
|
Facility-Based Physician Services
|
|
|
|
|
|
|
|
|
|
Net Revenue
|
|
384,954
|
|
326,288
|
|
1,091,991
|
|
904,651
|
|
Segment Adjusted EBITDA
|
|
48,627
|
|
40,449
|
|
137,294
|
|
112,652
|
|
Total
|
|
|
|
|
|
|
|
|
|
Total Net Revenue
|
|
737,180
|
|
665,056
|
|
2,125,338
|
|
1,915,369
|
|
Total Adjusted EBITDA
|
|
80,076
|
|
72,287
|
|
232,905
|
|
210,803
|
|
Reconciliation of Adjusted EBITDA
to Net Income
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
80,076
|
|
$
|
72,287
|
|
$
|
232,905
|
|
$
|
210,803
|
|
Depreciation and amortization expense
|
|
(16,528
|
)
|
(15,733
|
)
|
(48,400
|
)
|
(48,658
|
)
|
Interest expense
|
|
(4,856
|
)
|
(10,280
|
)
|
(18,182
|
)
|
(30,749
|
)
|
Realized gain on investments
|
|
730
|
|
544
|
|
879
|
|
2,030
|
|
Interest and other income
|
|
277
|
|
502
|
|
748
|
|
1,442
|
|
Loss on early debt extinguishment
|
|
|
|
|
|
(19,091
|
)
|
|
|
Income tax expense
|
|
(22,990
|
)
|
(18,533
|
)
|
(57,355
|
)
|
(53,144
|
)
|
Equity in earnings of unconsolidated subsidiary
|
|
53
|
|
91
|
|
252
|
|
244
|
|
Net income
|
|
$
|
36,762
|
|
$
|
28,878
|
|
$
|
91,756
|
|
$
|
81,968
|
|
A reconciliation of Adjusted
EBITDA to cash flows provided by operating activities is as follows:
|
|
Quarter ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Adjusted
EBITDA
|
|
$
|
80,076
|
|
$
|
72,287
|
|
$
|
232,905
|
|
$
|
210,803
|
|
Interest
paid
|
|
(4,195
|
)
|
(9,773
|
)
|
(16,385
|
)
|
(29,424
|
)
|
Change
in accounts receivable
|
|
(10,882
|
)
|
7,574
|
|
(30,441
|
)
|
8,448
|
|
Change
in other operating assets/liabilities
|
|
11,164
|
|
(2,956
|
)
|
18,192
|
|
16,000
|
|
Equity
based compensation
|
|
2,042
|
|
1,121
|
|
4,587
|
|
2,875
|
|
Excess
tax benefits from stock-based compensation
|
|
(479
|
)
|
|
|
(13,977
|
)
|
|
|
Income
tax expense, net of change in deferred taxes
|
|
(24,092
|
)
|
(472
|
)
|
(57,617
|
)
|
(3,155
|
)
|
Other
|
|
989
|
|
1,081
|
|
2,101
|
|
4,254
|
|
Cash
flows provided by operating activities
|
|
$
|
54,623
|
|
$
|
68,862
|
|
$
|
139,365
|
|
$
|
209,801
|
|
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:
13
Table of Contents
Consolidating Statement of Operations
For the quarter ended September 30, 2010
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
Eliminations/
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo, Inc.
|
|
HoldCo, Inc.
|
|
Guarantors
|
|
Non-Guarantor
|
|
Adjustments
|
|
Total
|
|
Net
revenue
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
737,180
|
|
$
|
19,164
|
|
$
|
(19,164
|
)
|
$
|
737,180
|
|
Compensation
and benefits
|
|
|
|
|
|
|
|
|
|
523,263
|
|
|
|
|
|
523,263
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
91,023
|
|
|
|
|
|
91,023
|
|
Insurance
expense
|
|
|
|
|
|
|
|
|
|
24,586
|
|
20,371
|
|
(19,164
|
)
|
25,793
|
|
Selling,
general and administrative expenses
|
|
|
|
|
|
|
|
|
|
17,742
|
|
|
|
|
|
17,742
|
|
Depreciation
and amortization expense
|
|
|
|
|
|
|
|
|
|
16,528
|
|
|
|
|
|
16,528
|
|
Income
(loss) from operations
|
|
|
|
|
|
|
|
|
|
64,038
|
|
(1,207
|
)
|
|
|
62,831
|
|
Interest
income from restricted assets
|
|
|
|
|
|
|
|
|
|
240
|
|
477
|
|
|
|
717
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
(4,856
|
)
|
|
|
|
|
(4,856
|
)
|
Realized
gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
730
|
|
|
|
730
|
|
Interest
and other income
|
|
|
|
|
|
|
|
|
|
277
|
|
|
|
|
|
277
|
|
Income
before income taxes
|
|
|
|
|
|
|
|
|
|
59,699
|
|
|
|
|
|
59,699
|
|
Income
tax expense
|
|
|
|
|
|
|
|
|
|
(22,990
|
)
|
|
|
|
|
(22,990
|
)
|
Income
before equity in earnings of unconsolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
36,709
|
|
|
|
|
|
36,709
|
|
Equity
in earnings of unconsolidated subsidiaries
|
|
36,762
|
|
36,762
|
|
10,567
|
|
26,195
|
|
53
|
|
|
|
(110,286
|
)
|
53
|
|
Net
income
|
|
$
|
36,762
|
|
$
|
36,762
|
|
$
|
10,567
|
|
$
|
26,195
|
|
$
|
36,762
|
|
$
|
|
|
$
|
(110,286
|
)
|
$
|
36,762
|
|
Consolidating Statement of Operations
For the quarter ended September 30, 2009
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
Eliminations/
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo, Inc.
|
|
HoldCo, Inc.
|
|
Guarantors
|
|
Non-Guarantor
|
|
Adjustments
|
|
Total
|
|
Net
revenue
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
665,056
|
|
$
|
7,226
|
|
$
|
(7,226
|
)
|
$
|
665,056
|
|
Compensation
and benefits
|
|
|
|
|
|
|
|
|
|
467,625
|
|
|
|
|
|
467,625
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
85,510
|
|
|
|
|
|
85,510
|
|
Insurance
expense
|
|
|
|
|
|
|
|
|
|
23,714
|
|
8,357
|
|
(7,226
|
)
|
24,845
|
|
Selling,
general and administrative expenses
|
|
|
|
|
|
|
|
|
|
15,871
|
|
|
|
|
|
15,871
|
|
Depreciation
and amortization expense
|
|
|
|
|
|
|
|
|
|
15,733
|
|
|
|
|
|
15,733
|
|
Income
(loss) from operations
|
|
|
|
|
|
|
|
|
|
56,603
|
|
(1,131
|
)
|
|
|
55,472
|
|
Interest
income from restricted assets
|
|
|
|
|
|
|
|
|
|
495
|
|
587
|
|
|
|
1,082
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
(10,280
|
)
|
|
|
|
|
(10,280
|
)
|
Realized
gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
544
|
|
|
|
544
|
|
Interest
and other income
|
|
|
|
|
|
|
|
|
|
502
|
|
|
|
|
|
502
|
|
Income
before income taxes
|
|
|
|
|
|
|
|
|
|
47,320
|
|
|
|
|
|
47,320
|
|
Income
tax expense
|
|
|
|
|
|
|
|
|
|
(18,533
|
)
|
|
|
|
|
(18,533
|
)
|
Income
before equity in earnings of unconsolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
28,787
|
|
|
|
|
|
28,787
|
|
Equity
in earnings of unconsolidated subsidiaries
|
|
28,878
|
|
28,878
|
|
8,409
|
|
20,469
|
|
91
|
|
|
|
(86,634
|
)
|
91
|
|
Net
income
|
|
$
|
28,878
|
|
$
|
28,878
|
|
$
|
8,409
|
|
$
|
20,469
|
|
$
|
28,878
|
|
$
|
|
|
$
|
(86,634
|
)
|
$
|
28,878
|
|
14
Table of Contents
Consolidating Statement of Operations
For the nine months ended September 30, 2010
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
Eliminations/
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo, Inc.
