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 June 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 July 30, 2010 — 30,265,888; shares of class B common stock outstanding at July 30, 2010 — 65,052; LP exchangeable units outstanding at July 30, 2010 — 13,724,676.

 

 

 



Table of Contents

 

EMERGENCY MEDICAL SERVICES CORPORATION

 

INDEX TO QUARTERLY REPORT

 

ON FORM 10-Q

 

FOR THE THREE AND SIX MONTHS ENDED

 

JUNE 30, 2010

 

Part 1. Financial Information

3

 

 

 

Item 1.

Financial Statements (Unaudited):

3

 

 

 

 

Consolidated Statements of Operations and Comprehensive Income

3

 

 

 

 

Consolidated Balance Sheets

4

 

 

 

 

Consolidated Statements of Cash Flows

5

 

 

 

 

Notes to Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

 

 

 

Item 4.

Controls and Procedures

32

 

 

 

Part II. Other Information

33

 

 

 

Item 1.

Legal Proceedings

33

 

 

 

Item 1A.

Risk Factors

33

 

 

 

Item 6.

Exhibits

34

 

 

 

Signatures

35

 

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EMERGENCY MEDICAL SERVICES CORPORATION

PART I. FINANCIAL INFORMATION

FOR THE THREE AND SIX MONTHS ENDED

JUNE 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 June 30,

 

Six months ended June 30,

 

 

 

2010

 

2009

 

2010

 

2009

 

Net revenue

 

$

708,804

 

$

637,291

 

$

1,388,158

 

$

1,250,313

 

Compensation and benefits

 

496,443

 

438,628

 

976,760

 

865,162

 

Operating expenses

 

90,586

 

82,173

 

177,115

 

166,845

 

Insurance expense

 

25,942

 

28,357

 

48,012

 

50,861

 

Selling, general and administrative expenses

 

18,298

 

16,279

 

35,156

 

31,315

 

Depreciation and amortization expense

 

15,692

 

16,157

 

31,872

 

32,925

 

Income from operations

 

61,843

 

55,697

 

119,243

 

103,205

 

Interest income from restricted assets

 

859

 

1,120

 

1,714

 

2,386

 

Interest expense

 

(5,060

)

(10,279

)

(13,326

)

(20,469

)

Realized gain on investments

 

57

 

847

 

149

 

1,486

 

Interest and other income

 

206

 

423

 

471

 

940

 

Loss on early debt extinguishment

 

(19,091

)

 

(19,091

)

 

Income before income taxes and equity in earnings of unconsolidated subsidiary

 

38,814

 

47,808

 

89,160

 

87,548

 

Income tax expense

 

(14,955

)

(18,885

)

(34,365

)

(34,611

)

Income before equity in earnings of unconsolidated subsidiary

 

23,859

 

28,923

 

54,795

 

52,937

 

Equity in earnings of unconsolidated subsidiary

 

105

 

96

 

199

 

153

 

Net income

 

23,964

 

29,019

 

54,994

 

53,090

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) during the period

 

1,101

 

(1,377

)

1,543

 

(2,534

)

Unrealized gains (losses) on derivative financial instruments

 

(563

)

916

 

(85

)

1,267

 

Comprehensive income

 

$

24,502

 

$

28,558

 

$

56,452

 

$

51,823

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.54

 

$

0.69

 

$

1.26

 

$

1.26

 

Diluted earnings per common share

 

$

0.54

 

$

0.67

 

$

1.23

 

$

1.23

 

Weighted average common shares outstanding, basic

 

44,011,821

 

42,354,667

 

43,792,979

 

42,140,632

 

Weighted average common shares outstanding, diluted

 

44,703,834

 

43,334,340

 

44,620,562

 

43,215,657

 

 

The accompanying notes are an integral part of these financial statements.

