Emergency Medical Services Announces Results of Operations for the Fourth Quarter and Year Ended December 31, 2006

Highlights: Diluted earnings per share were $0.25 for the fourth quarter, or $0.33 excluding restructuring charges, exceeding analysts’ mean estimate of $0.27, which excludes restructuring charges; Diluted earnings per share were $0.92 for the year ended December 31, 2006, or $1.01 excluding restructuring charges; Net revenue was $500.9 million for the fourth quarter, an increase of 7.1% compared to the same quarter last year; EBITDA was $45.1 million for the fourth quarter, or $50.2 million excluding restructuring charges, an increase of 13.3% compared to the same quarter last year. Emergency Medical Services Corporation (NYSE:EMS) (EMSC or the Company) today announced results for the fourth quarter and year ended December 31, 2006. William A. Sanger, Chairman and Chief Executive Officer, said, "We are pleased with the performance of EMSC in the fourth quarter and for the year. We exceeded the Company’s previously stated guidance for the year, including restructuring charges. Our performance in 2006 was driven by executing our strategy of organic growth, improving margins, winning new contracts, and expanding into new markets and lines of business. "At EmCare, we experienced strong revenue growth and margin expansion. The acquisition of Clinical Staffing Solutions during the quarter positions EmCare to continue expanding our services in the growing inpatient market segment. "At AMR, our performance was impacted by the previously announced rezoning of the 9-1-1 system in LA County. However, we experienced growth in both existing markets and new markets we entered during 2006. We also made significant progress restructuring AMR’s operations. The new structure moves operational decision making closer to the customer, and will enable us to better respond to changes and opportunities in the marketplace,” Sanger concluded. Results of Operations for the Fourth Quarter 2006 For the fourth quarter ended December 31, 2006, EMSC generated net revenue of $500.9 million, an increase of 7.1% compared to the same quarter last year. The Company generated EBITDA of $45.1 million, an increase of 13.3% compared to the same quarter last year. EBITDA increased 20.9% excluding restructuring charges of $5.2 million and $1.8 million in the fourth quarters of 2006 and 2005, respectively. A reconciliation of non-GAAP to GAAP financial measures is included in this news release. EMSC generated net income of $10.8 million, or $0.25 per diluted share ($0.33 per diluted share excluding restructuring costs), on 42.8 million average diluted weighted shares outstanding for the fourth quarter of 2006, compared to net income of $6.1 million, or $0.17 per diluted share ($0.20 per diluted share excluding restructuring costs), on 35.8 million average diluted weighted shares outstanding, for the same quarter last year. The improvement in earnings is primarily due to revenue increases from new contracts, higher net revenue per encounter, reduced interest expense and favorable results from our risk mitigation programs. Operating cash flows for the quarter ended December 31, 2006, were $42.1 million, compared to $9.3 million for the same quarter last year. Operating cash flows in the quarter last year were negatively impacted primarily by the timing of collection of hurricane and tax-related receivables. Net cash used in investing activities was $25.5 million for the quarter ended December 31, 2006, compared to a net $0.0 million for the same quarter last year. Investing activities during the quarter related primarily to net capital expenditures of $17.1 million, a net decrease in insurance collateral of $3.4 million, and the use of $12.0 million of available cash to fund an acquisition. Net cash provided by financing activities was $0.2 million for the quarter ended December 31, 2006, compared to $1.4 million used in financing activities for the same quarter last year. Results of Operations for the Year Ended December 31, 2006 For the year ended December 31, 2006, EMSC generated net revenue of $1.93 billion, an increase of 7.5% compared to the same period last year. EBITDA was $173.7 million ($180.1 million excluding restructuring charges), an increase of 18.3% compared to the same period last year (excluding Laidlaw International, Inc. acquisition-related compensation charges in January, 2005). EMSC generated net