**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

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**FORM 10-Q**

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**(Markone)**
| **x**                                                                                                                                                                                                                                                                                                                                                                                                                                     | ** ** | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                | ** ** | ** **                                                                                        |
| **For the  quarterly period ended June 30, 2007**                                                                                                                                                                                                                                                                                                                                                                                         |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **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**

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**EMERGENCY MEDICAL SERVICES CORPORATION**

**EMERGENCYMEDICAL SERVICES L.P.**

(Exact name ofRegistrants 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, formeraddress and former fiscal year, if changed since last report:

**Notapplicable**

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Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.    Yes  x    No  o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  o                                      Acceleratedfiler  x                                                         Non-acceleratedfiler  o

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange act).  Yes  o No  x

Shares ofclass A common stock outstanding at August 3, 2007 – 9,288,848;shares of class B common stock outstanding at August 3, 2007 –142,545; LP exchangeable units outstanding at August 3, 2007 – 32,107,500.

 

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**EMERGENCYMEDICAL SERVICES CORPORATION**

**INDEX TOQUARTERLY REPORT**

**ON FORM10-Q**

**FOR THETHREE AND SIX MONTHS ENDED**

**JUNE 30,2007**
| Part  1. Financial Information |   |                                                                                        |
|--------------------------------|--------|---------------------------------------------------------------------------------------------|
|                           |   |                                                                                        |   |   |
| Item 1.                        |   | Financial  Statements (Unaudited):                                                          |   |   |
|                           |   |                                                                                        |   |   |
|                           |   | Consolidated Statements of Operations  and Comprehensive Income                             |   |   |
|                           |   |                                                                                        |   |   |
|                           |   | Consolidated Balance Sheets                                                                 |   |   |
|                           |   |                                                                                        |   |   |
|                           |   | Consolidated Statements of  Cash Flows                                                      |   |   |
|                           |   |                                                                                        |   |   |
|                           |   | Notes to  Consolidated Financial Statements                                                 |   |   |
|                           |   |                                                                                        |   |   |
| Item 2.                        |   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   |   |
|                           |   |                                                                                        |   |   |
| Item 3.                        |   | Quantitative  and Qualitative Disclosures About Market Risk                                 |   |   |
|                           |   |                                                                                        |   |   |
| Item 4.                        |   | Controls and  Procedures                                                                    |   |   |
|                           |   |                                                                                        |   |   |
| Part II. Other  Information    |   |                                                                                        |
|                           |   |                                                                                        |   |   |
| Item 1.                        |   | Legal Proceedings                                                                           |   |   |
|                           |   |                                                                                        |   |   |
| Item 1A.                       |   | Risk  Factors                                                                               |   |   |
|                           |   |                                                                                        |   |   |
| Item 2.                        |   | Unregistered  Sales of Equity Securities and Use of Proceeds                                |   |   |
|                           |   |                                                                                        |   |   |
| Item 4.                        |   | Submission  of Matters To A Vote of Security Holders                                        |   |   |
|                           |   |                                                                                        |   |   |
| Item 6.                   |   | Exhibits                                                                                    |   |   |
|                           |   |                                                                                        |   |   |
| Signatures                     |   |                                                                                        |   |   |

 

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**EMERGENCYMEDICAL SERVICES CORPORATION**

**PART I.FINANCIAL INFORMATION**

**FOR THE THREE AND SIX MONTHSENDED**

**JUNE 30,2007**

**ITEM 1.FINANCIAL STATEMENTS (UNAUDITED)**

**Emergency Medical ServicesCorporation**

**ConsolidatedStatements of Operations and Comprehensive Income**

**(unaudited;in thousands, except share and per share data)**
| ** **                                                                      | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|---------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                      | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net revenue                                                                     |       | $                                                   | 516,712    |                                              | $          | 478,451 |   | $ | 1,040,031 |   | $ | 947,575 |   |
| Compensation and  benefits                                                      |       | 357,309                                             |       | 330,927                                           |       | 712,241 |   | 656,974 |   |
| Operating  expenses                                                             |       | 76,262                                              |       | 69,203                                            |       | 156,258 |   | 135,657 |   |
| Insurance  expense                                                              |       | 17,476                                              |       | 20,566                                            |       | 37,777 |   | 44,796 |   |
| Selling, general  and administrative expenses                                   |       | 14,901                                              |       | 13,170                                            |       | 28,206 |   | 28,009 |   |
| Depreciation and  amortization expense                                          |       | 17,577                                              |       | 16,360                                            |       | 34,356 |   | 32,204 |   |
| Restructuring  charges                                                          |       | —                                              |       | 919                                               |       | 2,242 |   | 919 |   |
| Income from operations                                                          |       | 33,187                                              |       | 27,306                                            |       | 68,951 |   | 49,016 |   |
| Interest income  from restricted assets                                         |       | 1,660                                               |       | 1,362                                             |       | 3,375 |   | 2,685 |   |
| Interest expense                                                                |       | (11,395                                             | )          | (11,445                                           | )          | (22,629 | ) | (22,737 | ) |
| Realized gain  (loss) on investments                                            |       | 22                                                  |       | (306                                              | )          | 59 |   | (525 | ) |
| Interest and  other income                                                      |       | 532                                                 |       | 780                                               |       | 1,189 |   | 1,132 |   |
| Loss on early  debt extinguishment                                              |       | —                                              |       | (193                                              | )          | — |   | (193 | ) |
| Income before income taxes and equity in earnings of  unconsolidated subsidiary |       | 24,006                                              |       | 17,504                                            |       | 50,945 |   | 29,378 |   |
| Income tax  expense                                                             |       | (9,012                                              | )          | (6,788                                            | )          | (19,474 | ) | (11,416 | ) |
| Income before equity in earnings of unconsolidated  subsidiary                  |       | 14,994                                              |       | 10,716                                            |       | 31,471 |   | 17,962 |   |
| Equity in  earnings of unconsolidated subsidiary                                |       | 101                                                 |       | 2                                                 |       | 255 |   | 17 |   |
| Net income                                                                      |       | 15,095                                              |       | 10,718                                            |       | 31,726 |   | 17,979 |   |
| Other  comprehensive income (loss), net of tax:                                 |       |                                                |       |                                              |       |   |   |   |   |
| Unrealized holding gains (losses) during the period                             |       | (723                                                | )          | 111                                               |       | (425 | ) | (459 | ) |
| Comprehensive  income                                                           |       | $                                                   | 14,372     |                                              | $          | 10,829 |   | $ | 31,301 |   | $ | 17,520 |   |
|                                                                            |       |                                                |       |                                              |       |   |   |   |   |
| Basic earnings  per common share                                                |       | $                                                   | 0.36       |                                              | $          | 0.26 |   | $ | 0.76 |   | $ | 0.43 |   |
| Diluted earnings  per common share                                              |       | $                                                   | 0.35       |                                              | $          | 0.25 |   | $ | 0.74 |   | $ | 0.42 |   |
| Weighted average  common shares outstanding, basic                              |       | 41,544,901                                          |       | 41,497,245                                        |       | 41,533,093 |   | 41,497,238 |   |
| Weighted average common  shares outstanding, diluted                            |       | 43,211,661                                          |       | 42,356,192                                        |       | 43,120,416 |   | 42,377,804 |   |

 

The accompanyingnotes are an integral part of these financial statements.

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**Emergency Medical ServicesCorporation**

**ConsolidatedBalance Sheets**

**(inthousands, except share and per share data)**
| ** **                                                                                                                                             | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                             | ** ** | **(Unaudited)**         | ** ** | ** **                  | ** ** |
| **Assets**                                                                                                                                             | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Current assets:                                                                                                                                        |       |                    |       |                        |       |
| Cash and cash equivalents                                                                                                                              |       | $                       | 29,484     |                        | $          | 39,336 |   |
| Insurance collateral                                                                                                                                   |       | 52,974                  |       | 29,724                      |       |
| Trade and other accounts receivable, net                                                                                                               |       | 481,123                 |       | 416,450                     |       |
| Parts and supplies inventory                                                                                                                           |       | 18,403                  |       | 18,089                      |       |
| Prepaids and other current assets                                                                                                                      |       | 19,987                  |       | 16,417                      |       |
| Current deferred tax assets                                                                                                                            |       | 46,305                  |       | 12,473                      |       |
| Total current assets                                                                                                                                   |       | 648,276                 |       | 532,489                     |       |
| Non-current  assets:                                                                                                                                   |       |                    |       |                        |       |
| Property, plant and equipment, net                                                                                                                     |       | 150,420                 |       | 147,162                     |       |
| Intangible assets, net                                                                                                                                 |       | 63,265                  |       | 66,789                      |       |
| Non-current deferred tax assets                                                                                                                        |       | 98,006                  |       | 103,370                     |       |
| Insurance collateral                                                                                                                                   |       | 142,772                 |       | 163,300                     |       |
| Goodwill                                                                                                                                               |       | 273,763                 |       | 272,328                     |       |
| Other long-term assets                                                                                                                                 |       | 28,884                  |       | 32,779                      |       |
| Total assets                                                                                                                                           |       | $                       | 1,405,386  |                        | $          | 1,318,217 |   |
| **Liabilities  and Equity**                                                                                                                            | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Current  liabilities:                                                                                                                                  |       |                    |       |                        |       |
| Accounts payable                                                                                                                                       |       | $                       | 69,513     |                        | $          | 65,172 |   |
| Accrued liabilities                                                                                                                                    |       | 226,032                 |       | 231,631                     |       |
| Current portion of long-term debt                                                                                                                      |       | 4,641                   |       | 4,159                       |       |
| Total current liabilities                                                                                                                              |       | 300,186                 |       | 300,962                     |       |
| Long-term debt                                                                                                                                         |       | 480,481                 |       | 475,616                     |       |
| Insurance  reserves and other long-term liabilities                                                                                                    |       | 205,890                 |       | 155,599                     |       |
| Total liabilities                                                                                                                                      |       | 986,557                 |       | 932,177                     |       |
| 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, 9,288,848 and 9,262,853 issued and outstanding in 2007 and  2006, respectively) |       | 93                      |       | 93                          |       |
| Class B common stock ($0.01 par value; 40,000,000  shares authorized, 142,545 issued and outstanding in 2007 and 2006)                                 |       | 1                       |       | 1                           |       |
| Class B special voting stock ($0.01 par value; 1  share authorized, issued and outstanding in 2007 and 2006)                                           |       | —                  |       | —                      |       |
| LP exchangeable units (32,107,500 shares issued and  outstanding in 2007 and 2006)                                                                     |       | 212,361                 |       | 212,361                     |       |
| Additional paid-in capital                                                                                                                             |       | 115,959                 |       | 114,471                     |       |
| Retained earnings                                                                                                                                      |       | 90,864                  |       | 59,138                      |       |
| Accumulated other comprehensive loss                                                                                                                   |       | (449                    | )          | (24                         | )          |
| Total equity                                                                                                                                           |       | 418,829                 |       | 386,040                     |       |
| Total  liabilities and equity                                                                                                                          |       | $                       | 1,405,386  |                        | $          | 1,318,217 |   |

 

The accompanyingnotes are an integral part of these financial statements.

