Envision Healthcare Posts 1st Quarter Results

Envision Healthcare Holdings, Inc. ("EVHC") announced results for the first quarter ended March 31.

William A. Sanger, Chief Executive Officer, said, "We are pleased with the start of 2014 and our industry leading organic growth. This trend is driven by new contracts at EmCare, Evolution Health and AMR. Our EmCare joint venture model continues to expand with the addition of both new system partners and new service offerings. We also recently signed a national agreement to provide Evolution Health services to one of the largest sub-acute care companies.

"We are encouraged by early indications of healthcare reform benefits as evidenced by a shift in self-pay to Medicaid in the expansion states. We anticipate a continued reduction in self-pay mix throughout the remainder of the year as more uninsured migrate to Medicaid programs and the anticipated positive effects of exchange enrollment are realized.

"We believe the momentum in our businesses, combined with the impact of the ACA, has created a strong foundation for future growth."

In a release on May 7, the Company noted that for the first quarter of 2014, it generated net revenue of $1.01 billion, an increase of 14.2 percent.

Adjusted EBITDA was $110.0 million, an increase of 9.0 percent. The increase was primarily attributable to the impact of increased revenue from net new contracts, same store contracts and acquisitions.

EVHC generated net income of $24.8 million, compared to net loss of $3.8 million. The increase in net income is primarily attributable to an increase in income from operations and the reduction of interest expense related to the redemption on December 30, 2013 of the 8.125 percent Senior Notes due 2019, the redemption on August 30, 2013 of the Senior PIK Toggle Notes due 2017 and the re-pricing of the Term Loan Facility and ABL Facility in February 2013.

EVHC operates two business segments: EmCare Holdings, Inc., the Company's facility-based and post-acute care physician services segment and American Medical Response, Inc. ("AMR"), the Company's healthcare transportation services segment.

EmCare generated net revenue of $644.6 million, an increase of $89.7 million, or 16.2 percent. Organic growth was 15.9 percent, attributable to an increase of $73.9 million, or 13.4 percent, from net new contracts, and an increase of $14.0 million, or 2.5 percent, from "same store" contracts. Same contract volumes were lower in the quarter by 1.4 percent primarily related to lower emergency department visits as a result of a mild flu season and weather- related impacts early in the quarter. Same contract revenue per encounter increased by 3.9 percent primarily due to higher acuity, an improvement in payor mix and Medicaid parity reimbursement. Revenue from acquisitions increased $1.8 million, or 0.3 percent.

Adjusted EBITDA was $71.4 million, an increase of $5.2 million, or 7.9 percent. The increase in Adjusted EBITDA was primarily driven by the net impact of revenue increases from net new contracts and same store revenue growth, offset by an increase of $6.7 million in start-up compensation costs. The number of new contract starts in the last two quarters was approximately 40 percent higher than the comparable period last year. Many of these new contracts had accelerated start dates, leading to higher compensation costs due to increased temporary staffing requirements. The quarter also included a $3.3 million reduction to minority interest due to an adjustment of profit sharing associated with the HCA joint venture, offset by an unfavorable prior period insurance adjustment of $2.0 million. Income from operations was $51.2 million, an increase of $3.3 million, or 7.0 percent.

AMR generated net revenue of $369.6 million, an increase of $36.3 million, or 10.9 percent. Organic growth was 5.9 percent, driven by a 5.3 percent increase related to net new contract wins and increased revenue of 0.6 percent in existing markets. Acquisitions contributed to 5.0 percent revenue growth.

Adjusted EBITDA was $38.6 million, an increase of $3.8 million, or 10.9 percent. The increase was attributable to the net impact of higher revenue increases in existing markets from new contract wins and acquisitions. The quarter included a reduction to general and administrative expenses of $1.9 million related to a property settlement, offset by an unfavorable prior period insurance adjustment of $3.2 million. First quarter 2013 included a favorable prior period insurance adjustment of $1.7 million. Income from operations was $17.1 million, an increase of $2.0 million, or 13.6 percent.

Cash provided by operating activities was $30.2 million, compared to $6.6 million. When excluding $14.8 million of income tax effect related to exercised stock options in conjunction with the secondary offering in 2014 and $24.5 million in non-recurring outflows in 2013, operating cash flows were $45.0 million, compared to $31.1 million. The change was primarily driven by a decrease in cash interest payments, offset by an increase in insurance payments which included payments of approximately $10 million for the previously disclosed malpractice settlements in the fourth quarter of 2013. Days Sales Outstanding ("DSO") decreased one day from the fourth quarter of 2013. While AMR's DSO decreased by one day, EmCare's DSO remained unchanged primarily as a result of an increase in the number of new contract starts.

Net cash used in investing activities was $40.0 million, compared to $4.8 million. The increase in investing cash flow was primarily driven by acquisitions which were $35.8 million, compared to $1.4 million.

Net cash used in financing activities was $4.0 million, compared to net cash provided by financing activities of $20.4 million. The quarter includes $14.4 million of payments for employee related taxes for stock options exercised in connection with the secondary offering. At March 31, there were no amounts outstanding under the ABL Facility.

Adjusted Free Cash Flow was $40.8 million, compared to $27.8 million. The difference was primarily attributable to aforementioned changes in cash paid for interest and insurance claims paid.

More information:

www.evhc.net

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