income of $39.1 million, or $0.92 per diluted share ($1.01 per diluted share excluding restructuring charges), on 42.5 million average diluted weighted shares outstanding for the year ended December 31, 2006, compared to net income of $14.0 million for 2005. Operating cash flows for the year ended December 31, 2006, were $165.7 million, compared to $105.3 million for the same period last year. Operating cash flows for 2005 were negatively impacted primarily by the timing of collection of accounts receivable, including hurricane and tax-related receivables, offset by increases in accrued liabilities. Net cash used in investing activities was $113.1 million for the year ended December 31, 2006, compared to $74.0 million for the same period in 2005 (excluding $828.8 million related to the acquisition of AMR and EmCare from Laidlaw in February 2005). Net cash used in investing activities during the year ended December 31, 2006, relates primarily to net capital expenditures of $59.5 million for the purchase of new vehicles, medical equipment and technology-related assets, net cash to fund insurance collateral of $28.4 million and business acquisitions of $23.6 million. For the year ended December 31, 2006, net cash used in financing activities was $31.3 million, compared to $10.9 million in 2005 (excluding $822.6 million related to the acquisition of AMR and EmCare from Laidlaw in February 2005). Financing activities during 2006 included unscheduled payments on our senior secured term loan of $19.4 million. Segment Results EMSC operates two business segments: American Medical Response, Inc. (AMR), the Company’s healthcare transportation services segment, and EmCare Holdings, Inc. (EmCare), the Company’s emergency department and hospital-based management services segment. American Medical Response (AMR) For the fourth quarter ended December 31, 2006, AMR generated net revenue of $301.0 million, an increase of 1.0% compared to the same quarter last year (3.4% excluding the net impact of additional hurricane-related deployment). EBITDA was $18.8 million, or $23.9 million excluding restructuring charges, a decrease of 12.1% compared to the same quarter last year excluding restructuring charges in both periods. The decrease in EBITDA resulted primarily from the rezoning of the LA County 9-1-1 system in June 2006 and higher than anticipated provider network costs associated with our Texas Medicaid managed transportation business, partially offset by the net impact of revenue growth during the period and lower insurance costs. For the twelve months ended December 31, 2006, AMR generated net revenue of $1.19 billion, an increase of 3.1% compared to the same period last year (4.1% excluding the net impact of additional hurricane-related deployment). EBITDA was $90.7 million, or $97.0 million excluding restructuring charges, a decrease of 4.8% compared to the same period last year excluding Laidlaw acquisition-related compensation charges in January, 2005 and restructuring charges for the years ended December 31, 2006 and 2005, respectively. EmCare For the fourth quarter ended December 31, 2006, EmCare generated net revenue of $200.0 million, an increase of 17.7% compared to the same quarter last year. EBITDA was $26.3 million, an increase of 83.6% compared to the same quarter last year (excluding restructuring charges of $0.1 million for the quarter ended December 31, 2005). The increase in EBITDA resulted primarily from revenue increases from existing contracts, new contracts and reduced insurance, and selling, general and administrative expenses. For the twelve months ended December 31, 2006, EmCare generated net revenue of $744.8 million, an increase of 15.5% compared to the same period last year. EBITDA was $83.0 million, an increase of 77.9% compared to the same period last year (excluding Laidlaw acquisition-related compensation charges in January, 2005 and restructuring charges for the year ended December 31, 2005). Guidance The Company recently announced earnings guidance for the 2007 fiscal year ending December 31, 2007. The Company expects full year diluted earnings per share between $1.11 and $1.18. Full year EBITDA is expected to be in the $189.0 million to $195.0 million range. Conference Call EMSC management will host a conference call and live audio webcast on Thursday, February 8, 2007, at 11:00 a.m. EST, to discuss the Company’s financial results. A 30-day online replay will be available