 

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Emergency Medical Services Corporation

Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

 

June 30,

 

December 31,

 

 

 

2010

 

2009

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

313,033

 

$

332,888

 

Insurance collateral

 

30,936

 

24,986

 

Trade and other accounts receivable, net

 

483,597

 

459,088

 

Parts and supplies inventory

 

22,392

 

22,270

 

Prepaids and other current assets

 

32,578

 

19,662

 

Current deferred tax assets

 

 

6,323

 

Total current assets

 

882,536

 

865,217

 

Non-current assets:

 

 

 

 

 

Property, plant and equipment, net

 

121,324

 

125,855

 

Intangible assets, net

 

144,567

 

102,654

 

Non-current deferred tax assets

 

5,827

 

13,468

 

Insurance collateral

 

144,740

 

143,886

 

Goodwill

 

386,500

 

381,951

 

Other long-term assets

 

19,301

 

21,676

 

Total assets

 

$

1,704,795

 

$

1,654,707

 

Liabilities and Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

66,832

 

$

70,759

 

Accrued liabilities

 

267,585

 

273,704

 

Current deferred tax liability

 

11,494

 

 

Current portion of long-term debt

 

11,848

 

4,676

 

Total current liabilities

 

357,759

 

349,139

 

Long-term debt

 

415,687

 

449,254

 

Insurance reserves and other long-term liabilities

 

166,574

 

170,227

 

Total liabilities

 

940,020

 

968,620

 

Equity:

 

 

 

 

 

Preferred stock ($0.01 par value; 20,000,000 shares authorized, 0 issued and outstanding)

 

 

 

Class A common stock ($0.01 par value; 100,000,000 shares authorized, 30,285,248 and 29,541,411 issued and outstanding in 2010 and 2009, respectively)

 

303

 

295

 

Class B common stock ($0.01 par value; 40,000,000 shares authorized, 65,052 issued and outstanding in 2010 and 2009)

 

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)

 

90,776

 

90,776

 

Additional paid-in capital

 

297,544

 

275,316

 

Retained earnings

 

374,036

 

319,042

 

Accumulated other comprehensive income

 

2,115

 

657

 

Total equity

 

764,775

 

686,087

 

Total liabilities and equity

 

$

1,704,795

 

$

1,654,707

 

 

The accompanying notes are an integral part of these financial statements.

 

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Emergency Medical Services Corporation

Consolidated Statements of Cash Flows

(unaudited; in thousands)

 

 

 

Quarter ended June 30,

 

Six months ended June 30,

 

 

 

2010

 

2009

 

2010

 

2009

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

 

Net income

 

$

23,964

 

$

29,019

 

$

54,994

 

$

53,090

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

16,321

 

16,661

 

33,008

 

33,741

 

Loss on disposal of property, plant and equipment

 

45

 

38

 

89

 

36

 

Equity-based compensation expense

 

1,441

 

1,104

 

2,545

 

1,754

 

Excess tax benefits from stock-based compensation

 

(2,917

)

 

(13,498

)

 

Loss on early debt extinguishment

 

19,091

 

 

19,091

 

 

Equity in earnings of unconsolidated subsidiary

 

(105

)

(96

)

(199

)

(153

)

Dividends received

 

 

 

403

 

713

 

Deferred income taxes

 

973

 

17,333

 

840

 

31,928

 

Changes in operating assets/liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

 

Trade and other accounts receivable

 

(21,750

)

3,499

 

(19,559

)

874

 

Parts and supplies inventory

 

75

 

(87

)

(87

)

(107

)

Prepaids and other current assets

 

(8,828

)

12,530

 

(12,216

)

4,690

 

Accounts payable and accrued liabilities

 

7,093

 

20,120

 

13,099

 

11,620

 

Insurance accruals

 

4,754

 

(1,124

)

6,232

 

2,753

 

Net cash provided by operating activities

 

40,157

 

98,997

 

84,742

 

140,939

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

(8,652

)

(12,878

)

(15,168

)

(20,085

)

Proceeds from sale of property, plant and equipment

 

66

 

39

 

108

 

60

 

Acquisition of businesses, net of cash received

 

(47,675

)

(133

)

(50,975

)

(133

)

Net change in insurance collateral

 

(7,627

)

(15,243

)

(5,261

)

(1,933

)

Other investing activities

 

10,648

 

27

 

10,938

 

(643

)

Net cash used in investing activities

 

(53,240

)

(28,188

)

(60,358

)

(22,734

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

 

EMSC issuance of class A common stock

 

1,791

 

3,825

 

6,193

 

4,723

 

Repayments of capital lease obligations and other debt

 

(451,443

)

(1,453

)

(452,627

)

(2,612

)

Borrowings under credit facility

 

425,000

 

 