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**Emergency Medical ServicesCorporation**

**ConsolidatedStatements of Cash Flows**

**(unaudited;in thousands)**
| ** **                                                                         | ** ** | **Six months ended June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| **Cash  Flows from Operating Activities**                                          | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| Net income                                                                         |       | $                                                 | 31,726     |   | $ | 17,979 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                              |       |   |   |
| Depreciation and amortization                                                      |       | 35,376                                            |       | 33,270 |   |
| Gain on disposal of property, plant and equipment                                  |       | (181                                              | )          | (717 | ) |
| Equity-based compensation expense                                                  |       | 800                                               |       | 629 |   |
| Equity in earnings of unconsolidated subsidiary                                    |       | (255                                              | )          | (17 | ) |
| Loss on early debt extinguishment                                                  |       | —                                            |       | 193 |   |
| Dividends received                                                                 |       | 416                                               |       | — |   |
| Deferred income taxes                                                              |       | 19,050                                            |       | 11,033 |   |
| Changes in operating assets/liabilities, net of  acquisitions:                     |       |                                              |       |   |   |
| Trade and other accounts receivable                                                |       | (63,934                                           | )          | 31,881 |   |
| Parts and supplies inventory                                                       |       | (314                                              | )          | (164 | ) |
| Prepaids and other current assets                                                  |       | (3,570                                            | )          | (6,077 | ) |
| Accounts payable and accrued liabilities                                           |       | 162                                               |       | 15,418 |   |
| Insurance accruals                                                                 |       | 4                                                 |       | 8,987 |   |
| Net cash provided by operating activities                                          |       | 19,280                                            |       | 112,415 |   |
| **Cash  Flows from Investing Activities**                                          | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| Purchases of  property, plant and equipment                                        |       | (22,743                                           | )          | (28,555 | ) |
| Proceeds from  sale of property, plant and equipment                               |       | 291                                               |       | 259 |   |
| Acquisition of  businesses, net of cash received                                   |       | (477                                              | )          | (840 | ) |
| Insurance  collateral                                                              |       | (3,033                                            | )          | (12,515 | ) |
| Other investing  activities                                                        |       | 2,715                                             |       | (194 | ) |
| Net cash used in investing activities                                              |       | (23,247                                           | )          | (41,845 | ) |
| **Cash  Flows from Financing Activities**                                          | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| EMSC issuance of  class A common stock                                             |       | 249                                               |       | — |   |
| EMSC equity  issuance costs                                                        |       | —                                            |       | (912 | ) |
| Repayments of  capital lease obligations and other debt                            |       | (3,391                                            | )          | (13,923 | ) |
| Increase in bank  overdrafts                                                       |       | (2,743                                            | )          | (4,123 | ) |
| Net cash used in financing activities                                              |       | (5,885                                            | )          | (18,958 | ) |
| Change in cash  and cash equivalents                                               |       | (9,852                                            | )          | 51,612 |   |
| Cash and cash  equivalents, beginning of period                                    |       | 39,336                                            |       | 18,048 |   |
| Cash and cash  equivalents, end of period                                          |       | $                                                 | 29,484     |   | $ | 69,660 |   |
|                                                                               |       |                                              |       |   |   |
| **Non-cash  Activities**                                                           | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| Re-financing of  equipment under existing capital lease                            |       | $                                                 | 8,038      |   | $ | — |   |

 

The accompanyingnotes are an integral part of these financial statements.

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**Emergency Medical Services Corporation**

**Notes toUnaudited Consolidated Financial Statements**

**(inthousands, except share and per share data)**

**1.****             General**

***Basis of Presentation of Financial Statements***

The accompanyinginterim consolidated financial statements for Emergency Medical ServicesCorporation (“EMSC” or the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim reporting, andaccordingly, do not include all of the disclosures required for annualfinancial statements. In the opinion of management, all adjustments considerednecessary for fair presentation have been included. All such adjustments are ofa normal, recurring nature. Operating results for the three and six monthperiods ended June 30, 2007 are not necessarily indicative of the results thatmay be expected for the full year ending December 31, 2007. For furtherinformation, see the Company’s consolidated financial statements, including theaccounting policies and notes thereto, included in the Company’s Annual Reporton Form 10-K for the fiscal year ended December 31, 2006.

The consolidatedfinancial statements of EMSC include those of its direct subsidiary, EmergencyMedical Services L.P. (“EMS LP”), a Delaware limited partnership. EMS LPacquired American Medical Response, Inc. and its subsidiaries (“AMR”) andEmCare Holdings Inc. and its subsidiaries (“EmCare”) from LaidlawInternational, Inc. (“Laidlaw”) on February 10, 2005, with an effectivetransaction date after the close of business January 31, 2005. OnDecember 21, 2005, the Company effected a reorganization and issued classA common stock in an initial public offering.

The Company isparty to a management agreement with a wholly-owned subsidiary of OnexCorporation, the Company’s principal equityholder. In exchange for an annualmanagement fee of $1.0 million, the Onex subsidiary provides the Company withcorporate finance and strategic planning consulting services. For each of thethree and six months ended June 30, 2007 and 2006, the Company expensed $250and $500, respectively, in respect of this fee.

Starting in theperiods ended June 30, 2007, the Company reclassified income earned oninsurance related assets as Interest Income from Restricted Assets in theaccompanying consolidated statements of operations and comprehensive income;such income was previously reported as a component of insurance expense.

**2.****             Summary of Significant Accounting Policies**

***Consolidation***

The consolidatedfinancial statements include all wholly-owned subsidiaries of EMSC, includingAMR and EmCare and their respective subsidiaries. All significant intercompanytransactions and balances have been eliminated.

***Use of Estimates***

The preparation offinancial statements requires management to make estimates and assumptionsrelating to the reporting of results of operations, financial condition andrelated disclosure of contingent assets and liabilities at the date of thefinancial statements. Actual results may differ from those estimates underdifferent assumptions or conditions.

***Insurance***

Insurancecollateral is comprised principally of government and investment gradesecurities and cash deposits with third parties and supports the Company’sinsurance program and reserves. Certain of these investments, if sold orotherwise liquidated, would have to be replaced by other suitable financialassurances and are, therefore, considered restricted.

Insurance reservesare established for automobile, workers compensation, general liability andprofessional liability claims utilizing policies with both fully-insured andself-insured components. This includes the use of an

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off-shore captiveinsurance program through a wholly-owned subsidiary for certain professionalliability (malpractice) programs for EmCare. In those instances where theCompany has obtained third-party insurance coverage, the Company generallyretains liability for the first $1 to $2 million of the loss. Insurancereserves cover known claims and incidents within the level of Company retentionthat may result in the assertion of additional claims, as well as claims fromunknown incidents that may be asserted arising from activities through thebalance sheet date.

The Companyestablishes reserves for claims based upon an assessment of actual claims andclaims incurred but not reported. The reserves are established based onquarterly consultation with third-party independent actuaries using actuarialprinciples and assumptions that consider a number of factors, includinghistorical claim payment patterns (including legal costs) and changes in casereserves and the assumed rate of inflation in healthcare costs and propertydamage repairs.

The Company’s mostrecent actuarial valuation was completed in June 2007. As a result of thisactuarial valuation, in the three and six months ended June 30, 2007 theCompany recorded reductions in its provision for insurance liabilities ofapproximately $8.7 million and $13.8 million, respectively, related to itsreserves for losses in prior years.  In the three months ended June 30,2006, the Company recorded a reduction in its provision for insuranceliabilities of approximately $5.0 million as a result of an actuarial valuationcompleted in June 2006.

The long-termportion of insurance reserves was $148.9 million and $150.0 million as of June30, 2007 and December 31, 2006, respectively.

***Trade and Other Accounts Receivable, net***

The Companydetermines its allowances based on payor reimbursement schedules, historicalwrite-off experience and other economic data. The allowances for contractualdiscounts and uncompensated care are reviewed monthly. Account balances arecharged off against the uncompensated care allowance when it is probable thereceivable will not be recovered. Write-offs to the contractual allowance occurwhen payment is received. The allowance for uncompensated care is relatedprincipally to receivables recorded for self-pay patients.

***Revenue Recognition***

Revenue isrecognized at the time of service and is recorded net of provisions forcontractual discounts and estimated uncompensated care. Provisions forcontractual discounts and estimated uncompensated care as a percentage of grossrevenue and gross revenue less contractual discount provisions, are as follows:
|                                      | ** ** | **Three months ended  June 30,** | ** ** | **Six months ended  June 30,** | ** ** |
|--------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                           | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| Gross revenue                        |       | 100.0                                           | %          | 100.0                                         | %          | 100.0 | % | 100.0 | % |
| Provision for  contractual discounts |       | 42.2                                            | %          | 41.8                                          | %          | 42.3 | % | 42.5 | % |
| Provision for  uncompensated care    |       | 20.1                                            | %          | 20.1                                          | %          | 19.8 | % | 19.2 | % |
| After  contractual discounts         |       | 34.8                                            | %          | 34.6                                          | %          | 34.3 | % | 33.4 | % |

 

Healthcarereimbursement is complex and may involve lengthy delays. Third-party payors arecontinuing their efforts to control expenditures for healthcare, includingproposals to revise reimbursement policies. The Company has from time to timeexperienced delays in reimbursement from third-party payors. In addition,third-party payors may disallow, in whole or in part, claims for reimbursementbased on determinations that certain amounts are not reimbursable under plancoverage, determinations of medical necessity, or the need for additionalinformation. Laws and regulations governing the Medicare and Medicaid programsare very complex and subject to interpretation. As a result, there is areasonable possibility that recorded estimates will change materially in theshort-term. Retroactive adjustments may change the amounts realized fromthird-party payors and are considered in the recognition of revenue on anestimated basis in the period the related services are rendered. Such amountsare adjusted in future periods, as adjustments become known.  Retroactiveadjustments recorded in the second quarter, which increased revenue, were 1.7%of consolidated net revenue for the three months ended June 30, 2007 comparedto 1.0% of consolidated net revenue for the three months ended June 30,2006.  Retroactive adjustments recordedin the six month period ended June 30, 2007, which increased revenue, were 2.0%of consolidated net revenue compared to

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1.0% of consolidated netrevenue for the six months ended June 30, 2006.

The Company alsoprovides services to patients who have no insurance or other third-party payorcoverage. In certain circumstances, federal law requires providers to renderservices to any patient who requires emergency care regardless of their abilityto pay.

***Equity Structure***

OnDecember 21, 2005, the Company effected a reorganization and issued8.1 million shares of class A common stock in an initial public offering.Pursuant to the reorganization, EMS LP, the former top-tier holding company ofAMR and EmCare, became the consolidated subsidiary of EMSC, a newly formedcorporation. To effect the reorganization, the holders of the capital stock ofthe sole general partner of EMS LP contributed that capital stock to theCompany in exchange for class B common stock; the general partner was mergedinto 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 tothe Company in exchange for shares of the Company’s class A common stock, andthe holders of certain class A units of EMS LP contributed their units to theCompany in exchange for shares of the Company’s class B common stock.

The Company holds22.7% of the equity interests in EMS LP. LP exchangeable units, held by personsaffiliated with the Company’s principal equity holder, represent the balance ofthe EMS LP equity. The LP exchangeable units are exchangeable at any time, atthe option of the holder, for shares of the Company’s class B common stock on aone-for-one basis. The holders of the LP exchangeable units have the right tovote, 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 commonstock or class B special voting stock are entitled to vote.

