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Envision Healthcare Reports Second Quarter Adjusted EBITDA of $162.8 Million, up 21% on Strong Revenue Growth and Adjusted EPS Increases by 32%Envision Healthcare Holdings, Inc. (Envision or Company) (NYSE: EVHC) reported results from operations for the three months and six months ended June 30, 2015. All comparisons included in this release are for the 2015 periods to the comparable 2014 period, unless otherwise noted. Highlights:
"We continue to deliver strong financial results while at the same time expanding our clinical capabilities and aligning our resources to care for patients across a variety of healthcare settings," said William A. Sanger, chairman, president and chief executive officer. "Our top-line growth for the second quarter reflects strong organic growth and contributions from regional provider groups that joined our organization through acquisition. "As we actively shape healthcare services, the role of medical transportation and the integration of paramedics and emergency medical technicians takes on greater significance. Our agreement to acquire Rural/Metro, with its diverse and complementary presence, enhances our ability to deliver value to the patients we serve in this ever-changing healthcare landscape." Results of Operations for the Second Quarter of 2015 Envision generated net revenue of $1.35 billion, an increase of 25.9%, driven by balanced contributions from acquisitions, as well as net new contract wins and same-store growth. Adjusted EBITDA of $162.8 million grew by 20.5% from the prior-year period, and was driven by revenue growth. Envision's Adjusted EBITDA margin was 12.0%. Adjusted earnings per share for the quarter was $0.37, an increase of 32% from $0.28 per share, for the second quarter of 2014. On a GAAP basis, Envision earned $0.27 per share on a fully diluted basis, compared to a loss of $0.01 per share. Segment Results for the Second Quarter 2015 Envision operates two business segments: EmCare Holdings (EmCare), the Company's facility-based and post-acute care physician-led services segment and American Medical Response (AMR), the Company's medical transportation services segment. EmCare EmCare's net revenue for the second quarter of 2015 was $929.1 million, an increase of 34.6% from the prior-year period. Revenue from acquisitions completed during the past 12 months contributed growth of 20.1%, including three transactions completed during the first quarter of 2015. Organic revenue growth was 14.5%, and consisted of growth from net new contracts of 9.1% while revenue from same-store contracts contributed 5.4% to total revenue growth for the quarter. When calculated from the comparable contract base for both periods, same-store revenue grew by 6.0%, and consisted of 4.4% growth from patient volume and 1.6% yield growth. EmCare's Adjusted EBITDA grew by 19.1% to $105.2 million, or 11.3% of revenue, for the second quarter of 2015, from $88.3 million, or 12.8% of revenue for the prior-year period. EmCare's Adjusted EBITDA margin decline can be attributed primarily to the loss of Medicaid parity revenue during 2015 and lower collection rates from certain anesthesia contracts. American Medical Response AMR's net revenue grew by 10.3%, to $425.2 million, from $385.3 million in the prior-year period. Same-market revenue growth was 7.1%, net new contracts growth was 3.0%, and acquisition-related growth was 0.2%. Same market growth consisted of a 5.9% increase in volume and a 1.2% increase in yield. In July 2015, AMR also completed its previously announced acquisition of ambulance operations located in the northeastern U.S. AMR's Adjusted EBITDA of $57.6 million grew by 22.9%, from $46.8 million in the prior-year period. Adjusted EBITDA margin was 13.5% for the second quarter of 2015, a 140-basis point improvement from the prior year. AMR's margin continued to improve as a result of higher volume, ongoing efficiency initiatives and lower fuel costs. Envision Cash Flows for the Second Quarter of 2015 Envision generated cash flow from operations of $115.6 million, an increase of 81.4% when compared to $63.7 million in the second quarter of 2014. Cash flow from operations' growth was driven primarily by higher net income and a reduction in days sales outstanding. Adjusted Free Cash Flow was $108.0 million, compared to $43.5 million in the second quarter of 2014. Results of Operations for the Six Months Ended June 30, 2015 Envision's net revenue was $2.60 billion, an increase of 24.4% from the prior year-period, while Adjusted EBITDA of $291.6 million increased by 18.6%. Envision generated cash flow from operations of $160.9 million, an increase of 71.3%, and Adjusted Free Cash Flow of $145.1 million, an increase of 72.1%. Segment Results for