|
|
HoldCo, Inc.
|
|
Guarantors
|
|
Non-Guarantor
|
|
Adjustments
|
|
Total
|
|
Net
revenue
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
2,125,338
|
|
$
|
45,265
|
|
$
|
(45,265
|
)
|
$
|
2,125,338
|
|
Compensation
and benefits
|
|
|
|
|
|
|
|
|
|
1,500,023
|
|
|
|
|
|
1,500,023
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
268,138
|
|
|
|
|
|
268,138
|
|
Insurance
expense
|
|
|
|
|
|
|
|
|
|
71,423
|
|
47,647
|
|
(45,265
|
)
|
73,805
|
|
Selling,
general and administrative expenses
|
|
|
|
|
|
|
|
|
|
52,898
|
|
|
|
|
|
52,898
|
|
Depreciation
and amortization expense
|
|
|
|
|
|
|
|
|
|
48,400
|
|
|
|
|
|
48,400
|
|
Income
(loss) from operations
|
|
|
|
|
|
|
|
|
|
184,456
|
|
(2,382
|
)
|
|
|
182,074
|
|
Interest
income from restricted assets
|
|
|
|
|
|
|
|
|
|
928
|
|
1,503
|
|
|
|
2,431
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
(18,182
|
)
|
|
|
|
|
(18,182
|
)
|
Realized
gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
879
|
|
|
|
879
|
|
Interest
and other income
|
|
|
|
|
|
|
|
|
|
748
|
|
|
|
|
|
748
|
|
Loss
on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
(19,091
|
)
|
|
|
|
|
(19,091
|
)
|
Income
before income taxes
|
|
|
|
|
|
|
|
|
|
148,859
|
|
|
|
|
|
148,859
|
|
Income
tax expense
|
|
|
|
|
|
|
|
|
|
(57,355
|
)
|
|
|
|
|
(57,355
|
)
|
Income
before equity in earnings of unconsolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
91,504
|
|
|
|
|
|
91,504
|
|
Equity
in earnings of unconsolidated subsidiaries
|
|
91,756
|
|
91,756
|
|
24,087
|
|
67,669
|
|
252
|
|
|
|
(275,268
|
)
|
252
|
|
Net
income
|
|
$
|
91,756
|
|
$
|
91,756
|
|
$
|
24,087
|
|
$
|
67,669
|
|
$
|
91,756
|
|
$
|
|
|
$
|
(275,268
|
)
|
$
|
91,756
|
|
Consolidating Statement of Operations
For the nine months ended September 30, 2009
|
|
|
|
|
|
Issuer
|
|
Issuer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMR
|
|
EmCare
|
|
Subsidiary
|
|
Subsidiary
|
|
Eliminations/
|
|
|
|
|
|
EMSC
|
|
EMS LP
|
|
HoldCo, Inc.
|
|
HoldCo, Inc.
|
|
Guarantors
|
|
Non-Guarantor
|
|
Adjustments
|
|
Total
|
|
Net
revenue
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
1,915,369
|
|
$
|
21,256
|
|
$
|
(21,256
|
)
|
$
|
1,915,369
|
|
Compensation
and benefits
|
|
|
|
|
|
|
|
|
|
1,332,787
|
|
|
|
|
|
1,332,787
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
252,355
|
|
|
|
|
|
252,355
|
|
Insurance
expense
|
|
|
|
|
|
|
|
|
|
71,693
|
|
25,269
|
|
(21,256
|
)
|
75,706
|
|
Selling,
general and administrative expenses
|
|
|
|
|
|
|
|
|
|
47,186
|
|
|
|
|
|
47,186
|
|
Depreciation
and amortization expense
|
|
|
|
|
|
|
|
|
|
48,658
|
|
|
|
|
|
48,658
|
|
Income
(loss) from operations
|
|
|
|
|
|
|
|
|
|
162,690
|
|
(4,013
|
)
|
|
|
158,677
|
|
Interest
income from restricted assets
|
|
|
|
|
|
|
|
|
|
1,485
|
|
1,983
|
|
|
|
3,468
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
|
(30,749
|
)
|
|
|
|
|
(30,749
|
)
|
Realized
gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
2,030
|
|
|
|
2,030
|
|
Interest
and other income
|
|
|
|
|
|
|
|
|
|
1,442
|
|
|
|
|
|
1,442
|
|
Income
before income taxes
|
|
|
|
|
|
|
|
|
|
134,868
|
|
|
|
|
|
134,868
|
|
Income
tax expense
|
|
|
|
|
|
|
|
|
|
(53,144
|
)
|
|
|
|
|
(53,144
|
)
|
Income
before equity in earnings of unconsolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
81,724
|
|
|
|
|
|
81,724
|
|
Equity
in earnings of unconsolidated subsidiaries
|
|
81,968
|
|
81,968
|
|
26,344
|
|
55,624
|
|
244
|
|
|
|
(245,904
|
)
|
244
|
|
Net
income
|
|
$
|
81,968
|
|
$
|
81,968
|
|
$
|
26,344
|
|
$
|
55,624
|
|
$
|
81,968
|
|
$
|
|
|
$
|
(245,904
|
)
|
$
|
81,968
|
|
15
Table of Contents
Consolidating Balance Sheet
As of September 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
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
329,461
|
|
$
|
16,255
|
|
$
|
|
|
$
|
345,716
|
|
Insurance
collateral
|
|
|
|
|
|
|
|
|
|
8,681
|
|
32,053
|
|
(12,503
|
)
|
28,231
|
|
Trade
and other accounts receivable, net
|
|
|
|
|
|
|
|
|
|
492,234
|
|
489
|
|
|
|
492,723
|
|
Parts
and supplies inventory
|
|
|
|
|
|
|
|
|
|
22,759
|
|
|
|
|
|
22,759
|
|
Prepaids
and other current assets
|
|
|
|
|
|
|
|
|
|
24,854
|
|
329
|
|
(7,932
|
)
|
17,251
|
|
Current
deferred tax assets
|
|
|
|
|
|
|
|
|
|
(3,834
|
)
|
3,834
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
874,155
|
|
52,960
|
|
(20,435
|
)
|
906,680
|
|
Non-current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant, and equipment, net
|
|
|
|
|
|
|
|
|
|
126,759
|
|
|
|
|
|
126,759
|
|
Intercompany
receivable
|
|
|
|
|
|
284,948
|
|
126,640
|
|
|
|
|
|
(411,588
|
)
|
|
|
Intangible
assets, net
|
|
|
|
|
|
|
|
|
|
138,641
|
|
|
|
|
|
138,641
|
|
Non-current
deferred tax assets
|
|
|
|
|
|
|
|
|
|
10,849
|
|
(6,120
|
)
|
1,994
|
|
6,723
|
|
Insurance
collateral
|
|
|
|
|
|
|
|
|
|
30,977
|
|
124,889
|
|
(3,917
|
)
|
151,949
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
388,048
|
|
458
|
|
|
|
388,506
|
|
Other
long-term assets
|
|
|
|
|
|
8,273
|
|
3,500
|
|
6,975
|
|
|
|
|
|
18,748
|
|
Investment
and advances in subsidiaries
|
|
803,684
|
|
803,684
|
|
430,943
|
|
372,728
|
|
35,799
|
|
|
|
(2,446,838
|
)
|
|
|
Assets
|
|
$
|
803,684
|
|
$
|
803,684
|
|
$
|
724,164
|
|
$
|
502,868
|
|
$
|
1,612,203
|
|
$
|
172,187
|
|
$
|
(2,880,784
|
)
|
$
|
1,738,006
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
68,172
|
|
$
|
67
|
|
$
|
|
|
$
|
68,239
|
|
Accrued
liabilities
|
|
|
|
|
|
758
|
|
245
|
|
236,329
|
|
27,272
|
|
(1
|
)
|
264,603
|
|
Current
deferred tax liability
|
|
|
|
|
|
|
|
|
|
11,068
|
|
|
|
|
|
11,068
|
|
Current
portion of long-term debt
|
|
|
|
|
|
9,164
|
|
4,117
|
|
672
|
|
|
|
|
|
13,953
|
|
Current
liabilities
|
|
|
|
|
|
9,922
|
|
4,362
|
|
316,241
|
|
27,339
|
|
(1
|
)
|
357,863
|
|
Long-term
debt
|
|
|
|
|
|
282,253
|
|
126,810
|
|
1,244
|
|
|
|
|
|
410,307
|
|
Insurance
reserves and other long-term liabilities
|
|
|
|
|
|
|
|
|
|
88,284
|
|
100,225
|
|
(22,357
|
)
|
166,152
|
|
Intercompany
payable
|
|
|
|
|
|
|
|
|
|
402,764
|
|
8,824
|
|
(411,588
|
)
|
|
|
Liabilities
|
|
|
|
|
|
292,175
|
|
131,172
|
|
808,533
|
|
136,388
|
|
(433,946
|
)
|
934,322
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A common stock
|
|
303
|
|
|
|
|
|
|
|
|
|
30
|
|
(30
|
)
|
303
|
|
Class
B common stock
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Partnership
equity
|
|
90,776
|
|
390,077
|
|
319,292
|
|
70,786
|
|
388,561
|
|
|
|
(1,168,716
|