In the EMS LPpartnership agreement, the Company has agreed to maintain the economicequivalency of the LP exchangeable units and the class B common stock, and theholders of the LP exchangeable units have no general voting rights. The LPexchangeable units, when considered with the class B special voting stock, havethe same rights, privileges and characteristics of the Company’s class B commonstock. The LP exchangeable units are intended to be economically equivalent tothe class B common stock of the Company in that the LP exchangeable units carrythe right to vote (by virtue of the class B special voting stock) with theholders of class B common stock as if one class, and entitle holders to receivedistributions only if the equivalent dividends are declared on the Company’sclass B common stock. Accordingly, the Company accounts for the LP exchangeableunits as if the LP exchangeable units were shares of its common stock, includingreporting the LP exchangeable units in the equity section of the Company’sbalance sheet and including the number of outstanding LP exchangeable units inboth its basic and diluted earnings per share calculations.

***Recent Accounting Pronouncements***

On January 1,2007, the Company adopted the recognition and disclosure provisions of FASBInterpretation No. 48, “*Accounting forUncertainty in Income Taxes - an interpretation of FASB Statement No. 109*”(“FIN 48”).  This interpretation addresses the determination of whethertax benefits claimed or expected to be claimed on a tax return should berecorded in the financial statements.  Under FIN 48, the Company mayrecognize the tax benefit from an uncertain tax position only if it is morelikely than not that the tax position will be sustained on examination by thetaxing authorities, based on the technical merits of the position. The taxbenefits recognized in the financial statements from such a position should bemeasured based on the largest benefit that has a greater than fifty percentlikelihood of being realized upon ultimate settlement. FIN 48 also providesguidance on derecognition, classification, interest and penalties on incometaxes, and accounting in interim periods.

As a result of theimplementation of FIN 48 at January 1, 2007, the Company recorded a $49.0million liability with an offsetting increase to net current deferred taxassets.

In accordance withthe Company’s accounting policy, EMSC recognized accrued interest and penaltiesrelated to unrecognized tax benefits as a component of tax expense, which isconsistent with the recognition of these items in prior reportingperiods.  As of January 1, 2007, the Company recorded a liability ofapproximately $4.8 million and $6.1 million for interest and penalties,respectively.  The liability for interest and penalties did not materiallychange as of June 30, 2007.

8

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With limitedexception, the Company is no longer subject to U.S. federal, state, and localincome tax audits by taxing authorities for years through 2002.

**3.****             Accrued Liabilities**

Accruedliabilities were as follows at June 30, 2007 and December 31, 2006:
|                                             | ** ** | **June 30, 2007** | ** ** | **December 31,  2006** | ** ** |
|---------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Accrued wages  and benefits                 |       | $                           | 73,391     |                        | $          | 71,578 |   |
| Accrued paid  time-off                      |       | 23,413                      |       | 22,816                      |       |
| Current portion  of self-insurance reserves |       | 58,819                      |       | 57,596                      |       |
| Accrued  restructuring                      |       | 2,723                       |       | 5,738                       |       |
| Current portion  of compliance and legal    |       | 3,872                       |       | 4,910                       |       |
| Accrued billing  and collection fees        |       | 5,035                       |       | 5,085                       |       |
| Accrued profit  sharing                     |       | 17,863                      |       | 19,695                      |       |
| Accrued interest                            |       | 11,682                      |       | 11,810                      |       |
| Other                                       |       | 29,234                      |       | 32,403                      |       |
| Total accrued  liabilities                  |       | $                           | 226,032    |                        | $          | 231,631 |   |

 

**4.****             Long-Term Debt**

Long-term debtconsisted of the following at June 30, 2007 and December 31, 2006:
| ** **                                                                       | ** ** | **June 30, 2007** | ** ** | **December 31,  2006** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Senior subordinated  notes due 2015 (10%)                                        |       | $                           | 250,000    |                        | $          | 250,000 |   |
| Senior secured  term loan due 2012 (7.36% at June 30, 2007)                      |       | 225,320                     |       | 226,472                     |       |
| Notes due at  various dates from 2007 to 2022 with interest rates from 6% to 10% |       | 2,426                       |       | 1,856                       |       |
| Capital lease  obligations due at various dates from 2007 to 2010 (see note 5)   |       | 7,376                       |       | 1,447                       |       |
|                                                                             |       | 485,122                     |       | 479,775                     |       |
| Less current  portion                                                            |       | (4,641                      | )          | (4,159                      | )          |
| Total long-term debt                                                             |       | $                           | 480,481    |                        | $          | 475,616 |   |

 

**5.****             Commitments and Contingencies**

***Lease Commitments***

The Company leasesvarious facilities and equipment under operating lease agreements.

The Company alsoleases certain vehicles under a capital lease and during the first quarter of2007 extended the terms of this capital lease for an additional three years.Assets under capital lease are capitalized using inherent interest rates at theinception of each lease. Capital leases are collateralized by the leasedvehicles.

***Services***

The Company issubject to the Medicare and Medicaid fraud and abuse laws which prohibit, amongother things, any false claims, or any bribe, kick-back or rebate in return forthe referral of Medicare and Medicaid patients. Violation of these prohibitionsmay result in civil and criminal penalties and exclusion from participation inthe Medicare and Medicaid programs. Management has implemented policies andprocedures that management believes will assure that the Company is insubstantial compliance with these laws and regulations but there can be noassurance the Company will not be found to have violated certain of these lawsand regulations. From time to time, the Company receives requests forinformation from government agencies pursuant to their regulatory orinvestigational authority. Such requests can include subpoenas or demandletters for documents to assist the government in audits or investigations. TheCompany is cooperating with the government agencies conducting theseinvestigations and is providing requested information to the governmentagencies. Other than the proceedings described below, management believes thatthe outcome of any of these investigations would not have a material

9

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adverse effect on theCompany.

On April 17,2006, the Office of Inspector General for the United States Department ofHealth and Human Services, or OIG, finalized its draft report requesting thatthe Company’s Massachusetts subsidiary reimburse the Medicare program forapproximately $1.8 million in alleged overpayments from Medicare for servicesperformed between July 1, 2002 and December 31, 2002. The OIG claimsthat these payments were made for services that did not meet Medicaremedical necessity and reimbursement requirements.   On December 10,2006, AMR paid the $1.8 million in alleged overpayments.  However, theCompany disagrees with the OIG’s finding and has filed an administrativeappeal. If AMR is successful in the administrative appeal the Company maybe entitled to repayment of all or part of the $1.8 million.

***Other Legal Matters***

On December 13,2005, a lawsuit purporting to be a class action was commenced against AMR inSpokane, Washington in Washington State Court, Spokane County.  Thecomplaint alleges that AMR billed patients and third party payors fortransports it conducted between 1998 and 2005 at higher rates thancontractually permitted.  The court has certified a class in this case,but the size and membership of the class has not been determined.  At thistime, AMR does not believe that any incorrect billings are material in amount.

EmCare enteredinto a settlement agreement with respect to June Belt, et. al. v. EmCare, Inc.et. al. brought by a number of nurse practitioners and physician assistantsunder the Fair Labor Standards Act.  The suit was filed on February 25,2003 in the Eastern District of Texas.  Pursuant to the settlementagreement, EmCare paid $1.7 million during the first quarter of 2007 insatisfaction of all claims in the lawsuit.

AMR and the Cityof Stockton, California, are parties to litigation regarding the terms andenforceability of a memorandum of understanding and a related joint ventureagreement between the parties to present a joint bid in response to a requestfor proposals to provide emergency ambulance services in the County of SanJoaquin, California. The suit was filed on June 28, 2005, in the UnitedStates District Court for the Eastern District of California. The parties wereunable to agree on the final terms of a joint bid. AMR has been awarded the SanJoaquin contract. While we are unable at this time to estimate the amount ofpotential damages, we believe that Stockton may claim as damages a portion ofour profit on the contract or the profit Stockton might have realized had thejoint venture proceeded.

**6.****             Restructuring Charges**

The Companyrestructured certain billing functions of AMR and operations in the LosAngeles, California market during the first quarter of 2007 and recorded arestructuring charge of $2.2 million.  This restructuring charge included$0.2 million in lease termination and exit costs and $2.0 million related totermination benefits.

**7.****             Equity Based Compensation**

The Companyadopted the provisions of Statement of Financial Accounting Standards (“SFAS”)No. 123 (revised 2004)*Share-BasedPayment* (“SFAS 123R”) on January 1, 2006 using the prospectivetransition method.  The stock options are valued using the Black-Scholesvaluation method on the date of grant.

Under the Company’sEquity Option Plan, key employees were granted options that permit theindividuals to purchase class A common shares and vest ratably generally over aperiod of four years. In addition, certain performance measures must be met for50% of the options to become exercisable. Options with similar provisions weregranted to non-employee directors. The Company recorded a compensation chargeof $300 for each of the three months ended June 30, 2007 and 2006 and $600 foreach of the six months ended June 30, 2007 and 2006.

In June 2006, theBoard of Directors of the Company adopted an equity compensation program fornon-employee directors of the Company, other than the Chair of the ComplianceCommittee (“Directors’ Plan”), which was subsequently approved by thestockholders of the Company in May 2007. Non-employee directors were granted8,000 Restricted Stock Units (“RSUs”) on June 1, 2006, each RSUrepresenting one share of the Company’s class A common stock. Immediatelyfollowing each annual stockholder meeting, each non-employee director willreceive a grant of RSUs having a fair market value of $100 on the date ofgrant, based on the closing price of the Company’s class A common stock on thebusiness day immediately preceding the grant date. The Directors’ Plan allows

10

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directors to defer incomefrom the grant of RSUs. The RSUs vest immediately prior to the election ofdirectors at the next following annual stockholder meeting, and will be paid inshares of the Company’s class A common stock (one share for each RSU). Eachnon-employee director (other than the Chair of the Compliance Committee) isalso entitled to an annual cash retainer of $50 to be paid in four quarterlyinstallments. In connection with this plan, the Company expensed $100 and $200in the three and six months ended June 30, 2007, respectively.

On April 7, 2007,the Board of Directors of the Company approved the adoption of the EMSCLong-Term Incentive Plan (the “Plan”), subject to stockholder approval. Thestockholders of EMSC approved the Plan at the Company’s 2007 Annual Meeting inMay 2007.  The Plan provides for thegrant of long-term incentives, including various equity-based incentives, tothose persons with responsibility for the success and growth of the Company andits subsidiaries.  No future grants willbe made under the Company’s previous Equity Option Plan referred to above.  On June 14, 2007, the Board of Directors ofthe Company granted 20,000 shares of restricted stock pursuant to the Plan,which shares vest ratably over a period of three years.  In addition, certain performance measuresmust be met for 50% of the shares to vest.

**8.****             Segment Information**

The Company isorganized around two separately managed business units: healthcaretransportation services and emergency management services, which have beenidentified as operating segments. The healthcare transportation servicesreportable segment focuses on providing a full range of medical transportationservices from basic patient transit to the most advanced emergency care andpre-hospital assistance. The emergency management services reportable segmentprovides outsourced business services to hospitals primarily for emergencydepartments, urgent care centers and for certain inpatient departments. TheChief Executive Officer has been identified as the chief operating decisionmaker (“CODM”) for purposes of SFAS No. 131*Disclosures about Segments of an Enterprise andRelated Information* (“SFAS 131”), as he assesses theperformance of the business units and decides how to allocate resources to thebusiness units.