the Six Months ended June 30, 2015 Net revenue at EmCare was $1.75 billion, an increase of 31.4% from the prior-year period. Adjusted EBITDA was $182.3 million, an increase of 13.9%. Net revenue at AMR was $844.6 million, an increase of 11.9% from the prior-year period. Adjusted EBITDA was $109.3 million, an increase of 27.2%. Agreement to Acquire Rural/Metro In a separate announcement, AMR has entered into a definitive agreement to acquire Rural/Metro Corporation (Rural/Metro) in a $620 million all-cash transaction. Rural/Metro is expected to generate annualized 2015 revenue of approximately $600 million and pre-synergy Adjusted EBITDA margins of approximately 10%. Upon closing, the transaction is expected to be accretive to Envision's Adjusted EPS. The transaction is subject to regulatory approval and customary closing conditions, and is expected to close in the fourth quarter of 2015. 2015 Guidance Envision is maintaining its existing 2015 guidance of Adjusted EBITDA in a range of $653 million to $665 million and Adjusted EPS of $1.42 to $1.50. The Company anticipates that its third quarter of 2015 results will be approximately 26% to 26.5% of its full year guidance. At this time, 2015 guidance does not incorporate any impact from the pending Rural/Metro acquisition. Conference Call Envision management will host a conference call today, Thursday, July 30, 2015, at 5 p.m. Eastern Time, to discuss the Company's financial results and the Rural/Metro transaction. Interested participants may listen to the call by dialing 800-857-6175, or 517-623-4852 for international callers, and referencing participant code 909712. For those unable to participate in the live call, a replay will be available one hour after the call ends through August 31, 2015. To access the replay, dial 800-666-0214, or 203-369-3308 for international callers, and enter access code 909712. An audio file will also be archived for 30 days on the investor relations section of the Company's website: investor.evhc.net. About Envision Healthcare Holdings, Inc. Envision Healthcare Holdings, Inc., and our more than 35,000 employees and affiliated clinicians, offers an array of healthcare related services to consumers, hospitals, healthcare systems, health plans and local, state and national government entities. Through Envision Healthcare Corporation, we operate American Medical Response, Inc. (AMR), EmCare Holdings, Inc. (EmCare) and Evolution Health, LLC (Evolution Health). AMR is a provider and manager of community-based medical transportation services, including emergency ('911'), non-emergency, managed transportation, fixed-wing air ambulance and disaster response. EmCare is a provider of integrated facility-based physician services, including emergency, anesthesiology, hospitalist/inpatient care, radiology, tele-radiology and surgery. Evolution Health provides comprehensive care to patients across various settings, many of whom suffer from advanced illnesses and chronic diseases. We are headquartered in Greenwood Village, Colorado. For additional information, visit www.evhc.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 including, but not limited to, statements relating to our 2015 guidance, 2015 performance, objectives, plans and strategies, including the proposed acquisition of Rural/Metro, and all statements that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future, including statements regarding the benefits of the Rural/Metro acquisition. Any forward-looking statements herein are made as of the date of this press release, and Envision undertakes no duty to update 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 to differ materially from forward-looking statements are described in Envision's filings with the U.S. Securities and Exchange Commission from time to time. Among the factors that could cause future results to differ materially are: decreases in our revenue and profit margin under our fee-for-service contracts due to changes in volume, payor mix and third party reimbursement rates, including from political discord in the federal budgeting process; the loss of existing contracts; failure to accurately assess costs under new contracts; difficulties in our ability to recruit and retain qualified physicians and other healthcare professionals, and enforce our non-compete agreements with our physicians; failure to implement some or all of our business strategies, including our efforts to grow our Evolution Health business and cross-sell our services; lawsuits for which we are not fully reserved; the adequacy of our insurance coverage and insurance reserves; our ability to successfully integrate strategic acquisitions, including the Rural/Metro acquisition; closing of the Rural/Metro acquisition may not occur or may be delayed; expected