approximately one hour following the conclusion of the live broadcast. A link to the live broadcast and online replay is available on the Investor Relations section of the Company’s website at www.emsc.net. About Emergency Medical Services Corporation Emergency Medical Services Corporation (EMSC) is a leading provider of emergency medical services in the United States. EMSC operates two business segments: American Medical Response, Inc. (AMR), the Company’s healthcare transportation services segment, and EmCare Holdings, Inc. (EmCare), the Company’s emergency department and hospital-based management services segment. AMR is the leading provider of ambulance services in the United States. EmCare is the nation’s leading provider of outsourced emergency department staffing and related management services. In 2006, EMSC provided services to nearly 10 million patients in more than 2,000 communities nationwide. EMSC is headquartered in Greenwood Village, Colorado. For additional information visit www.emsc.net. Forward-Looking Statements Certain statements and information herein may be deemed to be "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. Any forward-looking statements herein are made as of the date of this press release, and EMSC undertakes no duty to update or revise any such statements. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in EMSC's filings with the SEC from time to time, including in the section entitled "Risk Factors” in the Company’s most recent Annual Report on Form 10-K and subsequent periodic reports. Among the factors that could cause future results to differ materially from those provided in this press release are: the impact on our revenue of changes in transport volume, mix of insured and uninsured patients, and third party reimbursement rates and methods; the adequacy of our insurance coverage and insurance reserves; potential penalties or changes to our operations if we fail to comply with extensive and complex government regulation of our industry, both as it exists now and as it may change in the future; our ability to recruit and retain qualified physicians and other healthcare professionals, and enforce our non-compete agreements with our physicians; the loss of one or more members of our senior management team; the outcome of government investigations of certain of our business practices; our ability to generate cash flow to service our debt obligations and fund the cost of capital expenditures to maintain and upgrade our vehicle fleet and medical equipment; and the loss of existing contracts and the accuracy of our assessment of costs under new contracts. Comparability of Historical Financial Data The comparability of our financial information has been affected by a number of significant events and transactions. In February 2005, AMR and EmCare were acquired by Emergency Medical Services L.P. For the month ended January 31, 2005, prior to the acquisition, the AMR and EmCare businesses formerly owned by Laidlaw International, Inc., are referred to as the "Predecessor.” In addition, EMSC completed an IPO in December 2005 and used net proceeds from this offering to pay down a portion of a senior secured credit facility entered into as part of the acquisition. Generally the results of operations of our segments are comparable from quarter to quarter except for certain capital costs, such as interest and amortization, and Laidlaw acquisition-related compensation charges. Non-GAAP Financial Measures Reconciliation This press release includes presentations of EBITDA, which is defined as operating income plus depreciation and amortization expense. EBITDA is commonly used by management and investors as a measure of leverage capacity, debt service ability and liquidity. EBITDA is not considered a measure of financial performance under U.S. generally accepted accounting principles (GAAP), and the items excluded from EBITDA are significant components in understanding and assessing our financial performance. EBITDA should not be considered in isolation or as an alternative to such GAAP measures as net income, cash flows provided by or used in operating, investing or financing activities or other financial statement data presented in our consolidated financial statements as an indicator of financial performance or liquidity. Reconciliations of non-GAAP financial measures are provided in this news release. However, a reconciliation for the forward-looking EBITDA