)
|
90,776
|
|
Treasury
stock at cost
|
|
(1,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,289
|
)
|
Additional
paid-in capital
|
|
300,286
|
|
|
|
|
|
|
|
|
|
4,316
|
|
(4,316
|
)
|
300,286
|
|
Retained
earnings
|
|
410,798
|
|
410,798
|
|
112,346
|
|
298,452
|
|
412,300
|
|
26,522
|
|
(1,260,418
|
)
|
410,798
|
|
Comprehensive
income
|
|
2,809
|
|
2,809
|
|
351
|
|
2,458
|
|
2,809
|
|
4,931
|
|
(13,358
|
)
|
2,809
|
|
Equity
|
|
803,684
|
|
803,684
|
|
431,989
|
|
371,696
|
|
803,670
|
|
35,799
|
|
(2,446,838
|
)
|
803,684
|
|
Liabilities
and Equity
|
|
$
|
803,684
|
|
$
|
803,684
|
|
$
|
724,164
|
|
$
|
502,868
|
|
$
|
1,612,203
|
|
$
|
172,187
|
|
$
|
(2,880,784
|
)
|
$
|
1,738,006
|
|
16
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
|
|
17
Table of Contents
Condensed Consolidating Statement of Cash Flows
For the quarter ended September 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
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
42,954
|
|
$
|
11,669
|
|
$
|
54,623
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
(16,199
|
)
|
|
|
(16,199
|
)
|
Proceeds
from sale of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
12
|
|
Acquisition
of businesses, net of cash received
|
|
|
|
|
|
|
|
|
|
(183
|
)
|
|
|
(183
|
)
|
Net
change in insurance collateral
|
|
|
|
|
|
|
|
|
|
6,634
|
|
(10,774
|
)
|
(4,140
|
)
|
Net change
in deposits and other assets
|
|
|
|
|
|
|
|
|
|
83
|
|
|
|
83
|
|
Net
cash used in investing activities
|
|
|
|
|
|
|
|
|
|
(9,653
|
)
|
(10,774
|
)
|
(20,427
|
)
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMSC
issuance of class A common stock
|
|
221
|
|
|
|
|
|
|
|
|
|
|
|
221
|
|
Class
A common stock repurchased as treasury stock
|
|
(1,289
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,289
|
)
|
Repayments
of capital lease obligations and other debt
|
|
|
|
|
|
(2,157
|
)
|
(970
|
)
|
(148
|
)
|
|
|
(3,275
|
)
|
Borrowings
under credit facility
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
issue costs
|
|
|
|
|
|
(151
|
)
|
(68
|
)
|
|
|
|
|
(219
|
)
|
Payment
of premiums for debt extinguishment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess
tax benefits from stock-based compensation
|
|
|
|
|
|
|
|
|
|
479
|
|
|
|
479
|
|
Net
change in bank overdrafts
|
|
|
|
|
|
|
|
|
|
2,570
|
|
|
|
2,570
|
|
Net
intercompany borrowings (payments)
|
|
1,068
|
|
|
|
2,308
|
|
1,038
|
|
(4,414
|
)
|
|
|
|
|
Net
cash used in financing activities
|
|
|
|
|
|
|
|
|
|
(1,513
|
)
|
|
|
(1,513
|
)
|
Change
in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
31,788
|
|
895
|
|
32,683
|
|
Cash
and cash equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
297,673
|
|
15,360
|
|
313,033
|
|
Cash
and cash equivalents, end of period
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
329,461
|
|
$
|
16,255
|
|
$
|
345,716
|
|
Condensed Consolidating Statement of Cash Flows
For the quarter ended September 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
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
69,172
|
|
$
|
(310
|
)
|
$
|
68,862
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
(13,576
|
)
|
|
|
(13,576
|
)
|
Proceeds
from sale of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
41
|
|
|
|
41
|
|
Acquisition
of businesses, net of cash received
|
|
|
|
|
|
|
|
|
|
(1,241
|
)
|
|
|
(1,241
|
)
|
Net
change in insurance collateral
|
|
|
|
|
|
|
|
|
|
(9,241
|
)
|
15,243
|
|
6,002
|
|
Net
change in deposits and other assets
|
|
|
|
|
|
|
|
|
|
(166
|
)
|
|
|
(166
|
)
|
Net
cash (used in) provided by investing activities
|
|
|
|
|
|
|
|
|
|
(24,183
|
)
|
15,243
|
|
(8,940
|
)
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMSC
issuance of class A common stock
|
|
2,437
|
|
|
|
|
|
|
|
|
|
|
|
2,437
|
|
Repayments
of capital lease obligations and other debt
|
|
|
|
|
|
|
|
|
|
(1,214
|
)
|
|
|
(1,214
|
)
|
Increase
in bank overdrafts
|
|
|
|
|
|
|
|
|
|
2,821
|
|
|
|
2,821
|
|
Net
intercompany borrowings (payments)
|
|
(2,437
|
)
|
|
|
|
|
|
|
2,437
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
|
|
|
|
|
|
|
4,044
|
|
|
|
4,044
|
|
Change
in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
49,033
|
|
14,933
|
|
63,966
|
|
Cash
and cash equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
266,772
|
|
367
|
|
267,139
|
|
Cash
and cash equivalents, end of period
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
315,805
|
|
$
|
15,300
|
|
$
|
331,105
|
|
18
Table of Contents
Condensed Consolidating Statement of Cash Flows
For the nine months ended September 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
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
99,852
|
|
$
|
39,513
|
|
$
|
139,365
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
(31,367
|
)
|
|
|
(31,367
|
)
|
Proceeds
from sale of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
120
|
|
|
|
120
|
|
Acquisition
of businesses, net of cash received
|
|
|
|
|
|
|
|
|
|
(51,158
|
)
|
|
|
(51,158
|
)
|
Net
change in insurance collateral
|
|
|
|
|
|
|
|
|
|
29,207
|
|
(38,608
|
)
|
(9,401
|
)
|
Net
change in deposits and other assets
|
|
|
|
|
|
|
|
|
|
11,021
|
|
|
|
11,021
|
|
Net
cash used in investing activities
|
|
|
|
|
|
|
|
|
|
(42,177
|
)
|
(38,608
|
)
|
(80,785
|
)
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMSC
issuance of class A common stock
|
|
6,414
|
|
|
|
|
|
|
|
|
|
|
|
6,414
|
|
Class
A common stock repurchased as treasury stock
|
|
(1,289
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,289
|
)
|
Repayments
of capital lease obligations and other debt
|
|
|
|
|
|
(312,495
|
)
|
(140,397
|
)
|
(3,010
|
)
|
|
|
(455,902
|
)
|
Borrowings
under credit facility
|
|
|
|
|
|
293,250
|
|
131,750
|
|
|
|
|
|
425,000
|
|
Debt
issue costs
|
|
|
|
|
|
(8,258
|
)
|
(3,710
|
)
|
|
|
|
|
(11,968
|
)
|
Payment
of premiums for debt extinguishment
|
|
|
|
|
|
(10,014
|
)
|
(4,499
|
)
|
|
|
|
|
(14,513
|
)
|
Excess
tax benefits from stock-based compensation
|
|
|
|
|
|
|
|
|
|
13,977
|
|
|
|
13,977
|
|
Net
change in bank overdrafts
|
|
|
|
|
|
|
|
|
|
(7,471
|
)
|
|
|
(7,471
|
)
|
Net
intercompany borrowings (payments)
|
|
(5,125
|
)
|
|
|
37,517
|
|
16,856
|
|
(49,248
|
)
|
|
|
|
|
Net
cash used in financing activities
|
|
|
|
|
|
|
|
|
|
(45,752
|
)
|
|
|
(45,752
|
)
|
Change
in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
11,923
|
|
905
|
|
12,828
|
|
Cash
and cash equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