Net income beforeequity in earnings of unconsolidated subsidiary, income tax expense, loss onearly debt extinguishment, interest and other income, realized gain (loss) oninvestments, interest expense, interest income from restricted assets anddepreciation and amortization (“Adjusted EBITDA”) is the measure of profit andloss that the CODM uses to assess performance, measure liquidity and make decisions.The accounting policies for reported segments are the same as for the Companyas a whole.
| ** **                                           | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                           | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Healthcare  Transportation Services**              |       |                                                |       |                                              |       |   |   |   |   |
| Revenue                                              |       | $                                                   | 295,304    |                                              | $          | 293,860 |   | $ | 603,412 |   | $ | 589,172 |   |
| Segment Adjusted  EBITDA                             |       | 23,364                                              |       | 24,444                                            |       | 48,309 |   | 47,603 |   |
| **Emergency  Management Services**                   |       |                                                |       |                                              |       |   |   |   |   |
| Revenue                                              |       | 221,408                                             |       | 184,591                                           |       | 436,619 |   | 358,403 |   |
| Segment Adjusted  EBITDA                             |       | 29,060                                              |       | 20,584                                            |       | 58,373 |   | 36,302 |   |
| **Total**                                            |       |                                                |       |                                              |       |   |   |   |   |
| Total revenue                                        |       | 516,712                                             |       | 478,451                                           |       | 1,040,031 |   | 947,575 |   |
| Total Adjusted  EBITDA                               |       | 52,424                                              |       | 45,028                                            |       | 106,682 |   | 83,905 |   |
| **Reconciliation  of Adjusted EBITDA to Net Income** |       |                                                |       |                                              |       |   |   |   |   |
| Adjusted EBITDA                                      |       | $                                                   | 52,424     |                                              | $          | 45,028 |   | $ | 106,682 |   | $ | 83,905 |   |
| Depreciation and  amortization expense               |       | (17,577                                             | )          | (16,360                                           | )          | (34,356 | ) | (32,204 | ) |
| Interest expense                                     |       | (11,395                                             | )          | (11,445                                           | )          | (22,629 | ) | (22,737 | ) |
| Realized gain  (loss) on investments                 |       | 22                                                  |       | (306                                              | )          | 59 |   | (525 | ) |
| Interest and  other income                           |       | 532                                                 |       | 780                                               |       | 1,189 |   | 1,132 |   |
| Loss on early  debt extinguishment                   |       | —                                              |       | (193                                              | )          | — |   | (193 | ) |
| Income tax  expense                                  |       | (9,012                                              | )          | (6,788                                            | )          | (19,474 | ) | (11,416 | ) |
| Equity in  earnings of unconsolidated subsidiary     |       | 101                                                 |       | 2                                                 |       | 255 |   | 17 |   |
| Net income                                           |       | $                                                   | 15,095     |                                              | $          | 10,718 |   | $ | 31,726 |   | $ | 17,979 |   |

 

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**9.****             Guarantors of Debt**

EMS LP financedthe acquisition of AMR and EmCare in part by issuing $250.0 millionprincipal amount of senior subordinated notes and borrowing $370.2 millionunder its senior secured credit facility. Its wholly-owned subsidiaries, AMRHoldCo, Inc. (f/k/a EMSC Management, Inc.) and EmCare HoldCo, Inc., are theissuers of the senior subordinated notes and the borrowers under the seniorsecured credit facility. As part of the transaction, AMR and its subsidiariesbecame wholly-owned subsidiaries of AMR HoldCo, Inc. and EmCare and itssubsidiaries became wholly-owned subsidiaries of EmCare HoldCo, Inc. The seniorsubordinated notes and the senior secured credit facility include a full,unconditional and joint and several guarantee by EMSC, EMS LP and EMSC’sdomestic subsidiaries. The senior subordinated notes and senior secured creditfacility do not include a guarantee by the Company’s captive insurancesubsidiary. All of the operating income and cash flow of EMSC, EMS LP, AMRHoldCo, Inc. and EmCare HoldCo, Inc. is generated by AMR, EmCare and theirsubsidiaries. As a result, funds necessary to meet the debt service obligationsunder the senior secured notes and senior secured credit facility describedabove are provided by the distributions or advances from the subsidiarycompanies, AMR and EmCare. Investments in subsidiary operating companies areaccounted for on the equity method. Accordingly, entries necessary toconsolidate EMSC, EMS LP, AMR HoldCo, Inc., EmCare HoldCo, Inc. and all oftheir subsidiaries are reflected in the Eliminations/Adjustments column.Separate complete financial statements of the issuers, EMS LP and subsidiaryguarantors would not provide additional material information that would beuseful in assessing the financial composition of the issuers, EMS LP or thesubsidiary guarantors. The condensed consolidating and combining financialstatements for EMSC, EMS LP, the issuers, the guarantors and the non-guarantorare as follows:

**Consolidating Statement ofOperations**

**For thethree months ended June 30, 2007**
| ** **                                                       | ** ** | **EMSC** | ** ** | **EMSLP** | ** ** | **Issuer  AMR  HoldCo, Inc.** | ** ** | **Issuer  EmCare  HoldCo, Inc.** | ** ** | **Subsidiary  Guarantors** | ** ** | **Subsidiary  Non-Guarantor** | ** ** | **Eliminations/  Adjustments** | ** ** | **Total** | ** ** |
|------------------------------------------------------------------|------------|----------|------------|-----------|------------|------------------------------------|------------|---------------------------------------|------------|----------------------------|------------|-------------------------------|------------|--------------------------------|------------|-----------|------------|
| Net revenue                                                      |       | $        | —     |      | $          | —                             |       | $                                     | —     |                       | $          | —                        |       | $                              | 516,712    |      | $          | 6,867 |   | $ | (6,867 | ) | $ | 516,712 |   |
| Compensation and benefits                                        |       | —   |       | —    |       | —                             |       | —                                |       | 357,309                    |       | —                        |       | —                         |       | 357,309   |       |
| Operating expenses                                               |       | —   |       | —    |       | —                             |       | —                                |       | 76,262                     |       | —                        |       | —                         |       | 76,262    |       |
| Insurance expense                                                |       | —   |       | —    |       | —                             |       | —                                |       | 17,454                     |       | 6,889                         |       | (6,867                         | )          | 17,476    |       |
| Selling, general and administrative expenses                     |       | —   |       | —    |       | —                             |       | —                                |       | 14,901                     |       | —                        |       | —                         |       | 14,901    |       |
| Depreciation and amortization expense                            |       | —   |       | —    |       | —                             |       | —                                |       | 17,577                     |       | —                        |       | —                         |       | 17,577    |       |
| Income from operations                                           |       | —   |       | —    |       | —                             |       | —                                |       | 33,209                     |       | (22                           | )          | —                         |       | 33,187    |       |
| Interest income from restricted assets                           |       | —   |       | —    |       | —                             |       | —                                |       | 1,660                      |       | —                        |       | —                         |       | 1,660     |       |
| Interest expense                                                 |       | —   |       | —    |       | —                             |       | —                                |       | (11,395                    | )          | —                        |       | —                         |       | (11,395   | )          |
| Realized gain on investments                                     |       | —   |       | —    |       | —                             |       | —                                |       | —                     |       | 22                            |       | —                         |       | 22        |       |
| Interest and other income                                        |       | —   |       | —    |       | —                             |       | —                                |       | 532                        |       | —                        |       | —                         |       | 532       |       |
| Income before income taxes                                       |       | —   |       | —    |       | —                             |       | —                                |       | 24,006                     |       | —                        |       | —                         |       | 24,006    |       |
| Income tax expense                                               |       | —   |       | —    |       | —                             |       | —                                |       | (9,012                     | )          | —                        |       | —                         |       | (9,012    | )          |
| Income before equity in  earnings of unconsolidated subsidiaries |       | —   |       | —    |       | —                             |       | —                                |       | 14,994                     |       | —                        |       | —                         |       | 14,994    |       |
| Equity in earnings of unconsolidated subsidiaries                |       | 15,095   |       | 15,095    |       | 2,050                              |       | 13,045                                |       | 101                        |       | —                        |       | (45,285                        | )          | 101       |       |
| Net  income                                                      |       | $        | 15,095     |      | $          | 15,095                             |       | $                                     | 2,050      |                       | $          | 13,045                        |       | $                              | 15,095     |      | $          | — |   | $ | (45,285 | ) | $ | 15,095 |   |

 

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**Consolidating Statement ofOperations**

**For thethree months ended June 30, 2006**
| ** **                                                       | ** ** | **EMSC** | ** ** | **EMS LP** | ** ** | **Issuer  AMR  HoldCo, Inc.** | ** ** | **Issuer  EmCare  HoldCo, Inc.** | ** ** | **Subsidiary  Guarantors** | ** ** | **Subsidiary  Non-Guarantor** | ** ** | **Eliminations/  Adjustments** | ** ** | **Total** | ** ** |
|------------------------------------------------------------------|------------|----------|------------|-----------------|------------|------------------------------------|------------|---------------------------------------|------------|----------------------------|------------|-------------------------------|------------|--------------------------------|------------|-----------|------------|
| Net  revenue                                                     |       | $        | —     |            | $          | —                             |       | $                                     | —     |                       | $          | —                        |       | $                              | 478,451    |      | $          | 9,440 |   | $ | (9,440 | ) | $ | 478,451 |   |
| Compensation  and benefits                                       |       | —   |       | —          |       | —                             |       | —                                |       | 330,927                    |       | —                        |       | —                         |       | 330,927   |       |
| Operating  expenses                                              |       | —   |       | —          |       | —                             |       | —                                |       | 69,203                     |       | —                        |       | —                         |       | 69,203    |       |
| Insurance  expense                                               |       | —   |       | —          |       | —                             |       | —                                |       | 20,872                     |       | 9,134                         |       | (9,440                         | )          | 20,566    |       |
| Selling,  general and administrative expenses                    |       | —   |       | —          |       | —                             |       | —                                |       | 13,170                     |       | —                        |       | —                         |       | 13,170    |       |
| Depreciation  and amortization expense                           |       | —   |       | —          |       | —                             |       | —                                |       | 16,360                     |       | —                        |       | —                         |       | 16,360    |       |
| Restructuring  charge                                            |       | —   |       | —          |       | —                             |       | —                                |       | 919                        |       | —                        |       | —                         |       | 919       |       |
| Income from operations                                           |       | —   |       | —          |       | —                             |       | —                                |       | 27,000                     |       | 306                           |       | —                         |       | 27,306    |       |
| Interest  income from restricted assets                          |       | —   |       | —          |       | —                             |       | —                                |       | 1,362                      |       | —                        |       | —                         |       | 1,362     |       |
| Interest  expense                                                |       | —   |       | —          |       | —                             |       | —                                |       | (11,445                    | )          | —                        |       | —                         |       | (11,445   | )          |
| Realized  loss on investments                                    |       | —   |       | —          |       | —                             |       | —                                |       | —                     |       | (306                          | )          | —                         |       | (306      | )          |
| Interest  and other income                                       |       | —   |       | —          |       | —                             |       | —                                |       | 780                        |       | —                        |       | —                         |       | 780       |       |
| Loss  on early debt extinguishment                               |       | —   |       | —          |       | —                             |       | —                                |       | (193                       | )          | —                        |       | —                         |       | (193      | )          |
| Income before income taxes                                       |       | —   |       | —          |       | —                             |       | —                                |       | 17,504                     |       | —                        |       | —                         |       | 17,504    |       |
| Income  tax expense                                              |       | —   |       | —          |       | —                             |       | —                                |       | (6,788                     | )          | —                        |       | —                         |       | (6,788    | )          |
| Income before equity in earnings of unconsolidated  subsidiaries |       | —   |       | —          |       | —                             |       | —                                |       | 10,716                     |       | —                        |       | —                         |       | 10,716    |       |
| Equity  in earnings of unconsolidated subsidiaries               |       | 10,718   |       | 10,718          |       | 3,222                              |       | 7,496                                 |       | 2                          |       | —                        |       | (32,154                        | )          | 2         |       |
| Net income                                                       |       | $        | 10,718     |            | $          | 10,718                             |       | $                                     | 3,222      |                       | $          | 7,496                         |       | $                              | 10,718     |      | $          | — |   | $ | (32,154 | ) | $ | 10,718 |   |