projections presented herein is not being provided due to the number of variables in the projected EBITDA range. The EBITDA range in this press release is calculated in accordance with the Company’s past practices. Since EBITDA is not a measure determined in accordance with GAAP and is susceptible to varying calculations, EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Furthermore, earnings per share has been presented in this press release both with and without restructuring charges; we have presented non-GAAP measures in addition to the GAAP measure in order to provide investors with a meaningful comparison of our earnings per share results with the mean estimate of analysts, which does not include restructuring charges. EMERGENCY MEDICAL SERVICES CORPORATION Condensed Statements of Operations and Other Information Including a Reconciliation of EBITDA to Net Income (in thousands, except shares, per share data and other information) Predecessor combined one month ended January 31, 2005 Pro forma year ended December 31, 20051 Consolidated three months ended December 31, 2006 Consolidated three months ended December 31, 2005 Consolidated year ended December 31, 2006 Consolidated eleven months ended December 31, 2005 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)   Net revenue $ 500,933  $ 467,832  $ 1,934,205  $ 1,655,485  $ 143,069  $ 1,798,554  Compensation and benefits 343,268  323,460  1,333,648  1,146,055  103,191  1,249,246  Operating expenses 78,636  64,387  294,806  233,087  18,469  251,556  Insurance expense 14,049  22,418  68,271  82,800  7,768  90,568  Selling, general and administrative expenses 14,734  16,014  57,403  54,262  4,283  58,545  Restructuring charges 5,183  1,781  6,369  1,781  -  1,781  Laidlaw compensation charges -  -  -  -  14,440  14,440  EBITDA $ 45,063  $ 39,772  $ 173,708  $ 137,500  $ (5,082) $ 132,418    Reconciliation of EBITDA to net income (loss) EBITDA $ 45,063  $ 39,772  $ 173,708  $ 137,500  $ (5,082) $ 132,418  Depreciation and amortization expense (16,960) (15,332) (66,005) (54,143) (3,894) (58,037) Income (loss) from operations 28,103  24,440  107,703  83,357  (8,976) 74,381  Interest expense (11,336) (13,406) (45,605) (47,813) (1,169) (48,982) Realized gain (loss) on investments (30) (124) (467) (164) 13  (151) Interest and other income (expense) 682  851  2,346  1,040  (4) 1,036  Loss on early debt extinguishment -  (2,040) (377) (2,040) -  (2,040) Income tax (expense) benefit (7,005) (3,715) (24,961) (14,372) 4,060  (10,312) Equity in earnings of unconsolidated subsidiary 394  59  432  59  -  59  Net income (loss) $ 10,808  $ 6,065  $ 39,071  $ 20,067  $ (6,076) $ 13,991    Restructuring charges $ 5,183  $ 1,781  $ 6,369  $ 1,781  $ -  $ 1,781  Income tax expense related to restructuring charges (2,034) (745) (2,500) (745) -  (745) Net income excluding tax effected restructuring charges $ 13,957  $ 7,101  $ 42,940  $ 21,103  $ (6,076) $ 15,027    Basic net income per common share $ 0.26  $ 0.17  $ 0.94  $ 0.56  N/A  N/A  Diluted net income per common share $ 0.25  $ 0.17  $ 0.92  $ 0.55  N/A  N/A  Diluted net income per common share excluding tax effected restructuring charges $ 0.33  $ 0.20  $ 1.01  $ 0.58  N/A  N/A  Average common shares outstanding, basic 41,512,898  34,805,926  41,502,632  33,621,542  N/A  N/A  Average common shares outstanding, diluted 42,790,664  35,802,841  42,528,885  34,282,176  N/A  N/A    Other Information EmCare patient visits 1,663,720  1,520,109  6,463,617  5,579,955  464,500  6,044,455  AMR ambulance transports 714,146  721,638  2,889,498  2,644,685  243,700  2,888,385  AMR weighted transports 729,222  735,463  2,950,605  2,701,342  249,421  2,950,763    1 Pro forma combined one-month Predecessor with eleven-month Successor. EMERGENCY MEDICAL SERVICES CORPORATION Unaudited Reconciliation of Segment EBITDA to Income from Operations (in thousands) Predecessor combined one month ended January 31, Consolidated three months ended December 31, Consolidated three months ended December 31, Consolidated year ended December 31, Consolidated eleven months ended December 31, Pro forma year ended December 31, 20061 20051 20061 20051 20052 20051,2,3 AMR EBITDA $ 18,751  $ 25,591  $ 90,671  $ 93,404  $ 1,074  $ 94,478  Depreciation and amortization expense     (13,792) (12,563) (53,024) (44,090) (3,418) (47,508) Income (loss) from operations 4,959  13,028  37,647  49,314  (2,344) 46,970    EmCare EBITDA 26,312  14,181  