317,538
|
|
15,350
|
|
332,888
|
|
Cash
and cash equivalents, end of period
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
329,461
|
|
$
|
16,255
|
|
$
|
345,716
|
|
Condensed Consolidating Statement of Cash Flows
For the nine months ended September 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
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
213,794
|
|
$
|
(3,993
|
)
|
$
|
209,801
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
(33,661
|
)
|
|
|
(33,661
|
)
|
Proceeds
from sale of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
101
|
|
|
|
101
|
|
Acquisition
of businesses, net of cash received
|
|
|
|
|
|
|
|
|
|
(1,374
|
)
|
|
|
(1,374
|
)
|
Net change
in insurance collateral
|
|
|
|
|
|
|
|
|
|
(9,503
|
)
|
13,572
|
|
4,069
|
|
Net
change in deposits and other assets
|
|
|
|
|
|
|
|
|
|
(809
|
)
|
|
|
(809
|
)
|
Net
cash (used in) provided by investing activities
|
|
|
|
|
|
|
|
|
|
(45,246
|
)
|
13,572
|
|
(31,674
|
)
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMSC
issuance of class A common stock
|
|
7,160
|
|
|
|
|
|
|
|
|
|
|
|
7,160
|
|
Repayments
of capital lease obligations and other debt
|
|
|
|
|
|
|
|
|
|
(3,826
|
)
|
|
|
(3,826
|
)
|
Increase
in bank overdrafts
|
|
|
|
|
|
|
|
|
|
3,471
|
|
|
|
3,471
|
|
Net
intercompany borrowings (payments)
|
|
(7,160
|
)
|
|
|
|
|
|
|
7,160
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
|
|
|
|
|
|
|
6,805
|
|
|
|
6,805
|
|
Change
in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
175,353
|
|
9,579
|
|
184,932
|
|
Cash
and cash equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
140,452
|
|
5,721
|
|
146,173
|
|
Cash
and cash equivalents, end of period
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
315,805
|
|
$
|
15,300
|
|
$
|
331,105
|
|
11.
Subsequent
Events
The Companys
management has evaluated events subsequent to September 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.
19
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 EMSCs 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; the impact of changes in the healthcare industry;
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 maintain or implement complex
information systems; 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.
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 EMSCs 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
medical transportation 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 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 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 visits for the three and nine months ended September 30,
2010 and 2009. In determining the net revenue payor mix, we use cash
20
Table of Contents
collections in the period as
an approximation of net revenue recorded.
|
|
Percentage of Cash Collections (Net Revenue)
|
|
Percentage of Total Volume
|
|
|
|
Quarter ended
September 30,
|
|
Nine months ended
September 30,
|
|
Quarter ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Medicare
|
|
22.2
|
%
|
22.4
|
%
|
22.0
|
%
|
23.2
|
%
|
25.5
|
%
|
23.7
|
%
|
25.1
|
%
|
24.6
|
%
|
Medicaid
|
|
5.8
|
%
|
4.9
|
%
|
5.4
|
%
|
4.7
|
%
|
13.3
|
%
|
11.4
|
%
|
12.7
|
%
|
11.2
|
%
|
Commercial insurance and managed care
|
|
47.5
|
%
|
50.2
|
%
|
49.0
|
%
|
50.5
|
%
|
41.0
|
%
|
42.9
|
%
|
42.4
|
%
|
42.7
|
%
|
Self-pay
|
|
4.4
|
%
|
3.8
|
%
|
4.2
|
%
|
3.9
|
%
|
20.2
|
%
|
22.0
|
%
|
19.8
|
%
|
21.5
|
%
|
Subsidies & fees
|
|
20.1
|
%
|
18.7
|
%
|
19.4
|
%
|
17.7
|
%
|
|
|
|
|
|
|
|
|
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 compared to our 2009 volume mix primarily due to the recent
expansion of our anesthesia business, which has a lower percentage of self-pay
mix when compared to our emergency department, radiology and inpatient services
businesses, and due 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 86% of AMRs
net revenue for the nine months ended September 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.
EmCare
Of EmCares net revenue for
the nine months ended September 30, 2010, approximately 78% was derived
from our hospital contracts for emergency department staffing and approximately
22% 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
21
Table of Contents
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 10.6% and 9.7% of AMRs operating expenses for the three months
ended September 30, 2010 and 2009, respectively, and 10.1% and 8.9% for
the nine months ended September 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
Revenue is recognized at the
time of service and is recorded net of provisions for contractual discounts and
estimated uncompensated care. We
estimate our provision for contractual discounts and uncompensated care based
on payor reimbursement schedules, historical collections and write-off experience
and other economic data. As a result of
the estimates used in recording the provisions, the nature of healthcare
collections, which may involve lengthy delays, there is a reasonable
possibility that recorded estimates will change materially in the short-term.
The changes in the
provisions for contractual discounts and uncompensated care are primarily a
result of changes in our gross fee-for-service rate schedules and gross
accounts receivable balances. These gross fee schedules, including any changes
to existing fee schedules, generally are negotiated with various contracting
entities, including municipalities and facilities. Fee schedule increases are
billed for all revenue sources and to all payors under that specific contract;
however, reimbursement in the case of certain state and federal payors,
including Medicare and Medicaid, will not change as a result of the change in
gross fee schedules. In certain cases, this results in a higher level of
contractual and uncompensated care provisions and allowances, requiring a
higher percentage of contractual discount and uncompensated care provisions
compared to gross charges.
In addition, management
analyzes the ultimate collectability of revenue and accounts receivable after
certain stages of the collection cycle using a look-back analysis to determine
the amount of receivables subsequently collected. Adjustments related to this analysis are
recorded as a reduction or increase to net revenue each month, and were less than
1% of net revenue for the three and nine month periods ended September 30,
2010 and 2009.