 

**Consolidating Statement ofOperations**

**For thesix months ended June 30, 2007**
| ** **                                                       | ** ** | **EMSC** | ** ** | **EMS LP** | ** ** | **Issuer  AMR  HoldCo, Inc.** | ** ** | **Issuer  EmCare  HoldCo, Inc.** | ** ** | **Subsidiary  Guarantors** | ** ** | **Subsidiary  Non-Guarantor** | ** ** | **Eliminations/  Adjustments** | ** ** | **Total** | ** ** |
|------------------------------------------------------------------|------------|----------|------------|-----------------|------------|------------------------------------|------------|---------------------------------------|------------|----------------------------|------------|-------------------------------|------------|--------------------------------|------------|-----------|------------|
| Net revenue                                                      |       | $        | —     |            | $          | —                             |       | $                                     | —     |                       | $          | —                        |       | $                              | 1,040,031  |      | $          | 15,507 |   | $ | (15,507 | ) | $ | 1,040,031 |   |
| Compensation and benefits                                        |       | —   |       | —          |       | —                             |       | —                                |       | 712,241                    |       | —                        |       | —                         |       | 712,241   |       |
| Operating expenses                                               |       | —   |       | —          |       | —                             |       | —                                |       | 156,258                    |       | —                        |       | —                         |       | 156,258   |       |
| Insurance expense                                                |       | —   |       | —          |       | —                             |       | —                                |       | 37,718                     |       | 15,566                        |       | (15,507                        | )          | 37,777    |       |
| Selling, general and administrative expenses                     |       | —   |       | —          |       | —                             |       | —                                |       | 28,206                     |       | —                        |       | —                         |       | 28,206    |       |
| Depreciation and amortization expense                            |       | —   |       | —          |       | —                             |       | —                                |       | 34,356                     |       | —                        |       | —                         |       | 34,356    |       |
| Restructuring charge                                             |       | —   |       | —          |       | —                             |       | —                                |       | 2,242                      |       | —                        |       | —                         |       | 2,242     |       |
| Income from operations                                           |       | —   |       | —          |       | —                             |       | —                                |       | 69,010                     |       | (59                           | )          | —                         |       | 68,951    |       |
| Interest income from restricted assets                           |       | —   |       | —          |       | —                             |       | —                                |       | 3,375                      |       | —                        |       | —                         |       | 3,375     |       |
| Interest expense                                                 |       | —   |       | —          |       | —                             |       | —                                |       | (22,629                    | )          | —                        |       | —                         |       | (22,629   | )          |
| Realized gain on investments                                     |       | —   |       | —          |       | —                             |       | —                                |       | —                     |       | 59                            |       | —                         |       | 59        |       |
| Interest and other income                                        |       | —   |       | —          |       | —                             |       | —                                |       | 1,189                      |       | —                        |       | —                         |       | 1,189     |       |
| Income before income taxes                                       |       | —   |       | —          |       | —                             |       | —                                |       | 50,945                     |       | —                        |       | —                         |       | 50,945    |       |
| Income tax expense                                               |       | —   |       | —          |       | —                             |       | —                                |       | (19,474                    | )          | —                        |       | —                         |       | (19,474   | )          |
| Income before equity in  earnings of unconsolidated subsidiaries |       | —   |       | —          |       | —                             |       | —                                |       | 31,471                     |       | —                        |       | —                         |       | 31,471    |       |
| Equity in earnings of unconsolidated subsidiaries                |       | 31,726   |       | 31,726          |       | 4,876                              |       | 26,850                                |       | 255                        |       | —                        |       | (95,178                        | )          | 255       |       |
| Net  income                                                      |       | $        | 31,726     |            | $          | 31,726                             |       | $                                     | 4,876      |                       | $          | 26,850                        |       | $                              | 31,726     |      | $          | — |   | $ | (95,178 | ) | $ | 31,726 |   |

 

13

----

**Consolidating Statement ofOperations**

**For thesix months ended June 30, 2006**
| ** **                                                       | ** ** | **EMSC** | ** ** | **EMS LP** | ** ** | **Issuer  AMR  HoldCo, Inc.** | ** ** | **Issuer  EmCare  HoldCo, Inc.** | ** ** | **Subsidiary  Guarantors** | ** ** | **Subsidiary  Non-Guarantor** | ** ** | **Eliminations/  Adjustments** | ** ** | **Total** | ** ** |
|------------------------------------------------------------------|------------|----------|------------|-----------------|------------|------------------------------------|------------|---------------------------------------|------------|----------------------------|------------|-------------------------------|------------|--------------------------------|------------|-----------|------------|
| Net revenue                                                      |       | $        | —     |            | $          | —                             |       | $                                     | —     |                       | $          | —                        |       | $                              | 947,575    |      | $          | 19,305 |   | $ | (19,305 | ) | $ | 947,575 |   |
| Compensation and benefits                                        |       | —   |       | —          |       | —                             |       | —                                |       | 656,974                    |       | —                        |       | —                         |       | 656,974   |       |
| Operating expenses                                               |       | —   |       | —          |       | —                             |       | —                                |       | 135,657                    |       | —                        |       | —                         |       | 135,657   |       |
| Insurance expense                                                |       | —   |       | —          |       | —                             |       | —                                |       | 45,321                     |       | 18,780                        |       | (19,305                        | )          | 44,796    |       |
| Selling, general and administrative expenses                     |       | —   |       | —          |       | —                             |       | —                                |       | 28,009                     |       | —                        |       | —                         |       | 28,009    |       |
| Depreciation and amortization expense                            |       | —   |       | —          |       | —                             |       | —                                |       | 32,204                     |       | —                        |       | —                         |       | 32,204    |       |
| Restructuring charge                                             |       | —   |       | —          |       | —                             |       | —                                |       | 919                        |       | —                        |       | —                         |       | 919       |       |
| Income from operations                                           |       | —   |       | —          |       | —                             |       | —                                |       | 48,491                     |       | 525                           |       | —                         |       | 49,016    |       |
| Interest income from restricted assets                           |       | —   |       | —          |       | —                             |       | —                                |       | 2,685                      |       | —                        |       | —                         |       | 2,685     |       |
| Interest expense                                                 |       | —   |       | —          |       | —                             |       | —                                |       | (22,737                    | )          | —                        |       | —                         |       | (22,737   | )          |
| Realized loss on investments                                     |       | —   |       | —          |       | —                             |       | —                                |       | —                     |       | (525                          | )          | —                         |       | (525      | )          |
| Interest and other income                                        |       | —   |       | —          |       | —                             |       | —                                |       | 1,132                      |       | —                        |       | —                         |       | 1,132     |       |
| Loss on early debt extinguishment                                |       | —   |       | —          |       | —                             |       | —                                |       | (193                       | )          | —                        |       | —                         |       | (193      | )          |
| Income before income taxes                                       |       | —   |       | —          |       | —                             |       | —                                |       | 29,378                     |       | —                        |       | —                         |       | 29,378    |       |
| Income tax expense                                               |       | —   |       | —          |       | —                             |       | —                                |       | (11,416                    | )          | —                        |       | —                         |       | (11,416   | )          |
| Income before equity in  earnings of unconsolidated subsidiaries |       | —   |       | —          |       | —                             |       | —                                |       | 17,962                     |       | —                        |       | —                         |       | 17,962    |       |
| Equity in earnings of unconsolidated subsidiaries                |       | 17,979   |       | 17,979          |       | 5,351                              |       | 12,628                                |       | 17                         |       | —                        |       | (53,937                        | )          | 17        |       |
| Net  income                                                      |       | $        | 17,979     |            | $          | 17,979                             |       | $                                     | 5,351      |                       | $          | 12,628                        |       | $                              | 17,979     |      | $          | — |   | $ | (53,937 | ) | $ | 17,979 |   |

 