83,037  44,096  (6,156) 37,940  Depreciation and amortization expense (3,168) (2,747) (12,981) (10,031) (476) (10,507) Income (loss) from operations 23,144  11,434  70,056  34,065  (6,632) 27,433    Total EBITDA 45,063  39,772  173,708  137,500  (5,082) 132,418  Depreciation and amortization expense (16,960) (15,310) (66,005) (54,121) (3,894) (58,015) Depreciation and amortization expense parent -  (22) -  (22) -  (22) Income (loss) from operations $ 28,103  $ 24,440  $ 107,703  $ 83,357  $ (8,976) $ 74,381        1 AMR EBITDA includes $5.2 million and $6.4 million of restructuring charges for the three months and year ended December 31, 2006, respectively and $1.6 million of restructuring charges for the three months and year ended December 31, 2005. EmCare EBITDA includes $0.1 million of restructuring charges for the three months and for the year ended December 31, 2006. 2 Income (loss) from operations includes Laidlaw compensation charges of $5.8 million at AMR and $8.6 million at EmCare in connection with the acquisition from Laidlaw. 3 Pro forma combined one-month Predecessor with eleven-month Successor. EMERGENCY MEDICAL SERVICES CORPORATION Condensed Consolidated Balance Sheets (in thousands)     December 31, December 31, 2006  2005  (unaudited) Assets Current assets: Cash and cash equivalents $ 39,336  $ 18,048  Trade and other accounts receivable, net 416,450  411,184  Other current assets 76,703  86,064  Total current assets 532,489  515,296  Non-current assets: Property, plant and equipment, net 147,162  138,037  Goodwill and other intangible assets, net 339,117  329,351  Other long-term assets 299,449  284,344  Total assets $ 1,318,217  $ 1,267,028    Liabilities and Equity Current liabilities $ 300,962  $ 277,435  Long-term debt 475,616  495,520  Insurance reserves and other long-term liabilities 155,599  149,089  Total liabilities 932,177  922,044  Total equity 386,040  344,984  Total liabilities and equity $ 1,318,217  $ 1,267,028  EMERGENCY MEDICAL SERVICES CORPORATION Condensed Statements of Cash Flows (in thousands)   Predecessor combined one month ended January 31, 2005 Pro forma year ended December 31, 20051 Consolidated three months ended December 31, 2006 Consolidated three months ended December 31, 2005 Consolidated year ended December 31, 2006 Consolidated eleven months ended December 31, 2005 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Cash Flows from Operating Activities Net income (loss) $ 10,808  $ 6,065  $ 39,071  $ 20,067  $ (6,076) $ 13,991    Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation, amortization, deferred taxes and other 24,748  31,028  93,339  74,869  (209) 74,660  Non-cash Laidlaw allocated compensation expense -  -  -  -  14,440  14,440  Changes in operating assets/ liabilities: Trade and other accounts receivable (9,533) (41,418) (4,740) (36,617) (20,771) (57,388) Insurance accruals (1,937) 3,716  8,414  20,719  1,772  22,491  Other assets and liabilities 18,062  9,897  29,658  30,925  6,164  37,089  Net cash provided by (used in) operating activities 42,148  9,288  165,742  109,963  (4,680) 105,283    Cash Flows from Investing Activities Purchase of property, plant and equipment, net (17,119) (13,843) (59,513) (48,225) (3,890) (52,115) Acquisition of business, net of cash received (11,968) -  (23,555) -  -  -  Insurance collateral 3,410  6,073  (28,363) (39,941) 12,534  (27,407) Other investing activities 164  7,776  (1,696) 7,312  (1,828) 5,484  EMS LP purchase of AMR and EmCare -  -  -  (828,775) -  (828,775) Net cash (used in) provided by investing activities (25,513) 6  (113,127) (909,629) 6,816  (902,813)   Cash Flows from Financing Activities EMS LP purchase of AMR and EmCare, net -  (127) -  822,606  -  822,606  EMSC issuance of class A common stock, net -  104,071  (2,304) 104,071  -  104,071  Repayments of capital lease obligations and other debt (1,677) (106,423) (27,066) (132,345) (2,021) (134,366) Other financing activities 1,914  1,120  (1,957) 8,751  10,653  19,404  Net cash provided by (used in) financing activities 237  (1,359) (31,327) 803,083  8,632  811,715    Change in cash and cash equivalents 16,872  7,935  21,288  3,417  10,768  14,185  Cash and cash equivalents, beginning of period 22,464  10,113  18,048  14,631  3,863  3,863  Cash and cash equivalents, end of period $ 39,336  $ 18,048  $ 39,336  $ 18,048  $ 14,631  $ 18,048      1 Pro forma combined one-month Predecessor with eleven-month Successor.