22
Table of Contents
Results of
Operations
Three and
Nine Months Ended September 30, 2010 Compared to Three and Nine Months
Ended September 30, 2009
The following tables present
a comparison of financial data from our unaudited consolidated statements of
operations for the three and nine months ended September 30, 2010 and for
the three and nine months ended September 30, 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
September 30, 2010
|
|
Quarter ended
September 30, 2009
|
|
Nine months ended
September 30, 2010
|
|
Nine months ended
September 30, 2009
|
|
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
Net revenue
|
|
$
|
737,180
|
|
100.0
|
%
|
$
|
665,056
|
|
100.0
|
%
|
$
|
2,125,338
|
|
100.0
|
%
|
$
|
1,915,369
|
|
100.0
|
%
|
Compensation and
benefits
|
|
523,263
|
|
71.0
|
|
467,625
|
|
70.3
|
|
1,500,023
|
|
70.6
|
|
1,332,787
|
|
69.6
|
|
Operating expenses
|
|
91,023
|
|
12.3
|
|
85,510
|
|
12.9
|
|
268,138
|
|
12.6
|
|
252,355
|
|
13.2
|
|
Insurance expense
|
|
25,793
|
|
3.5
|
|
24,845
|
|
3.7
|
|
73,805
|
|
3.5
|
|
75,706
|
|
4.0
|
|
Selling, general and
administrative expenses
|
|
17,742
|
|
2.4
|
|
15,871
|
|
2.4
|
|
52,898
|
|
2.5
|
|
47,186
|
|
2.5
|
|
Interest income from
restricted assets
|
|
(717
|
)
|
(0.1
|
)
|
(1,082
|
)
|
(0.2
|
)
|
(2,431
|
)
|
(0.1
|
)
|
(3,468
|
)
|
(0.2
|
)
|
Adjusted EBITDA
|
|
$
|
80,076
|
|
10.9
|
%
|
$
|
72,287
|
|
10.9
|
%
|
$
|
232,905
|
|
11.0
|
%
|
$
|
210,803
|
|
11.0
|
%
|
Depreciation and
amortization expense
|
|
(16,528
|
)
|
(2.2
|
)
|
(15,733
|
)
|
(2.4
|
)
|
(48,400
|
)
|
(2.3
|
)
|
(48,658
|
)
|
(2.5
|
)
|
Interest expense
|
|
(4,856
|
)
|
(0.7
|
)
|
(10,280
|
)
|
(1.5
|
)
|
(18,182
|
)
|
(0.9
|
)
|
(30,749
|
)
|
(1.6
|
)
|
Realized gain on
investments
|
|
730
|
|
0.1
|
|
544
|
|
0.1
|
|
879
|
|
0.0
|
|
2,030
|
|
0.1
|
|
Interest and other
income
|
|
277
|
|
0.0
|
|
502
|
|
0.1
|
|
748
|
|
0.0
|
|
1,442
|
|
0.1
|
|
Loss on early debt
extinguishment
|
|
|
|
|
|
|
|
|
|
(19,091
|
)
|
(0.9
|
)
|
|
|
|
|
Income tax expense
|
|
(22,990
|
)
|
(3.1
|
)
|
(18,533
|
)
|
(2.8
|
)
|
(57,355
|
)
|
(2.7
|
)
|
(53,144
|
)
|
(2.8
|
)
|
Equity in earnings of
unconsolidated subsidiary
|
|
53
|
|
0.0
|
|
91
|
|
0.0
|
|
252
|
|
0.0
|
|
244
|
|
0.0
|
|
Net income
|
|
$
|
36,762
|
|
5.0
|
%
|
$
|
28,878
|
|
4.3
|
%
|
$
|
91,756
|
|
4.3
|
%
|
$
|
81,968
|
|
4.3
|
%
|
23
Table of Contents
Unaudited Reconciliation of Adjusted EBITDA to Cash
Flows Provided by Operating Activities
(dollars in thousands)
|
|
Quarter ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Adjusted
EBITDA
|
|
$
|
80,076
|
|
$
|
72,287
|
|
$
|
232,905
|
|
$
|
210,803
|
|
Interest
paid
|
|
(4,195
|
)
|
(9,773
|
)
|
(16,385
|
)
|
(29,424
|
)
|
Change
in accounts receivable
|
|
(10,882
|
)
|
7,574
|
|
(30,441
|
)
|
8,448
|
|
Change
in other operating assets/liabilities
|
|
11,164
|
|
(2,956
|
)
|
18,192
|
|
16,000
|
|
Equity
based compensation
|
|
2,042
|
|
1,121
|
|
4,587
|
|
2,875
|
|
Excess
tax benefits from stock-based compensation
|
|
(479
|
)
|
|
|
(13,977
|
)
|
|
|
Income
tax expense, net of change in deferred taxes
|
|
(24,092
|
)
|
(472
|
)
|
(57,617
|
)
|
(3,155
|
)
|
Other
|
|
989
|
|
1,081
|
|
2,101
|
|
4,254
|
|
Cash
flows provided by operating activities
|
|
$
|
54,623
|
|
$
|
68,862
|
|
$
|
139,365
|
|
$
|
209,801
|
|
Unaudited Segment Results of Operations and as a
Percentage of Net Revenue
(dollars in thousands)
AMR
|
|
Quarter ended
September 30, 2010
|
|
Quarter ended
September 30, 2009
|
|
Nine months ended
September 30, 2010
|
|
Nine months ended
September 30, 2009
|
|
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
Net revenue
|
|
$
|
352,226
|
|
100.0
|
%
|
$
|
338,768
|
|
100.0
|
%
|
$
|
1,033,347
|
|
100.0
|
%
|
$
|
1,010,718
|
|
100.0
|
%
|
Compensation and
benefits
|
|
221,426
|
|
62.9
|
|
211,921
|
|
62.6
|
|
641,079
|
|
62.0
|
|
628,015
|
|
62.1
|
|
Operating expenses
|
|
79,749
|
|
22.6
|
|
75,677
|
|
22.3
|
|
233,827
|
|
22.6
|
|
222,296
|
|
22.0
|
|
Insurance expense
|
|
9,379
|
|
2.7
|
|
10,417
|
|
3.1
|
|
33,339
|
|
3.2
|
|
35,433
|
|
3.5
|
|
Selling, general and
administrative expenses
|
|
10,463
|
|
3.0
|
|
9,410
|
|
2.8
|
|
30,419
|
|
2.9
|
|
28,308
|
|
2.8
|
|
Interest income from
restricted assets
|
|
(240
|
)
|
(0.1
|
)
|
(495
|
)
|
(0.1
|
)
|
(928
|
)
|
(0.1
|
)
|
(1,485
|
)
|
(0.1
|
)
|
Adjusted EBITDA
|
|
$
|
31,449
|
|
8.9
|
%
|
$
|
31,838
|
|
9.4
|
%
|
$
|
95,611
|
|
9.3
|
%
|
$
|
98,151
|
|
9.7
|
%
|
Reconciliation of
Adjusted EBITDA to income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
31,449
|
|
8.9
|
|
31,838
|
|
9.4
|
|
95,611
|
|
9.3
|
|
98,151
|
|
9.7
|
|
Depreciation and
amortization expense
|
|
(11,325
|
)
|
(3.2
|
)
|
(12,199
|
)
|
(3.6
|
)
|
(33,629
|
)
|
(3.3
|
)
|
(37,147
|
)
|
(3.7
|
)
|
Interest income from
restricted assets
|
|
(240
|
)
|
(0.1
|
)
|
(495
|
)
|
(0.1
|
)
|
(928
|
)
|
(0.1
|
)
|
(1,485
|
)
|
(0.1
|
)
|
Income from operations
|
|
$
|
19,884
|
|
5.6
|
%
|
$
|
19,144
|
|
5.7
|
%
|
$
|
61,054
|
|
5.9
|
%
|
$
|
59,519
|
|
5.9
|
%
|
EmCare
|
|
Quarter ended
September 30, 2010
|
|
Quarter ended
September 30, 2009
|
|
Nine months ended
September 30, 2010
|
|
Nine months ended
September 30, 2009
|
|
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
|
|
% of net
revenue
|
|
Net revenue
|
|
$
|
384,954
|
|
100.0
|
%
|
$
|
326,288
|
|
100.0
|
%
|
$
|
1,091,991
|
|
100.0
|
%
|
$
|
904,651
|
|
100.0
|
%
|
Compensation and
benefits
|
|
301,837
|
|
78.4
|
|
255,704
|
|
78.4
|
|
858,944
|
|
78.7
|
|
704,772
|
|
77.9
|
|
Operating expenses
|
|
11,274
|
|
2.9
|
|
9,833
|
|
3.0
|
|
34,311
|
|
3.1
|
|
30,059
|
|
3.3
|
|
Insurance expense
|
|
16,414
|
|
4.3
|
|
14,428
|
|
4.4
|
|
40,466
|
|
3.7
|
|
40,273
|
|
4.5
|
|
Selling, general and
administrative expenses
|
|
7,279
|
|
1.9
|
|
6,461
|
|
2.0
|
|
22,479
|
|
2.1
|
|
18,878
|
|
2.1
|
|
Interest income from
restricted assets
|
|
(477
|
)
|
(0.1
|
)
|
(587
|
)
|
(0.2
|
)
|
(1,503
|
)
|
(0.1
|
)
|
(1,983
|
)
|
(0.2
|
)
|
Adjusted EBITDA
|
|
$
|
48,627
|
|
12.6
|
%
|
$
|
40,449
|
|
12.4
|
%
|
$
|
137,294
|
|
12.6
|
%
|
$
|
112,652
|
|
12.5
|
%
|
Reconciliation of
Adjusted EBITDA to income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
48,627
|
|
12.6
|
|
40,449
|
|
12.4
|
|
137,294
|
|
12.6
|
|
112,652
|
|
12.5
|
|
Depreciation and
amortization expense
|
|
(5,203
|
)
|
(1.4
|
)
|
(3,534
|
)
|
(1.1
|
)
|
(14,771
|
)
|
(1.4
|
)
|
(11,511
|
)
|
(1.3
|
)
|
Interest income from
restricted assets
|
|
(477
|
)
|
(0.1
|
)
|
(587
|
)
|
(0.2
|
)
|
(1,503
|
)
|
(0.1
|
)
|
(1,983
|
)
|
(0.2
|
)
|
Income from operations
|
|
$
|
42,947
|
|
11.2
|
%
|
$
|
36,328
|
|
11.1
|
%
|
$
|
121,020
|
|
11.1
|
%
|
$
|
99,158
|
|
11.0
|
%
|
24
Table of
Contents
Quarter ended September 30, 2010 compared to the quarter ended September 30,
2009
Consolidated
Our results for the three
months ended September 30, 2010 reflect an increase in net revenue of
$72.1 million and an increase in net income of $7.9 million compared to the
three months ended September 30, 2009. The increase in net income
was attributable primarily to growth in income from operations and a decrease
in interest expense. Basic and diluted
earnings per share were $0.83 and $0.82, respectively, for the three months
ended September 30, 2010. Basic and diluted earnings per share were
$0.67 and $0.66, respectively, for the same period in 2009.