425,000

 

 

Debt issue costs

 

(11,749

)

 

(11,749

)

 

Payment for premiums for debt extinguishment

 

(14,513

)

 

(14,513

)

 

Excess tax benefits from stock-based compensation

 

2,917

 

 

13,498

 

 

Net change in bank overdrafts

 

(6,942

)

(190

)

(10,041

)

650

 

Net cash (used in) provided by financing activities

 

(54,939

)

2,182

 

(44,239

)

2,761

 

Change in cash and cash equivalents

 

(68,022

)

72,991

 

(19,855

)

120,966

 

Cash and cash equivalents, beginning of period

 

381,055

 

194,148

 

332,888

 

146,173

 

Cash and cash equivalents, end of period

 

$

313,033

 

$

267,139

 

$

313,033

 

$

267,139

 

 

The accompanying notes are an integral part of these financial statements.

 

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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 fair presentation have been included. All such adjustments are of a normal, recurring nature. Operating results for the three and six month periods ended June 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 Company’s consolidated financial statements, including the accounting policies and notes thereto, included in the Company’s 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 Company’s 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 Company’s 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 six months ended June 30, 2010 and 2009, the Company expensed $250 and $500, 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 Company’s 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

 

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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) and changes in case reserves and the assumed rate of inflation in healthcare costs and property damage repairs.

 

The Company’s most recent actuarial valuation was completed in June 2010. As a result of this and previous actuarial valuations, the Company recorded an increase of $1.5 million in its provision for insurance liabilities related to reserves for losses in prior years during the three months ended June 30, 2010.  A total decrease of $1.3 million was recorded during the six months ended June 30, 2010.  As a result of the actuarial valuation completed in June 2009, the Company recorded an increase in its provision for insurance liabilities of $4.4 million during the three months ended June 30, 2009 and $5.2 million during the six months ended June 30, 2009.

 

The long-term portion of insurance reserves was $156.1 million and $143.6 million as of June 30, 2010 and December 31, 2009, respectively.

 

Trade and Other Accounts Receivable, net

 

The Company estimates its allowances based on payor reimbursement schedules, historical collections and 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 Company’s accounts receivable and allowances are as follows:

 

 

 

June 30,
2010

 

December 31,
2009

 

Gross trade accounts receivable

 

$

2,050,884

 

$

1,955,152

 

Allowance for contractual discounts

 

1,058,380

 

1,001,285

 

Allowance for uncompensated care

 

590,954

 

572,015

 

Net trade accounts receivable

 

401,550

 

381,852

 

Other receivables, net

 

82,047

 

77,236

 

Net accounts receivable

 

$

483,597

 

$

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.  AMR’s 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

 

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percentage of gross revenue and as a percentage of gross revenue less provision for contractual discounts are as follows:

 

 

 

Quarter ended
June 30,

 

Six months ended
June 30,

 

 

 

2010

 

2009

 

2010

 

2009

 

Gross revenue

 

100.0

%

100.0

%

100.0

%

100.0

%

Provision for contractual discounts

 

53.1

%

49.4

%

52.6

%

48.7

%

Revenue net of contractual discounts

 

46.9

%

50.6

%

47.4

%

51.3

%

Provision for uncompensated care as a percentage of gross revenue

 

18.3

%

20.4

%

18.5

%

20.0

%

Provision for uncompensated care as a percentage of gross revenue less contractual discounts

 

39.0

%

40.2

%

39.1

%

39.0

%

 

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 six month periods ending June 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 Company’s 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 Company’s class B common stock.

 

As of June 30, 2010, the Company holds 68.9% of the equity interests in EMS LP. LP exchangeable units, held by persons affiliated with the Company’s 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 Company’s 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 Company’s class B special voting stock, at all stockholder meetings at which holders of the Company’s 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 Company’s 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 if one class, and entitle holders to receive distributions only if the equivalent dividends are declared on the Company’s class B common stock. Accordingly, the Company accounts for the LP exchangeable units as if the LP

 

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exchangeable units were shares of its common stock, including reporting the LP exchangeable units in the equity section of the Company’s 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 Company’s own assumptions about the fair value of the asset or liability.