14

----

**Consolidating Balance Sheet**

**As ofJune 30, 2007**
| ** **                                | ** ** | **EMSC** | ** ** | **EMS LP** | ** ** | **Issuer  AMR  HoldCo, Inc.** | ** ** | **Issuer  EmCare  HoldCo, Inc.** | ** ** | **Subsidiary  Guarantors** | ** ** | **Subsidiary  Non-Guarantor** | ** ** | **Eliminations/  Adjustments** | ** ** | **Total** | ** ** |
|-------------------------------------------|------------|----------|------------|-----------------|------------|------------------------------------|------------|---------------------------------------|------------|----------------------------|------------|-------------------------------|------------|--------------------------------|------------|-----------|------------|
| **Assets**                                |       |     |       |            |       |                               |       |                                  |       |                       |       |                          |       |                           |       |      |       |
| Current assets:                           |       |     |       |            |       |                               |       |                                  |       |                       |       |                          |       |                           |       |      |       |
| Cash and cash equivalents                 |       | $        | —     |            | $          | —                             |       | $                                     | —     |                       | $          | —                        |       | $                              | 29,321     |      | $          | 163 |   | $ | — |   | $ | 29,484 |   |
| Insurance collateral                      |       | —   |       | —          |       | —                             |       | —                                |       | 26,214                     |       | 44,408                        |       | (17,648                        | )          | 52,974    |       |
| Trade and other accounts  receivable, net |       | —   |       | —          |       | —                             |       | —                                |       | 480,032                    |       | 1,091                         |       | —                         |       | 481,123   |       |
| Parts and supplies  inventory             |       | —   |       | —          |       | —                             |       | —                                |       | 18,403                     |       | —                        |       | —                         |       | 18,403    |       |
| Other current assets                      |       | —   |       | —          |       | —                             |       | —                                |       | 17,154                     |       | 3,074                         |       | (241                           | )          | 19,987    |       |
| Current deferred tax assets               |       | —   |       | —          |       | —                             |       | —                                |       | 43,142                     |       | 3,163                         |       | —                         |       | 46,305    |       |
| Current assets                            |       | —   |       | —          |       | —                             |       | —                                |       | 614,266                    |       | 51,899                        |       | (17,889                        | )          | 648,276   |       |
| Non-current assets:                       |       |     |       |            |       |                               |       |                                  |       |                       |       |                          |       |                           |       |      |       |
| Property, plant, and  equipment, net      |       | —   |       | —          |       | —                             |       | —                                |       | 150,420                    |       | —                        |       | —                         |       | 150,420   |       |
| Intercompany receivable                   |       | 2,653    |       | 113,400         |       | 282,540                            |       | 193,064                               |       | —                     |       | —                        |       | (591,657                       | )          | —    |       |
| Intangible assets, net                    |       | —   |       | —          |       | —                             |       | —                                |       | 63,265                     |       | —                        |       | —                         |       | 63,265    |       |
| Non-current deferred tax  assets          |       | —   |       | —          |       | —                             |       | —                                |       | 99,137                     |       | (1,131                        | )          | —                         |       | 98,006    |       |
| Insurance collateral                      |       | —   |       | —          |       | —                             |       | —                                |       | 57,262                     |       | 85,510                        |       | —                         |       | 142,772   |       |
| Goodwill                                  |       | —   |       | —          |       | —                             |       | —                                |       | 273,305                    |       | 458                           |       | —                         |       | 273,763   |       |
| Other long-term assets                    |       | —   |       | —          |       | 7,856                              |       | 3,555                                 |       | 17,473                     |       | —                        |       | —                         |       | 28,884    |       |
| Investment and advances in  subsidiaries  |       | 416,176  |       | 302,776         |       | 211,845                            |       | 90,917                                |       | 6,271                      |       | —                        |       | (1,027,985                     | )          | —    |       |
| Assets                                    |       | $        | 418,829    |            | $          | 416,176                            |       | $                                     | 502,241    |                       | $          | 287,536                       |       | $                              | 1,281,399  |      | $          | 136,736 |   | $ | (1,637,531 | ) | $ | 1,405,386 |   |
| **Liabilities and Equity**                |       |     |       |            |       |                               |       |                                  |       |                       |       |                          |       |                           |       |      |       |
| Current liabilities:                      |       |     |       |            |       |                               |       |                                  |       |                       |       |                          |       |                           |       |      |       |
| Accounts payable                          |       | $        | —     |            | $          | —                             |       | $                                     | —     |                       | $          | —                        |       | $                              | 69,397     |      | $          | 116 |   | $ | — |   | $ | 69,513 |   |
| Accrued liabilities                       |       | —   |       | —          |       | 6,426                              |       | 5,256                                 |       | 183,776                    |       | 30,574                        |       | —                         |       | 226,032   |       |
| Current portion of  long-term debt        |       | —   |       | —          |       | 1,656                              |       | 744                                   |       | 2,241                      |       | —                        |       | —                         |       | 4,641     |       |
| Current liabilities                       |       | —   |       | —          |       | 8,082                              |       | 6,000                                 |       | 255,414                    |       | 30,690                        |       | —                         |       | 300,186   |       |
| Long-term debt                            |       | —   |       | —          |       | 282,314                            |       | 190,605                               |       | 7,562                      |       | —                        |       | —                         |       | 480,481   |       |
| Other long-term liabilities               |       | —   |       | —          |       | —                             |       | —                                |       | 124,004                    |       | 99,775                        |       | (17,889                        | )          | 205,890   |       |
| Intercompany                              |       | —   |       | —          |       | —                             |       | —                                |       | 591,657                    |       | —                        |       | (591,657                       | )          | —    |       |
| Liabilities                               |       | —   |       | —          |       | 290,396                            |       | 196,605                               |       | 978,637                    |       | 130,465                       |       | (609,546                       | )          | 986,557   |       |
| Equity:                                   |       |     |       |            |       |                               |       |                                  |       |                       |       |                          |       |                           |       |      |       |
| Class A common stock                      |       | 93       |       | —          |       | —                             |       | —                                |       | —                     |       | 30                            |       | (30                            | )          | 93        |       |
| Class B common stock                      |       | 1        |       | —          |       | —                             |       | —                                |       | —                     |       | —                        |       | —                         |       | 1         |       |
| Partnership equity                        |       | 212,361  |       | 325,761         |       | 189,394                            |       | 22,967                                |       | 212,361                    |       | —                        |       | (750,483                       | )          | 212,361   |       |
| Additional paid-in capital                |       | 115,959  |       | —          |       | —                             |       | —                                |       | —                     |       | 6,690                         |       | (6,690                         | )          | 115,959   |       |
| Retained earnings                         |       | 90,864   |       | 90,864          |       | 22,451                             |       | 68,413                                |       | 90,850                     |       | —                        |       | (272,578                       | )          | 90,864    |       |
| Comprehensive income (loss)               |       | (449     | )          | (449            | )          | —                             |       | (449                                  | )          | (449                       | )          | (449                          | )          | 1,796                          |       | (449      | )          |
| Equity                                    |       | 418,829  |       | 416,176         |       | 211,845                            |       | 90,931                                |       | 302,762                    |       | 6,271                         |       | (1,027,985                     | )          | 418,829   |       |
| Liabilities and Equity                    |       | $        | 418,829    |            | $          | 416,176                            |       | $                                     | 502,241    |                       | $          | 287,536                       |       | $                              | 1,281,399  |      | $          | 136,736 |   | $ | (1,637,531 | ) | $ | 1,405,386 |   |

 

15

----

**Consolidating Balance Sheet**

**As ofDecember 31, 2006**
| ** **                                | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **Issuer** AMR HoldCo, Inc. | ** ** | **Issuer  EmCare  HoldCo, Inc.** | ** ** | **Subsidiary  Guarantors** | ** ** | **Subsidiary  Non-Guarantor** | ** ** | **Eliminations/  Adjustments** | ** ** | **Total**  | ** ** |
|-------------------------------------------|------------|------------|------------|-----------------|------------|----------------------------------|------------|---------------------------------------|------------|----------------------------|------------|-------------------------------|------------|--------------------------------|------------|------------|------------|
| **Assets**                                | ** ** | ** ** | ** ** | ** **      | ** ** | ** **                       | ** ** | ** **                            | ** ** | ** **                 | ** ** | ** **                    | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Current assets:                           |       |       |       |            |       |                             |       |                                  |       |                       |       |                          |       |                           |       |       |       |
| Cash and cash equivalents                 |       | $          | —     |            | $          | —                           |       | $                                     | —     |                       | $          | —                        |       | $                              | 39,329     |       | $          | 7 |   | $ | — |   | $ | 39,336 |   |
| Insurance collateral                      |       | —     |       | —          |       | —                           |       | —                                |       | 24,912                     |       | 4,812                         |       | —                         |       | 29,724     |       |
| Trade and other accounts  receivable, net |       | —     |       | —          |       | —                           |       | —                                |       | 415,290                    |       | 1,160                         |       | —                         |       | 416,450    |       |
| Parts and supplies  inventory             |       | —     |       | —          |       | —                           |       | —                                |       | 18,089                     |       | —                        |       | —                         |       | 18,089     |       |
| Other current assets                      |       | —     |       | —          |       | —                           |       | —                                |       | 16,972                     |       | 394                           |       | (949                           | )          | 16,417     |       |
| Current deferred tax assets               |       | —     |       | —          |       | —                           |       | —                                |       | 9,310                      |       | 3,163                         |       | —                         |       | 12,473     |       |
| Current assets                            |       | —     |       | —          |       | —                           |       | —                                |       | 523,902                    |       | 9,536                         |       | (949                           | )          | 532,489    |       |
| Non-current assets:                       |       |       |       |            |       |                             |       |                                  |       |                       |       |                          |       |                           |       |       |       |
| Property, plant, and  equipment, net      |       | —     |       | —          |       | —                           |       | —                                |       | 147,162                    |       | —                        |       | —                         |       | 147,162    |       |
| Intercompany receivable                   |       | 400        |       | 114,165         |       | 282,691                          |       | 193,177                               |       | —                     |       | —                        |       | (590,433                       | )          | —     |       |
| Intangible assets, net                    |       | —     |       | —          |       | —                           |       | —                                |       | 66,789                     |       | —                        |       | —                         |       | 66,789     |       |
| Non-current deferred tax  assets          |       | —     |       | —          |       | —                           |       | —                                |       | 104,501                    |       | (1,131                        | )          | —                         |       | 103,370    |       |
| Insurance collateral                      |       | —     |       | —          |       | —                           |       | —                                |       | 59,599                     |       | 103,701                       |       | —                         |       | 163,300    |       |
| Goodwill                                  |       | —     |       | —          |       | —                           |       | —                                |       | 271,870                    |       | 458                           |       | —                         |       | 272,328    |       |
| Other long-term assets                    |       | —     |       | —          |       | 8,590                            |       | 3,838                                 |       | 20,351                     |       | —                        |       | —                         |       | 32,779     |       |
| Investment and advances in  subsidiaries  |       | 385,640    |       | 271,475         |       | 206,969                          |       | 64,492                                |       | 6,696                      |       | —                        |       | (935,272                       | )          | —     |       |
| Assets                                    |       | $          | 386,040    |            | $          | 385,640                          |       | $                                     | 498,250    |                       | $          | 261,507                       |       | $                              | 1,200,870  |       | $          | 112,564 |   | $ | (1,526,654 | ) | $ | 1,318,217 |   |
| **Liabilities and Equity**                | ** ** | ** ** | ** ** | ** **      | ** ** | ** **                       | ** ** | ** **                            | ** ** | ** **                 | ** ** | ** **                    | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Current liabilities:                      |       |       |       |            |       |                             |       |                                  |       |                       |       |                          |       |                           |       |       |       |
| Accounts payable                          |       | $          | —     |            | $          | —                           |       | $                                     | —     |                       | $          | —                        |       | $                              | 65,172     |       | $          | — |   | $ | — |   | $ | 65,172 |   |
| Accrued liabilities                       |       | —     |       | —          |       | 6,515                            |       | 5,295                                 |       | 192,501                    |       | 27,320                        |       | —                         |       | 231,631    |       |
| Current portion of  long-term debt        |       | —     |       | —          |       | 1,656                            |       | 744                                   |       | 1,759                      |       | —                        |       | —                         |       | 4,159      |       |
| Current liabilities                       |       | —     |       | —          |       | 8,171                            |       | 6,039                                 |       | 259,432                    |       | 27,320                        |       | —                         |       | 300,962    |       |
| Long-term debt                            |       | —     |       | —          |       | 283,110                          |       | 190,962                               |       | 1,544                      |       | —                        |       | —                         |       | 475,616    |       |
| Other long-term liabilities               |       | —     |       | —          |       | —                           |       | —                                |       | 78,000                     |       | 78,548                        |       | (949                           | )          | 155,599    |       |
| Intercompany                              |       | —     |       | —          |       | —                           |       | —                                |       | 590,433                    |       | —                        |       | (590,433                       | )          | —     |       |
| Liabilities                               |       | —     |       | —          |       | 291,281                          |       | 197,001                               |       | 929,409                    |       | 105,868                       |       | (591,382                       | )          | 932,177    |       |
| Equity:                                   |       |       |       |            |       |                             |       |                                  |       |                       |       |                          |       |                           |       |       |       |
| Class A common stock                      |       | 93         |       | —          |       | —                           |       | —                                |       | —                     |       | 30                            |       | (30                            | )          | 93         |       |
| Class B common stock                      |       | 1          |       | —          |       | —                           |       | —                                |       | —                     |       | —                        |       | —                         |       | 1          |       |
| Partnership equity                        |       | 212,361    |       | 326,526         |       | 189,394                          |       | 22,967                                |       | 212,361                    |       | —                        |       | (751,248                       | )          | 212,361    |       |
| Additional paid-in capital                |       | 114,471    |       | —          |       | —                           |       | —                                |       | —                     |       | 6,690                         |       | (6,690                         | )          | 114,471    |       |
| Retained earnings                         |       | 59,138     |       | 59,138          |       | 17,575                           |       | 41,563                                |       | 59,124                     |       | —                        |       | (177,400                       | )          | 59,138     |       |
| Comprehensive income (loss)               |       | (24        | )          | (24             | )          | —                           |       | (24                                   | )          | (24                        | )          | (24                           | )          | 96                             |       | (24        | )          |
| Equity                                    |       | 386,040    |       | 385,640         |       | 206,969                          |       | 64,506                                |       | 271,461                    |       | 6,696                         |       | (935,272                       | )          | 386,040    |       |
| Liabilities and Equity                    |       | $          | 386,040    |            | $          | 385,640                          |       | $                                     | 498,250    |                       | $          | 261,507                       |       | $                              | 1,200,870  |       | $          | 112,564 |   | $ | (1,526,654 | ) | $ | 1,318,217 |   |