synergies and other financial benefits of the acquisition may not be realized; litigation related to the acquisition or limitations or restrictions imposed by regulatory authorities may delay or negative impact the acquisition; unanticipated restructuring costs may be incurred or undisclosed liabilities assumed from the acquisition; attempts to retain key personnel and customers from Rural/Metro may not succeed; the high level of competition in the markets we serve; 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; our ability to maintain or implement complex information systems; disruptions in disaster recovery systems, management continuity planning, or information systems; our ability to adequately protect our intellectual property and other proprietary rights or to defend against intellectual property infringement claims; challenges by tax authorities on our treatment of certain physicians as independent contractors; the impact of labor union representation; the impact of fluctuations in results due to our national contract with FEMA; potential penalties or changes to our operations, including our ability to collect accounts receivable if we fail to comply with extensive and complex government regulation of our industry; the impact of changes in the healthcare industry, including changes due to healthcare reform; our ability to timely enroll our providers in the Medicare program; our ability to restructure our operations to comply with future changes in government regulation; the outcome of government investigations of certain of our business practices; our ability to comply with the terms of our settlement agreements with the government; and our ability to generate cash flow to service our substantial debt obligations and the factors discussed in "Risk Factors" in the Company's Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q. Non-GAAP Financial Measures Description and Reconciliation This press release includes presentations of Adjusted EBITDA, Adjusted Free Cash Flow and Adjusted EPS, which are not financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America (GAAP). Adjusted EBITDA is defined as net income (loss) before equity in earnings of unconsolidated subsidiary, income tax benefit (expense), loss on early debt extinguishment, other income (expense), net, realized gains (losses) on investments, interest expense, net, equity-based compensation expense, transaction costs related to acquisition activities, related party management fees, restructuring charges, adjustment to net loss (income) attributable to non-controlling interest due to deferred taxes, and depreciation and amortization expense. Adjusted Free Cash Flow is defined as cash flow from operations adjusted for cash used in non-acquisition related investing activities and certain out-of-period or non-recurring cash payments. Adjusted EPS is defined as diluted earnings per share adjusted for expenses related to the Company's secondary offerings, amortization expense, equity-based compensation expense, restructuring charges and loss on early debt extinguishment, net of an estimated tax benefit. Adjusted EBITDA and Adjusted EPS for the three months and six months ended June 30, 2014, as presented herein, excludes transaction costs related to acquisition activities to conform to the Company's current definitions of Adjusted EBITDA and Adjusted EPS, respectively. These non-GAAP financial measures are commonly used by management and investors as performance measures or liquidity indicators. However, the items excluded from these non-GAAP financial measures are significant components in understanding and assessing the Company's financial performance, and as a result, these measures should not be considered in isolation or as an alternative to GAAP measures such as net income, cash flows provided by or used in operating, investing or financing activities or other financial statement data presented in the Company's consolidated financial statements as an indicator of financial performance or liquidity. Since these non-GAAP financial measures are not measures determined in accordance with GAAP and are susceptible to varying calculations, these measures, as presented, may not be comparable to other similarly titled measures of other companies. Reconciliations of non-GAAP financial measures are provided in this press release. Reconciliation for the forward-looking full-year 2015 Adjusted EBITDA and Adjusted EPS projections presented herein is not being provided due to the number of variables in the projected full-year 2015 Adjusted EBITDA and Adjusted EPS ranges and thus the Company does not currently have sufficient data to accurately estimate the individual adjustments for such reconciliation.
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