 

The following table summarizes the valuation of EMSC’s financial instruments as of June 30, 2010 by the above fair value hierarchy levels:

 

Description

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

Securities

 

$

81,753

 

$

67,827

 

$

13,926

 

$

 

Derivatives

 

$

35

 

$

 

$

35

 

$

 

 

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 performed, $31.1 million was reclassified from goodwill to intangible assets, and, as a result, an adjustment was also made to amortization expense.

 

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 $51.0 million and the Company has recorded $35.0 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 June 30, 2010 and December 31, 2009:

 

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June 30,
2010

 

December 31,
2009

 

Accrued wages and benefits

 

$

114,760

 

$

92,721

 

Accrued paid time-off

 

27,321

 

24,290

 

Current portion of self-insurance reserves

 

56,542

 

62,832

 

Accrued restructuring

 

171

 

181

 

Current portion of compliance and legal

 

5,758

 

2,814

 

Accrued billing and collection fees

 

4,168

 

4,093

 

Accrued profit sharing

 

18,093

 

34,000

 

Accrued interest

 

1,090

 

9,773

 

Accrued income taxes payable

 

 

5,454

 

Other

 

39,682

 

37,546

 

Total accrued liabilities

 

$

267,585

 

$

273,704

 

 

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 LP’s 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 Company’s 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 June 30, 2010 and December 31, 2009:

 

 

 

June 30,
2010

 

December 31,
2009

 

Senior subordinated notes

 

$

 

$

250,000

 

Senior secured term loan due 2015 (3.35% at June 30, 2010)

 

425,000

 

199,765

 

Notes due at various dates from 2010 to 2022 with interest rates from 6% to 10%

 

1,696

 

1,249

 

Capital lease obligations due at various dates from 2010 to 2018 (see note 7)

 

839

 

2,916

 

 

 

427,535

 

453,930

 

Less current portion

 

(11,848

)

(4,676

)

Total long-term debt

 

$

415,687

 

$

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 June 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 $2.96 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 6.8 million gallons, which

 

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represent approximately 32% of the Company’s total estimated usage over the hedge period, and are spread over periods from July 2010 through June 2012.  As of June 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 less than $0.1 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 six months ended June 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.

 

Forward 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 quality as derivatives. There was no material impact to operating expenses related to these contracts during the three or six month periods ended June 30, 2010.

 

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 alleges 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.  At this time, AMR does not believe that any incorrect billings are material in amount.

 

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

 

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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 Company’s stock options are valued using the Black-Scholes valuation method on the date of grant.  Equity based compensation has been issued under the plans described below.

 

Equity Option Plan

 

Under the Company’s 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 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 six months ended June 30, 2010 as well as during the three months ended June 30, 2009.  A compensation charge of $97 was recorded for the six months ended June 30, 2009.  Options are no longer granted under the Equity Option Plan, but rather under the Company’s Second Amended and Restated Long-Term Incentive Plan described below.

 

Long-Term Incentive Plan

 

The Company’s 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 granted options and restricted stock to key employees during the three months ended June 30, 2010 under the Plan.  The options permit employees to purchase a total of 166,500 shares of class A common stock at a weighted average exercise price of $56.34 per share, vest ratably over a period of four to five years, and have a maximum term of ten years.  The Company also granted 166,500 shares of restricted stock pursuant to the Plan, which vest ratably over a period of three years.

 

The Company recorded a compensation charge of $1,297 and $979 during the three months ended June 30, 2010 and 2009, respectively, and $2,276 and $1,407 during the six months ended June 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 Company’s 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 Company’s class A common stock on the business day immediately preceding the grant date.  The Non-Employee Director

 

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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 in 2010 and 3,018 RSUs per director in 2009.  The Company expensed $144 and $125 during the three month periods ended June 30, 2010 and 2009, respectively, and $269 and $250 during the six month periods ended June 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 a Stock Purchase Plan and the Company’s Employee Stock Purchase Plan (together, the “SPPs”).  The purchases of stock under the SPPs will occur in October 2010 at a 5% discount to the closing price of the Company’s class A common stock on October 15, 2010, and as such no compensation charge has been recorded for the SPPs in the second quarter of 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, interest and other income, realized gain on investments, loss on early debt extinguishment, interest expense and depreciation and amortization (“Adjusted 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 June 30,

 

Six months ended June 30,

 

 

 

2010

 

2009

 