 

16

----

**Condensed Consolidating Statementof Cash Flows**

**For thesix months ended June 30, 2007**
| ** **                                              | ** ** | **EMSC** | ** ** | **EMS LP** | ** ** | **Issuer  AMR  HoldCo Inc.** | ** ** | **Issuer  EmCare  HoldCo Inc.** | ** ** | **Subsidiary  Guarantors** | ** ** | **Subsidiary  Non-guarantors** | ** ** | **Total** | ** ** |
|---------------------------------------------------------|------------|----------|------------|-----------------|------------|-----------------------------------|------------|--------------------------------------|------------|----------------------------|------------|--------------------------------|------------|-----------|------------|
| **Cash Flows from Operating  Activities**               |       |     |       |            |       |                              |       |                                 |       |                       |       |                           |       |      |       |
| Net cash  provided by operating activities              |       | $        | —     |            | $          | —                            |       | $                                    | —     |                       | $          | —                         |       | $         | 14,956     |   | $ | 4,324 |   | $ | 19,280 |   |
| **Cash Flows from Investing  Activities**               |       |     |       |            |       |                              |       |                                 |       |                       |       |                           |       |      |       |
| Purchase of property,  plant and equipment              |       | —   |       | —          |       | —                            |       | —                               |       | (22,743                    | )          | —                         |       | (22,743   | )          |
| Proceeds from sale of  property, plant and equipment    |       | —   |       | —          |       | —                            |       | —                               |       | 291                        |       | —                         |       | 291       |       |
| Acquisition of  businesses, net of cash received        |       | —   |       | —          |       | —                            |       | —                               |       | (477                       | )          |                           |       | (477      | )          |
| Insurance collateral                                    |       | —   |       | —          |       | —                            |       | —                               |       | 1,135                      |       | (4,168                         | )          | (3,033    | )          |
| Net change in deposits  and other assets                |       | —   |       | —          |       | —                            |       | —                               |       | 2,715                      |       | —                         |       | 2,715     |       |
| Net cash used in  investing activities                  |       | —   |       | —          |       | —                            |       | —                               |       | (19,079                    | )          | (4,168                         | )          | (23,247   | )          |
| **Cash Flows from Financing  Activities**               |       |     |       |            |       |                              |       |                                 |       |                       |       |                           |       |      |       |
| Issuance of EMSC equity                                 |       | 249      |       | —          |       | —                            |       | —                               |       | —                     |       | —                         |       | 249       |       |
| Repayments of capital  lease obligations and other debt |       | —   |       | —          |       | —                            |       | —                               |       | (3,391                     | )          | —                         |       | (3,391    | )          |
| Net intercompany  borrowings (payments)                 |       | (249     | )          | —          |       | —                            |       | —                               |       | 249                        |       | —                         |       | —    |       |
| Increase in bank  overdrafts                            |       | —   |       | —          |       | —                            |       | —                               |       | (2,743                     | )          | —                         |       | (2,743    | )          |
| Net cash used in  financing activities                  |       | —   |       | —          |       | —                            |       | —                               |       | (5,885                     | )          | —                         |       | (5,885    | )          |
| Increase in cash and cash  equivalents                  |       | —   |       | —          |       | —                            |       | —                               |       | (10,008                    | )          | 156                            |       | (9,852    | )          |
| Cash and cash  equivalents, beginning of period         |       | —   |       | —          |       | —                            |       | —                               |       | 39,329                     |       | 7                              |       | 39,336    |       |
| Cash and cash equivalents, end of period                |       | $        | —     |            | $          | —                            |       | $                                    | —     |                       | $          | —                         |       | $         | 29,321     |   | $ | 163 |   | $ | 29,484 |   |

 

**Condensed Consolidating Statementof Cash Flows**

**For thesix months ended June 30, 2006**
| ** **                                              | ** ** | **EMSC** | ** ** | **EMS LP** | ** ** | **Issuer  AMR  HoldCo Inc.** | ** ** | **Issuer  EmCare  HoldCo Inc.** | ** ** | **Subsidiary  Guarantors** | ** ** | **Subsidiary  Non-guarantors** | ** ** | **Total** | ** ** |
|---------------------------------------------------------|------------|----------|------------|-----------------|------------|-----------------------------------|------------|--------------------------------------|------------|----------------------------|------------|--------------------------------|------------|-----------|------------|
| **Cash  Flows from Operating Activities**               |       |     |       |            |       |                              |       |                                 |       |                       |       |                           |       |      |       |
| Net cash provided by operating activities               |       | $        | —     |            | $          | —                            |       | $                                    | —     |                       | $          | —                         |       | $         | 103,167    |   | $ | 9,248 |   | $ | 112,415 |   |
| **Cash  Flows from Investing Activities**               |       |     |       |            |       |                              |       |                                 |       |                       |       |                           |       |      |       |
| Purchase of  property, plant and equipment              |       | —   |       | —          |       | —                            |       | —                               |       | (28,555                    | )          | —                         |       | (28,555   | )          |
| Proceeds from  sale of property, plant and equipment    |       | —   |       | —          |       | —                            |       | —                               |       | 259                        |       | —                         |       | 259       |       |
| Acquisition of  business                                |       | —   |       | —          |       | —                            |       | —                               |       | (840                       | )          | —                         |       | (840      | )          |
| Insurance  collateral                                   |       | —   |       | —          |       | —                            |       | —                               |       | (3,264                     | )          | (9,251                         | )          | (12,515   | )          |
| Net change in  deposits and other assets                |       | —   |       | —          |       | —                            |       | —                               |       | (194                       | )          | —                         |       | (194      | )          |
| Net cash used in investing activities                   |       | —   |       | —          |       | —                            |       | —                               |       | (32,594                    | )          | (9,251                         | )          | (41,845   | )          |
| **Cash  Flows from Financing Activities**               |       |     |       |            |       |                              |       |                                 |       |                       |       |                           |       |      |       |
| EMSC equity  issuance costs                             |       | (912     | )          | —          |       | —                            |       | —                               |       | —                     |       | —                         |       | (912      | )          |
| Repayments of  capital lease obligations and other debt |       | —   |       | —          |       | —                            |       | —                               |       | (13,923                    | )          | —                         |       | (13,923   | )          |
| Net intercompany  borrowings (payments)                 |       | 912      |       | —          |       | —                            |       | —                               |       | (912                       | )          | —                         |       | —    |       |
| Decrease in bank  overdrafts                            |       | —   |       | —          |       | —                            |       | —                               |       | (4,123                     | )          | —                         |       | (4,123    | )          |
| Net cash used in financing activities                   |       | —   |       | —          |       | —                            |       | —                               |       | (18,958                    | )          | —                         |       | (18,958   | )          |
| Increase in cash  and cash equivalents                  |       | —   |       | —          |       | —                            |       | —                               |       | 51,615                     |       | (3                             | )          | 51,612    |       |
| Cash and cash  equivalents, beginning of period         |       | —   |       | —          |       | —                            |       | —                               |       | 18,001                     |       | 47                             |       | 18,048    |       |
| Cash and cash  equivalents, end of period               |       | $        | —     |            | $          | —                            |       | $                                    | —     |                       | $          | —                         |       | $         | 69,616     |   | $ | 44 |   | $ | 69,660 |   |

 

**10.****        Subsequent Events**

The Companycompleted two acquisitions in July 2007 for approximately $71 million.  The acquisition of MedicWest Ambulance basedin North Las Vegas, Nevada was completed on July 18, 2007 and the acquisitionof Abbott Ambulance, Inc. based in St. Louis, Missouri was completed on July20, 2007.  The Company is in the processof performing its allocation of the purchase price.

17

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**ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS**

**Forward-LookingStatements and Factors That May Affect Results**

Certain statementsand information herein may be deemed to be “forward-looking statements” withinthe meaning of the Federal Private Securities Litigation Reform Act of 1995.Forward-looking statements may include, but are not limited to, statementsrelating to our objectives, plans and strategies, and all statements (otherthan statements of historical facts) that address activities, events ordevelopments that we intend, expect, project, believe or anticipate will or mayoccur in the future. Any forward-looking statements herein are made as of thedate this Quarterly Report on Form 10-Q is filed with the Securities andExchange Commission, and EMSC undertakes no duty to update or revise any suchstatements. Forward-looking statements are not guarantees of future performanceand are subject to risks and uncertainties. Important factors that could causeactual results, developments and business decisions to differ materially fromforward-looking statements are described in EMSC’s filings with the SEC fromtime to time, including in the section entitled “Risk Factors” in the Company’smost recent Annual Report on Form 10-K and in subsequent Quarterly Reports onForm 10-Q. Among the factors that could cause future results to differmaterially from those provided in this Quarterly Report on Form 10-Q are: theimpact on our revenue of changes in transport volume, mix of insured anduninsured patients, and third party reimbursement rates and methods; theadequacy of our insurance coverage and insurance reserves; potential penaltiesor changes to our operations if we fail to comply with extensive and complexgovernment regulation of our industry, both as it exists now and as it maychange in the future; our ability to recruit and retain qualified physiciansand other healthcare professionals, and enforce our non-compete agreements withour 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 thecost of capital expenditures to maintain and upgrade our vehicle fleet andmedical equipment; and the loss of existing contracts and the accuracy of ourassessment of costs under new contracts.

All references to “we”,“our”, “us” or “EMSC” refer to Emergency Medical Services Corporation and itssubsidiaries, including Emergency Medical Services L.P., or EMS LP. The Company’sbusiness is conducted primarily through two operating subsidiaries, AmericanMedical Response, Inc., or AMR, and EmCare Holdings Inc, or EmCare.

This Report shouldbe read in conjunction with the Company’s consolidated financial statements andnotes thereto included in our Annual Report on Form 10-K filed with the SEC onMarch 8, 2007.

***Company Overview***

We are a leadingprovider of emergency medical services in the United States. We operate ourbusiness and market our services under the AMR and EmCare brands. AMR is theleading provider of ambulance transport services in the United States. EmCareis the leading provider of outsourced emergency department staffing andmanagement services in the United States.