Net revenue.
For the
three months ended September 30, 2010, we generated net revenue of $737.2
million compared to $665.1million for the three months ended September 30,
2009, representing an increase of 10.8%. 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 $80.1 million, or 10.9% of net revenue, for the three months ended
September 30, 2010 compared to $72.3 million, or 10.9% of net revenue for
the three months ended September 30, 2009.
Interest
expense.
Interest expense for the three months ended
September 30, 2010 was $4.9 million compared to $10.3 million for the
three months ended September 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 increased by $4.5 million for the
three months ended September 30, 2010 compared to the same period in
2009. Our effective tax rate for the three months ended
September 30, 2010 was 38.5%, and 39.2% for the same period in 2009.
AMR
Net
revenue.
Net revenue for the three months ended
September 30, 2010 was $352.2 million, an increase of $13.5 million, or
4.0%, from $338.8 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 2.3%, or $7.6 million, and an increase of 1.7%, or $5.9 million,
in weighted transport volume. The increase in net revenue per weighted
transport was primarily due to growth in our managed transportation business
combined with other non-transport related revenue increases. Weighted transports increased 12,500 from the
same period last year. This change was
due to an increase in weighted transport volume in existing markets of 0.4%, or
3,000 weighted transports, and an increase of 10,600 weighted transports from
our entry into new markets, which increases were offset partially by a decrease
of 1,100 weighted transports from the exit of certain markets.
Compensation
and benefits.
Compensation and benefit costs for the three months
ended September 30, 2010 were $221.4 million, or 62.9% of net revenue,
compared to $211.9 million, or 62.6% of net revenue, for the same period in
2009. Ambulance crew wages per ambulance unit hour increased by approximately
5.0%, or $5.9 million attributable primarily to wage rate increases.
While weighted transport volume increased from the same period last year,
ambulance unit hours decreased by 0.3%, or $0.4 million, due primarily to the
increased efficiency in our ambulance unit hour deployment. During the three months ended September 30,
2010, we incurred $2.5 million in increased medical claim charges associated
with several large claims in our self-insured health plans compared to the same
period in 2009. We have historically not
seen the number and types of large claims we incurred in the third quarter of
2010.
Operating
expenses.
Operating expenses for the three months ended
September 30, 2010 were $79.7 million, or 22.6% of net revenue, compared
to $75.7 million, or 22.3% of net revenue, for the three months ended
September 30, 2009. The change is due primarily to increased fuel
costs of $1.0 million, increased costs associated with growth in our managed
transportation business of $0.9 million, and increased costs associated with
our entry into new markets of $0.8 million.
Insurance
expense.
Insurance expense for the three months ended
September 30, 2010 was $9.4 million, or 2.7% of net revenue, compared to
$10.4 million, or 3.1% of net revenue, for the same period in 2009. We
recorded a reduction of prior year insurance provisions of $3.0 million during
the three months ended September 30, 2010 and $2.1 million during the
three months ended September 30, 2009.
Selling,
general and administrative.
Selling, general and
administrative expense for the three months ended September 30, 2010 was
$10.5 million, or 3.0% of net revenue, compared to $9.4 million, or 2.8% of net
revenue, for the three months ended September 30, 2009.
25
Table of Contents
Depreciation
and amortization.
Depreciation and amortization expense for the
three months ended September 30, 2010 was $11.3 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
September 30, 2010 was $385.0 million, an increase of $58.7 million, or
18.0%, from $326.3 million for the three months ended September 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 June 30, 2009, we added 39 net new contracts which accounted for
a net revenue increase of $51.4 million for the three months ended
September 30, 2010. Of the 39 net new contracts added since June 30,
2009, 28 were added in 2009 resulting in an incremental increase in 2010 net
revenue of $43.1 million. EmCare has
added 54 new contracts and terminated 43 contracts to date in 2010, resulting
in an increase in net revenue of $8.3 million for the three months ended September 30,
2010. Net revenue under our same
store contracts (contracts in existence for the entirety of both periods)
increased $4.0 million, or 1.4%, for the three months ended September 30,
2010. The change is due to a 2.3% increase in revenue per weighted
patient encounter, offset partially by a decrease in same store weighted
patient encounters of 0.9% from the prior period.
Compensation
and benefits.
Compensation and benefits costs for the three months
ended September 30, 2010 were $301.8 million, or 78.4% of net revenue,
compared to $255.7 million, or 78.4% of net revenue, for the same period in
2009. Provider compensation and benefits costs increased $44.1 million from net
new contract additions. Same store provider compensation and benefits costs
were $2.5 million below the prior period due primarily to a 0.9% decrease in
same store weighted patient encounters.
Non-provider compensation and total benefits costs increased by $4.7
million due primarily to our recent acquisitions and $0.5 million due to
increased medical claim charges associated with our self-insured health plans.
Operating
expenses.
Operating expenses for the three months ended
September 30, 2010 were $11.3 million, or 2.9% of net revenue, compared to
$9.8 million, or 3.0% of net revenue, for the same period in 2009.
Operating expenses increased $1.5 million due primarily to higher collection
agency and billing fees incurred in connection with our net new contracts added
since June 30, 2009 and the expansion of our anesthesiology and radiology
businesses.
Insurance
expense.
Professional liability insurance expense for the
three months ended September 30, 2010 was $16.4 million, or 4.3% of net
revenue, compared to $14.4 million, or 4.4% of net revenue, for the three
months ended September 30, 2009. We
recorded an increase in prior year insurance provisions of $3.2 million for the
three months ended September 30, 2010 and $1.3 million for the same period
in 2009.
Selling,
general and administrative.
Selling, general and
administrative expense for the three months ended September 30, 2010 was
$7.3 million, or 1.9% of net revenue, compared to $6.5 million, or 2.0% of net
revenue, for the three months ended September 30, 2009.