2010

 

2009

 

Healthcare Transportation Services

 

 

 

 

 

 

 

 

 

Net Revenue

 

$

344,159

 

$

335,504

 

$

681,121

 

$

671,950

 

Segment Adjusted EBITDA

 

31,760

 

32,425

 

64,162

 

66,313

 

Facility-Based Physician Services

 

 

 

 

 

 

 

 

 

Net Revenue

 

$

364,645

 

301,787

 

$

707,037

 

578,363

 

Segment Adjusted EBITDA

 

46,634

 

40,549

 

88,667

 

72,203

 

Total

 

 

 

 

 

 

 

 

 

Total Net Revenue

 

$

708,804

 

637,291

 

$

1,388,158

 

1,250,313

 

Total Adjusted EBITDA

 

78,394

 

72,974

 

152,829

 

138,516

 

Reconciliation of Adjusted EBITDA to Net Income

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

78,394

 

$

72,974

 

$

152,829

 

$

138,516

 

Depreciation and amortization expense

 

(15,692

)

(16,157

)

(31,872

)

(32,925

)

Interest expense

 

(5,060

)

(10,279

)

(13,326

)

(20,469

)

Realized gain on investments

 

57

 

847

 

149

 

1,486

 

Interest and other income

 

206

 

423

 

471

 

940

 

Loss on early debt extinguishment

 

(19,091

)

 

(19,091

)

 

Income tax expense

 

(14,955

)

(18,885

)

(34,365

)

(34,611

)

Equity in earnings of unconsolidated subsidiary

 

105

 

96

 

199

 

153

 

Net income

 

$

23,964

 

$

29,019

 

$

54,994

 

$

53,090

 

 

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A reconciliation of Adjusted EBITDA to cash flows provided by operating activities is as follows:

 

 

 

For the quarter ended June 30,

 

For the six months ended June 30,

 

 

 

2010

 

2009

 

2010

 

2009

 

Adjusted EBITDA

 

$

78,394

 

$

72,974

 

$

152,829

 

$

138,516

 

Interest paid

 

(4,431

)

(9,774

)

(12,190

)

(19,651

)

Change in accounts receivable

 

(21,750

)

3,499

 

(19,559

)

874

 

Change in other operating assets/liabilities

 

3,094

 

31,439

 

7,028

 

18,956

 

Equity based compensation

 

1,441

 

1,104

 

2,545

 

1,754

 

Excess tax benefits from stock-based compensation

 

(2,917

)

 

(13,498

)

 

Income tax expense, net of change in deferred taxes

 

(13,982

)

(1,552

)

(33,525

)

(2,683

)

Other

 

308

 

1,307

 

1,112

 

3,173

 

Cash flows provided by operating activities

 

$

40,157

 

$

98,997

 

$

84,742

 

$

140,939

 

 

10.       Guarantors of Debt

 

EMS LP’s 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 EMSC’s domestic subsidiaries. The senior secured credit facility does not include a guarantee by the Company’s 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:

 

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Consolidating Statement of Operations

For the quarter ended June 30, 2010

 

 

 

 

 

 

 

Issuer

 

Issuer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMR

 

EmCare

 

Subsidiary

 

Subsidiary

 

Eliminations/

 

 

 

 

 

EMSC

 

EMS LP

 

HoldCo, Inc.

 

HoldCo, Inc.

 

Guarantors

 

Non-Guarantor

 

Adjustments

 

Total

 

Net revenue

 

$

 

$

 

$

 

$

 

$

708,804

 

$

18,863

 

$

(18,863

)

$

708,804

 

Compensation and benefits

 

 

 

 

 

496,443

 

 

 

496,443

 

Operating expenses

 

 

 

 

 

90,586

 

 

 

90,586

 

Insurance expense

 

 

 

 

 

25,370

 

19,435

 

(18,863

)

25,942

 

Selling, general and administrative expenses

 

 

 

 

 

18,298

 

 

 

18,298

 

Depreciation and amortization expense

 

 

 

 

 

15,692

 

 

 

15,692

 

Income (loss) from operations

 

 

 

 

 

62,415

 

(572

)

 

61,843

 

Interest income from restricted assets

 

 

 

 

 

344

 

515

 

 

859

 

Interest expense

 

 

 

 

 