Depreciation
and amortization.
Depreciation and amortization expense for the
three months ended September 30, 2010 was $5.2 million, or 1.4% of net
revenue, compared to $3.5 million, or 1.1% of net revenue, for the three months
ended September 30, 2009. The $1.7
million increase was due primarily to additional amortization expense
associated with contract intangible assets recorded on acquisitions completed
subsequent to June 30, 2009.
Nine months ended September 30, 2010 compared to the nine months
ended September 30, 2009
Consolidated
Our results for the nine
months ended September 30, 2010 reflect an increase in net revenue of
$210.0 million and an increase in net income of $9.8 million compared to the
nine months ended September 30, 2009.
The increase in net income is attributable primarily to growth in income
from operations and a decrease in interest expense, partially offset by the
loss on early debt extinguishment. Basic
and diluted earnings per share were $2.09 and $2.06, respectively, for the nine
months ended September 30, 2010. Basic and diluted earnings per share were
$1.93 and $1.89, respectively, for the same period in 2009. The basic and diluted earnings per share for
the nine months ended September 30, 2010 include the impact from the loss
on early debt extinguishment and a reserve recorded in connection with a
tentative legal settlement relating to certain AMR affiliates in New York. These items were recorded in the second
quarter of 2010 and account for basic and diluted earnings per share of $0.31
and $0.30, respectively, for the nine months ended September 30, 2010.
Net
revenue.
For the nine months ended September 30, 2010,
net revenue was $2,125.3 million compared to $1,915.4 million for the nine
months ended September 30, 2009, representing an increase of 11.0%. The
increase is attributable primarily to
26
Table of Contents
increases in revenues on
existing contracts and increased volume from net new contracts and
acquisitions.
Adjusted
EBITDA.
Adjusted EBITDA was $232.9 million, or 11.0% of net
revenue, for the nine months ended September 30, 2010 compared to $210.8
million, or 11.0% of net revenue for the nine months ended September 30,
2009.
Interest
expense.
Interest expense for the nine months ended
September 30, 2010 was $18.2 million compared to $30.7 million for the
nine months ended September 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 increased $4.2 million for the
nine months ended September 30, 2010, compared to the same period in
2009. Our effective tax rate for the nine months ended September 30,
2010 was 38.5% compared with 39.4% for the same period in 2009.
AMR
Net
revenue.
Net revenue for the nine months ended
September 30, 2010 was $1,033.3 million, an increase of $22.6 million, or
2.2%, from $1,010.7 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 3.2%, or $32.2 million,
partially offset by a decrease of 0.9%, or $9.6 million, in weighted transport
volume. The increase in net revenue per
weighted transport of 3.2% was due to a 1.8% increase in rates with the
remaining increase coming from growth in our managed transportation business
combined with other non-transport related revenue increases. Weighted transports decreased 20,700 from the
same period last year. This change was due to a decrease in weighted
transport volume in existing markets of 1.3%, or 28,400 weighted transports,
due to the exit of certain contracts in existing markets, and a decrease of
13,500 weighted transports from the exit of certain markets, which decreases
were partially offset by an increase of 21,200 weighted transports from our
entry into new markets.
Compensation
and benefits.
Compensation and benefit costs for the nine months
ended September 30, 2010 were $641.1 million, or 62.0% of net revenue,
compared to $628.0 million, or 62.1% of net revenue, for the same period in
2009. Ambulance crew wages per ambulance unit hour increased by approximately
4.7%, or $16.0 million attributable primarily to annual wage rate
increases. Ambulance unit hours decreased period over period by
2.2%, or $7.8 million, due primarily to the reduction in volume in existing
markets and increased efficiency in our ambulance unit hour deployment. During the nine months ended September 30,
2010, we incurred $2.5 million in increased medical claim charges associated
with several large claims in our self-insured health plans compared to the same
period in 2009. We have historically not
seen the number and types of large claims we incurred in the third quarter of
2010.
Operating
expenses.
Operating expenses for the nine months ended
September 30, 2010 were $233.8 million, or 22.6% of net revenue, compared
to $222.3 million, or 22.0% of net revenue, for the nine months ended
September 30, 2009. The change is
due primarily to increased fuel costs of $3.8 million, increased costs
associated with growth in our managed transportation business of $4.5 million,
and a $3.1 million reserve recorded in connection with a previously disclosed
tentative legal settlement relating to certain AMR affiliates in New York.
Insurance
expense.
Insurance expense for the nine months ended
September 30, 2010 was $33.3 million, or 3.2% of net revenue, compared to
$35.4 million, or 3.5% of net revenue, for the same period in 2009. We
recorded a reduction of prior year insurance provisions of $2.9 million during
the nine months ended September 30, 2010 and $0.2 million during the same
period in 2009.
Selling,
general and administrative.
Selling, general and
administrative expense for the nine months ended September 30, 2010 was
$30.4 million, or 2.9% of net revenue, compared to $28.3 million, or 2.8% of
net revenue, for the nine months ended September 30, 2009.
Depreciation
and amortization.
Depreciation and amortization expense for the
nine months ended September 30, 2010 was $33.6 million, or 3.3% of net
revenue, compared to $37.1 million, or 3.7% of net revenue, for the same period
in 2009. The decrease was due to a $2.6 million reduction in
depreciation expense related primarily to AMRs ability to utilize fewer
ambulances to service its existing contracts and the timing of replacing fully
depreciated assets. Amortization expense
also decreased by $0.9 million as certain contract-related intangible assets
were fully amortized.
EmCare
Net
revenue.
Net revenue for the nine months ended
September 30, 2010 was $1,092.0 million, an increase of $187.3 million, or
20.7%, from $904.7 million for the nine months ended September 30, 2009.
The increase was due primarily to an increase in
27
Table of Contents
patient encounters from net
new hospital contracts and net revenue increases in existing contracts.
Following December 31, 2008, we added 64 net new contracts which accounted
for a net revenue increase of $137.1 million for the nine months ended
September 30, 2010. Of the 64 net new contracts added since December 31,
2008, 53 were added in 2009 resulting in an incremental increase in 2010 net
revenue of $117.8 million. EmCare has
added 54 new contracts and terminated 43 contracts to date in 2010, resulting
in an increase in net revenue of $19.3 million for the nine months ended September 30,
2010. Net revenue under our same
store contracts (contracts in existence for the entirety of both periods)
increased $37.9 million, or 5.3%, for the nine months ended September 30,
2010. The change is due to a 4.0% increase in revenue per weighted
patient encounter and an increase in same store weighted patient encounters of
1.3% over the prior period. The number of
current period same store weighted patient encounters increased 1.3% compared
to the prior period notwithstanding increased volume during 2009 from the H1N1
virus and from a milder flu season in 2010.
Compensation
and benefits.
Compensation and benefits costs for the nine months
ended September 30, 2010 were $858.9 million, or 78.7% of net revenue,
compared to $704.8 million, or 77.9% of net revenue, for the same period in
2009. Provider compensation and benefits costs increased $113.0 million from
net new contract additions. Same store provider compensation and benefits costs
were $25.9 million over the prior period due to a 4.1% increase in provider
compensation per weighted patient encounter and a 1.3% increase in same store
weighted patient encounters. Non-provider
compensation and total benefits costs increased by $16.0 million due primarily
to our recent acquisitions and $0.5 million due to increased medical claim charges
associated with our self-insured health plans.
Operating
expenses.
Operating expenses for the nine months ended
September 30, 2010 were $34.3 million, or 3.1% of net revenue, compared to
$30.1 million, or 3.3% of net revenue, for the same period in 2009.
Operating expenses increased $4.2 million 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 nine months ended September 30, 2010 was $40.5 million, or 3.7% of net
revenue, compared to $40.3 million, or 4.5% of net revenue, for the nine months
ended September 30, 2009. We recorded an increase of prior year insurance
provisions of $3.2 million during the nine months ended September 30, 2010
and $4.5 million during the same period in 2009.
Selling,
general and administrative.
Selling, general and
administrative expense for the nine months ended September 30, 2010 was
$22.5 million, or 2.1% of net revenue, compared to $18.9 million, or 2.1% of
net revenue, for the nine months ended September 30, 2009. The $3.6
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
nine months ended September 30, 2010 was $14.8 million, or 1.4% of net
revenue, compared to $11.5 million, or 1.3% of net revenue, for the nine months
ended September 30, 2009. The $3.3
million increase was due primarily to additional amortization expense
associated with contract intangible assets 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 September 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 unaudited
consolidated financial statements. In
conjunction with completing this financing, we repaid the balance outstanding
on the previous senior secured term loan and redeemed our 10% senior
subordinated notes. These transactions
reduce our effective interest rate compared to the rate under our previous debt
structure.
28
Table of Contents
We believe our cash and cash
equivalents, cash provided by 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 $47.3 million at September 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.
|
|
Nine months ended
September 30, 2010
|
|
Nine months ended
September 30, 2009
|
|
Net
cash provided by (used in):
|
|
|
|
|
|
Operating
activities
|
|
$
|
139,365
|
|
$
|
209,801
|
|
Investing
activities
|
|
(80,785
|
)
|
(31,674
|
)
|
Financing
activities
|
|
(45,752
|
)
|
6,805
|
|
|
|
|
|
|
|
|
|
Operating
activities
. Net cash provided by operating activities was
$139.4 million for the nine months ended September 30, 2010 compared to
$209.8 million for the same period last year. Cash paid for income taxes increased
$45.7 million due to utilization of our net operating loss carryforwards in
2009. Trade and other accounts
receivable decreased cash flows from operations $30.4 million during the nine
months ended September 30, 2010 primarily due to revenue growth and
increased days sales outstanding, or DSO, in our AMR segment due to temporary
Medicare and Medicaid delays and the timing of receipts for our expanded
managed transportation business, which represented 3 days of AMRs DSO as of September 30,
2010.
We regularly analyze DSO
which is calculated by taking our net revenue for the quarter divided 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 June 30, 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:
|
|
Q3 2010
|
|
Q2 2010
|
|
Q1 2010
|
|
Q4 2009
|
|
Q3 2009
|
|
Q2 2009
|
|
AMR
|
|
70
|
|
68
|
|
66
|
|
68
|
|
70
|
|
73
|
|
EmCare
|
|
54
|
|
55
|
|
56
|
|
60
|
|
58
|
|
61
|
|
EMSC
|
|
61
|
|
62
|
|
61
|
|
64
|
|
64
|
|
67
|
|
Investing
activities
. Net cash used in investing activities was
$80.8 million for the nine months ended September 30, 2010 compared to
$31.7 million for the same period in 2009. The increase in cash used in
investing activities relates to $51.2 million used in the acquisition of
businesses during 2010. Additionally,
cash used for insurance collateral requirements increased by $13.5 million
during the nine months ended September 30, 2010 compared to the same
period in 2009. These changes in cash
used in investing activities were offset by an increase in cash provided by
other investing activities of $11.8 million during the nine months ended September 30,
2010 compared to the same period in 2009 due primarily to the return of
performance bond collateral.
Financing
activities.
For the nine months ended September 30, 2010,
net cash used in financing activities was $45.8 million compared to $6.8
million in net cash provided by financing activities for the nine months ended
September 30, 2009. During the nine
months ended September 30, 2010 we incurred $12.0 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 nine months ended September 30, 2010. This is offset by the cash flow benefit
related to tax deductions for stock-based compensation during the nine months
ended September 30, 2010. At September 30,
there were no amounts outstanding under our revolving credit facility.
29
Table of Contents
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 September 30, 2010, we were 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 $3.00 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 5.9 million gallons, which represent
approximately 32% of our total estimated usage over the hedge period, and are
spread over periods from October 2010 through June 2012. As of
December 31, 2009, we were party to a series of transactions under the same
master agreement with fuel prices ranging from $2.91 to $3.15 per gallon for
2.7 million gallons of fuel, or 26% of our total estimated usage at that time.
As of September 30,
2010, we had $423.5 million of debt excluding capital leases, of which $422.3
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 $0.8
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 September 30, 2010 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
30
Table of Contents
EMERGENCY MEDICAL SERVICES CORPORATION
PART II. OTHER INFORMATION
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2010
ITEM 1.
LEGAL PROCEEDINGS
As referenced in our Annual
Report on Form 10-K for the year ended December 31, 2009, a lawsuit purporting
to be a class action was commenced against AMR in Spokane, Washington in
Washington State Court, Spokane County. In September 2010, we reached an
agreement with class representatives to resolve the claims for approximately
$1.1 million, which amount includes all remaining refunds due to class members
and attorneys fees for the plaintiffs counsel. The settlement is expected to be approved and
finalized by the court by the end of January 2011.
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 Reports on Form 10-Q
filed with the SEC on May 4, 2010 and August 5, 2010.
ITEM 1A.
RISK FACTORS
There have been no material
changes from the risk factors disclosed in the Risk Factors sections of EMSCs
Annual Report on Form 10-K for the year ended December 31, 2009.
ITEM 2.
ISSUER PURCHASES OF EQUITY SECURITIES
Period
|
|
Total Number
of Shares
Purchased
|
|
Average
Price Paid
Per Share
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
|
|
Maximum Number (or
Approximate Dollar
Value) of Shares that may
yet be Purchased under
the Plans or Programs
|
|
|
|
|
|
|
|
|
|
|
|
July 1,
2010 through July 31, 2010
|
|
|
|
|
|
|
|
N/A
|
|
August 1,
2010 through August 31, 2010
|
|
|
|
|
|
|
|
N/A
|
|
September 1,
2010 through September 30, 2010
|
|
23,437
|
(1)
|
$
|
54.99
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Represents
shares delivered to the Company from shares of restricted stock under the Companys
Amended and Restated Long-Term Incentive Plan
held by
certain employees upon vesting for the purpose of covering the recipients tax
withholding obligation.
31
Table of Contents
ITEM 6.
EXHIBITS
10.14.4
|
|
Form of 2007 LTIP
Revised Named Executive Officer Restricted Stock Agreement.*
|
|
|
|
10.14.5
|
|
Form of 2007 LTIP
Revised Restricted Stock Agreement.*
|
|
|
|
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
** Furnished with this Report
32
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.
|
|
|
EMERGENCY
MEDICAL SERVICES CORPORATION
|
|
|
|
|
|
|
|
(registrant)
|
|
|
|
|
|
November 4, 2010
|
|
By:
|
/s/ William A. Sanger
|
|
Date
|
|
|
William A. Sanger
|
|
|
|
|
Chairman and Chief
Executive Officer
|
|
|
|
|
|
|
|
By:
|
/s/ Randel G. Owen
|
|
|
|
|
Randel G. Owen
|
|
|
|
|
Chief Financial Officer
and Executive Vice President
|
|
|
|
|
|
|
|
EMERGENCY
MEDICAL SERVICES L.P.
|
|
|
|
(registrant)
|
|
|
|
|
|
|
|
By:
|
Emergency Medical Services
Corporation, its General Partner
|
|
|
|
|
|
November 4, 2010
|
|
By:
|
/s/ William A. Sanger
|
|
Date
|
|
|
William A. Sanger
|
|
|
|
|
Chairman and Chief
Executive Officer
|
|
|
|
|
|
|
|
By:
|
/s/ Randel G. Owen
|
|
|
|
|
Randel G. Owen
|
|
|
|
|
Chief Financial Officer
and Executive Vice President
|
33
Table of Contents
EXHIBIT INDEX
10.14.4
|
|
Form of 2007 LTIP
Revised Named Executive Officer Restricted Stock Agreement.*
|
|
|
|
10.14.5
|
|
Form of 2007 LTIP
Revised Restricted Stock Agreement.*
|
|
|
|
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
** Furnished with this Report
34
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