(5,060

)

 

 

(5,060

)

Realized gain on investments

 

 

 

 

 

 

57

 

 

57

 

Interest and other income

 

 

 

 

 

206

 

 

 

206

 

Loss on early debt extinguishment

 

 

 

 

 

(19,091

)

 

 

(19,091

)

Income before income taxes

 

 

 

 

 

38,814

 

 

 

38,814

 

Income tax expense

 

 

 

 

 

(14,955

)

 

 

(14,955

)

Income before equity in earnings of unconsolidated subsidiaries

 

 

 

 

 

23,859

 

 

 

23,859

 

Equity in earnings of unconsolidated subsidiaries

 

23,964

 

23,964

 

3,235

 

20,729

 

105

 

 

(71,892

)

105

 

Net income

 

$

23,964

 

$

23,964

 

$

3,235

 

$

20,729

 

$

23,964

 

$

 

$

(71,892

)

$

23,964

 

 

Consolidating Statement of Operations

For the quarter ended June 30, 2009

 

 

 

 

 

 

 

Issuer

 

Issuer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMR

 

EmCare

 

Subsidiary

 

Subsidiary

 

Eliminations/

 

 

 

 

 

EMSC

 

EMS LP

 

HoldCo, Inc.

 

HoldCo, Inc.

 

Guarantors

 

Non-Guarantor

 

Adjustments

 

Total

 

Net revenue

 

$

 

$

 

$

 

$

 

$

637,291

 

$

7,147

 

$

(7,147

)

$

637,291

 

Compensation and benefits

 

 

 

 

 

438,628

 

 

 

438,628

 

Operating expenses

 

 

 

 

 

82,173

 

 

 

82,173

 

Insurance expense

 

 

 

 

 

26,825

 

8,679

 

(7,147

)

28,357

 

Selling, general and administrative expenses

 

 

 

 

 

16,279

 

 

 

16,279

 

Depreciation and amortization expense

 

 

 

 

 

16,157

 

 

 

16,157

 

Income (loss) from operations

 

 

 

 

 

57,229

 

(1,532

)

 

55,697

 

Interest income from restricted assets

 

 

 

 

 

435

 

685

 

 

1,120

 

Interest expense

 

 

 

 

 

(10,279

)

 

 

(10,279

)

Realized gain on investments

 

 

 

 

 

 

847

 

 

847

 

Interest and other income

 

 

 

 

 

423

 

 

 

423

 

Income before income taxes

 

 

 

 

 

47,808

 

 

 

47,808

 

Income tax expense

 

 

 

 

 

(18,885

)

 

 

(18,885

)

Income before equity in earnings of unconsolidated subsidiaries

 

 

 

 

 

28,923

 

 

 

28,923

 

Equity in earnings of unconsolidated subsidiaries

 

29,019

 

29,019

 

8,591

 

20,428

 

96

 

 

(87,057

)

96

 

Net income

 

$

29,019

 

$

29,019

 

$

8,591

 

$

20,428

 

$

29,019

 

$

 

$

(87,057

)

$

29,019

 

 

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Table of Contents

 

Consolidating Statement of Operations

For the six months ended June 30, 2010

 

 

 

 

 

 

 

Issuer

 

Issuer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMR

 

EmCare

 

Subsidiary

 

Subsidiary

 

Eliminations/

 

 

 

 

 

EMSC

 

EMS LP

 

HoldCo, Inc.

 

HoldCo, Inc.

 

Guarantors

 

Non-Guarantor

 

Adjustments

 

Total

 

Net revenue

 

$

 

$

 

$

 

$

 

$

1,388,158

 

$

26,101

 

$

(26,101

)

$

1,388,158

 

Compensation and benefits

 

 

 

 

 

976,760

 

 

 

976,760

 

Operating expenses

 

 

 

 

 

177,115

 

 

 

177,115

 

Insurance expense

 

 

 

 

 

46,837

 

27,276

 

(26,101

)

48,012

 

Selling, general and administrative expenses

 

 

 

 

 

35,156

 

 

 

35,156

 

Depreciation and amortization expense

 

 

 

 

 

31,872

 

 

 

31,872

 

Income (loss) from operations

 

 

 

 

 

120,418

 

(1,175

)

 

119,243

 

Interest income from restricted assets

 

 

 

 

 

688

 

1,026

 

 

1,714

 

Interest expense

 

 

 

 

 

(13,326

)

 

 

(13,326

)

Realized gain on investments

 

 

 

 

 

 

149

 

 

149

 

Interest and other income

 

 

 

 

 

471

 

 

 

471

 

Loss on early extinguishment of debt

 

 

 

 

 

(19,091

)

 

 

(19,091

)

Income before income taxes

 

 

 

 

 

89,160

 

 

 

89,160

 

Income tax expense

 

 

 

 

 

(34,365

)

 

 

(34,365

)

Income before equity in earnings of unconsolidated subsidiaries

 

 

 

 

 

54,795

 

 

 

54,795

 

Equity in earnings of unconsolidated subsidiaries

 

54,994

 

54,994

 

13,521

 

41,473

 

199

 

 

(164,982

)

199

 

Net income

 

$

54,994

 

$

54,994

 

$

13,521

 

$

41,473

 

$

54,994

 

$

 

$

(164,982

)

$

54,994

 

 

Consolidating Statement of Operations

For the six months ended June 30, 2009

 

 

 

 

 

 

 

Issuer

 

Issuer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMR

 

EmCare

 

Subsidiary

 

Subsidiary

 

Eliminations/

 

 

 

 

 

EMSC

 

EMS LP

 

HoldCo, Inc.

 

HoldCo, Inc.

 

Guarantors

 

Non-Guarantor

 

Adjustments

 

Total

 

Net revenue

 

$

 

$

 

$

 

$

 

$

1,250,313

 

$

14,030

 

$

(14,030

)

$

1,250,313

 

Compensation and benefits

 

 

 

 

 

865,162

 

 

 

865,162

 

Operating expenses

 

 

 

 

 

166,845

 

 

 

166,845

 

Insurance expense

 

 

 

 

 

47,979

 

16,912

 

(14,030

)

50,861

 

Selling, general and administrative expenses

 

 

 

 

 

31,315

 

 

 

31,315

 

Depreciation and amortization expense

 

 

 

 

 

32,925

 

 

 

32,925

 

Income (loss) from operations

 

 

 

 

 

106,087

 

(2,882

)

 

103,205

 

Interest income from restricted assets

 

 

 

 

 

990

 

1,396

 

 

2,386

 

Interest expense

 

 

 

 

 

(20,469

)

 

 

(20,469

)

Realized gain on investments

 

 

 

 

 

 

1,486

 

 

1,486

 

Interest and other income

 

 

 

 

 

940

 

 

 

940

 

Income before income taxes

 

 

 

 

 

87,548

 

 

 

87,548

 

Income tax expense

 

 

 

 

 

(34,611

)

 

 

(34,611

)

Income before equity in earnings of unconsolidated subsidiaries

 

 

 

 

 

52,937

 

 

 

52,937

 

Equity in earnings of unconsolidated subsidiaries

 

53,090

 

53,090

 

17,935

 

35,155

 

153

 

 

(159,270

)

153

 

Net income

 

$

53,090

 

$

53,090

 

$

17,935

 

$

35,155

 

$

53,090

 

$

 

$

(159,270

)

$

53,090

 

 

16



Table of Contents

 

Consolidating Balance Sheet

As of June 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

 

$

 

$

 

$

 

$

 

$

297,207

 

$

15,826

 

$

 

$

313,033

 

Insurance collateral

 

 

 

 

 

9,600

 

89,010

 

(67,674

)

30,936

 

Trade and other accounts receivable, net

 

 

 

 

 

483,144

 

453

 

 

483,597

 

Parts and supplies inventory

 

 

 

 

 

22,392

 

 

 

22,392

 

Prepaids and other current assets

 

 

 

 

 

28,705

 

490

 

3,383

 

32,578

 

Current deferred tax assets

 

 

 

 

 

(3,834

)

3,834

 

 

 

Current assets

 

 

 

 

 

837,214

 

109,613

 

(64,291

)

882,536

 

Non-current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant, and equipment, net

 

 

 

 

 

121,324

 

 

 

121,324

 

Intercompany receivable

 

 

 

286,520

 

127,369

 

 

 

(413,889

)

 

Intangible assets, net

 

 

 

 

 

144,567

 

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