**AmericanMedical Response**

Over its more than50 years of operating history, AMR has developed the largest network ofambulance transport services in the United States based on net revenue andnumber of transports. For the six months ended June 30, 2007, approximately 55%of AMR’s net revenue was generated from emergency 9-1-1 ambulance transportservices. Non-emergency ambulance transport services, including critical caretransfer, wheelchair transports and other interfacility transports, or IFTs,accounted for 32% of AMR’s net revenue for the same period, with the balancegenerated from fixed wing medical transportation services, Medicaid managedtransportation services, and the provision of training, dispatch and otherservices to communities and public safety agencies.

**EmCare**

Over its more than30 years of operating history, EmCare has become the largest provider ofoutsourced emergency department staffing and related management services tohealthcare facilities based on number of

18

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contracts with hospitalsand affiliated physician groups.

***Recent Developments***

On January 1,2007, we adopted the recognition and disclosure provisions of FASBInterpretation No. 48, “*Accounting forUncertainty in Income Taxes - an interpretation of FASB Statement No. 109*”(“FIN 48”).  This interpretation addresses the determination of whethertax benefits claimed or expected to be claimed on a tax return should berecorded in the financial statements.  Under FIN 48, EMSC may recognizethe tax benefit from an uncertain tax position only if it is more likely thannot that the tax position will be sustained on examination by the taxingauthorities, based on the technical merits of the position. The tax benefitsrecognized in the financial statements from such a position should be measuredbased on the largest benefit that has a greater than fifty percent likelihoodof being realized upon ultimate settlement. FIN 48 also provides guidance onderecognition, classification, interest and penalties on income taxes, andaccounting in interim periods.

As a result of theimplementation of FIN 48 at January 1, 2007, we recorded a $49.0 millionliability with an offsetting increase to current deferred tax assets.

In accordance withour accounting policy, EMSC recognized accrued interest and penalties relatedto unrecognized tax benefits as a component of tax expense, which is consistentwith the recognition of these items in prior reporting periods.  As ofJanuary 1, 2007, we recorded a liability of approximately $4.8 million and $6.1million for interest and penalties, respectively.  The liability forinterest and penalties did not materially change as of June 30, 2007.

With limitedexception, we are no longer subject to U.S. federal, state, and local incometax audits by taxing authorities for years through 2002.

***Key Factors and Measures We Use to Evaluate Our Business***

The key factorsand measures we use to evaluate our business focus on the number of patients wetreat and transport and the costs we incur to provide the necessary care andtransportation for each of our patients.

We evaluate ourrevenue net of provisions for contractual payor discounts and provisions foruncompensated care. Medicaid, Medicare and certain other payors receivediscounts from our standard charges, which we refer to as contractualdiscounts. In addition, individuals we treat and transport may be personallyresponsible for a deductible or co-pay under their third party payor coverage,and most of our contracts require us to treat and transport patients who haveno insurance or other third party payor coverage. Due to the uncertaintyregarding collectibility of charges associated with services we provide tothese patients, which we refer to as uncompensated care, our net revenuerecognition is based on expected cash collections. Our net revenue is grossbillings after provisions for contractual discounts and estimated uncompensatedcare. Provisions for contractual discounts and uncompensated care haveincreased historically primarily as a result of increases in gross billingrates.

In addition tocontinually monitoring our payor mix, we also analyze certain measures in eachof our business segments.

**AMR**

Approximately 87%of AMR’s net revenue for the six months ended June 30, 2007 was transportrevenue derived from the treatment and transportation of patients based onbillings to third party payors, healthcare facilities and patients. The balanceof AMR’s net revenue is derived from direct billings to communities andgovernment agencies for the provision of training, dispatch center and otherservices.  AMR’s measures for net revenue include transports (segregatedinto ambulance and wheelchair transports and in certain analyses weighted) andnet revenue per transport.

The change fromperiod to period in the number of transports is influenced by increases intransports in existing markets from both new and existing facilities we servefor non-emergency transports, the effects of general community conditions foremergency transports and the impact of newly acquired businesses.

The costs we incurin our AMR business segment consist primarily of compensation and benefits formedical

19

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crews and supportpersonnel, direct and indirect operating costs to provide transportationservices, and costs related to accident and insurance claims. AMR’s key costmeasures include unit hours and cost per unit hour (to measurecompensation-related costs and the efficiency of our ambulance deployment),operating costs per transport, and accident and insurance claims.

We have focusedour risk mitigation efforts on employee training for proper patient handlingtechniques, development of clinical and medical equipment protocols, drivingsafety, implementation of technology to reduce auto incidents and other riskmitigation processes which we believe have resulted in a reduction in thefrequency, severity and development of claims. We continue to see positivetrends in our claims costs but cannot provide assurance that these trends willcontinue.

**EmCare**

Of EmCare’s netrevenue for the six months ended June 30, 2007 approximately 99% was derivedfrom our hospital contracts for emergency department staffing, hospitalist andradiology services and other management services. Of this revenue,approximately 74% was generated from billings to third party payors andpatients for patient visits and approximately 26% was generated from billingsto hospitals and affiliated physician groups for professional services. EmCare’skey net revenue measures are patient visits, net revenue per patient visit, andnumber of contracts.

The change fromperiod to period in the number of patient visits under our “same store”contracts is influenced by general community conditions as well as hospital-specificelements, many of which are beyond our direct control.

The costs incurredin our EmCare business segment consist primarily of compensation and benefitsfor physicians and other professional providers, professional liability costs,and contract and other support costs. EmCare’s key cost measures includeprovider compensation per patient visit and professional liability costs.

We have developedextensive professional liability risk mitigation processes, including riskassessments on medical professionals and hospitals, extensive incidentreporting and tracking processes, clinical fail-safe programs, training andeducation and other risk mitigation programs which we believe have resulted ina continued reduction in the frequency, severity and development of claims. Wecontinue to see positive trends in our claims costs but cannot provideassurance that these trends will continue.

***Factors Affecting Operating Results***

**Changesin Net New Contracts**

Our operatingresults are affected directly by the number of net new contracts and relatedvolumes we have in a period, reflecting the effects of both new contracts andcontract expirations. We regularly bid for new contracts, frequently in aformal competitive bidding process that often requires written responses to aRequest for Proposal, or RFP, and, in any fiscal period, certain of ourcontracts will expire. We may elect not to seek extension or renewal of acontract, or may reduce certain services, if we determine that we cannotcontinue to provide such services on favorable terms. With respect to expiringcontracts we would like to renew, we may be required to seek renewal through anRFP, and we may not be successful in retaining any such contracts, or retainingthem on terms that are as favorable as present terms.

**Inflation**

Certain of ourexpenses, such as wages and benefits, insurance, fuel and equipment repair andmaintenance costs, are subject to normal inflationary pressures. Although wehave generally been able to offset inflationary cost increases throughincreased operating efficiencies and successful negotiation of fees andsubsidies, we can provide no assurance that we will be able to offset anyfuture inflationary cost increases through similar efficiencies and feechanges.

20

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***Critical Accounting Policies***

**RevenueRecognition**

Management alsoregularly analyzes the ultimate collectibility of accounts receivable aftercertain stages of the collection cycle using a look-back analysis to determinethe amount of receivables subsequently collected.  Retroactive adjustments recorded in the firsthalf of the year, which increased revenue, were 2.0% of consolidated netrevenue for the six months ended June 30, 2007 compared to 1.0% of consolidatednet revenue for the six months ended June 30, 2006.

**Resultsof Operations**

**Threeand Six Months Ended June 30, 2007 Compared to Three and Six Months Ended June30, 2006**

The followingtables present a comparison of financial data from our unaudited consolidatedstatements of operations for the three and six months ended June 30, 2007 andfor the three and six months ended June 30, 2006 for EMSC and our two operatingsegments.

**Non-GAAPMeasures**

*AdjustedEBITDA. *AdjustedEBITDA is defined as net income before equity in earnings of unconsolidatedsubsidiary, income tax expense, loss on early debt extinguishment, interest andother income, realized gain (loss) on investments, interest expense, interestincome from restricted assets and depreciation and amortization.  Adjusted EBITDA is commonly used bymanagement and investors as a performance measure and liquidity indicator.Adjusted EBITDA is not considered a measure of financial performance under U.S.generally accepted accounting principles, or GAAP, and the items excluded fromAdjusted EBITDA are significant components in understanding and assessing ourfinancial performance. Adjusted EBITDA should not be considered in isolation oras an alternative to such GAAP measures as net income, cash flows provided byor used in operating, investing or financing activities or other financialstatement data presented in our financial statements as an indicator offinancial performance or liquidity. Since Adjusted EBITDA is not a measuredetermined in accordance with GAAP and is susceptible to varying calculations,Adjusted EBITDA, as presented, may not be comparable to other similarly titledmeasures of other companies. The tables set forth a reconciliation of AdjustedEBITDA to net income and cash flows provided by operating activities.

**Unaudited Consolidated Results ofOperations and as a Percentage of Net Revenue**

**(dollarsin thousands)**

**EMSC**
| ** **                                      | ** ** | **Three months ended  June 30, 2007** | ** ** | **Three months ended  June 30, 2006** | ** ** | **Six months ended  June 30, 2007** | ** ** | **Six months ended  June 30, 2006** | ** ** |
|-------------------------------------------------|------------|-----------------------------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                      | ** ** | ** **                                                | ** ** | **% of net  revenue**                           | ** ** | ** **                                              | ** ** | **% of net  revenue**                         | ** ** | ** ** | ** ** | **% of net  revenue** | ** ** | ** ** | ** ** | **% of net  revenue** | ** ** |
| Net revenue                                     |       | $                                                         | 516,712    |                                                      | 100.0      | %                                                       | $          | 478,451                                                 |       | 100.0 | % | $ | 1,040,031 |   | 100.0 | % | $ | 947,575 |   | 100.0 | % |
| Compensation and benefits                       |       | 357,309                                                   |       | 69.2                                                      |       | 330,927                                                 |       | 69.2                                                    |       | 712,241 |   | 68.5 |   | 656,974 |   | 69.3 |   |
| Operating expenses                              |       | 76,262                                                    |       | 14.8                                                      |       | 69,203                                                  |       | 14.5                                                    |       | 156,258 |   | 15.0 |   | 135,657 |   | 14.3 |   |
| Insurance expense                               |       | 17,476                                                    |       | 3.4                                                       |       | 20,566                                                  |       | 4.3                                                     |       | 37,777 |   | 3.6 |   | 44,796 |   | 4.7 |   |
| Selling, general and administrative expenses    |       | 14,901                                                    |       | 2.9                                                       |       | 13,170                                                  |       | 2.8                                                     |       | 28,206 |   | 2.7 |   | 28,009 |   | 3.0 |   |
| Restructuring charges                           |       | —                                                    |       | —                                                    |       | 919                                                     |       | 0.2                                                     |       | 2,242 |   | 0.2 |   | 919 |   | 0.1 |   |
| Interest income from restricted assets          |       | (1,660                                                    | )          | (0.3                                                      | )          | (1,362                                                  | )          | (0.3                                                    | )          | (3,375 | ) | (0.3 | ) | (2,685 | ) | (0.3 | ) |
| Adjusted EBITDA                                 |       | 52,424                                                    |       | 10.1                                                      |       | 45,028                                                  |       | 9.4                                                     |       | 106,682 |   | 10.3 |   | 83,905 |   | 8.9 |   |
| Depreciation and amortization expenses          |       | (17,577                                                   | )          | (3.4                                                      | )          | (16,360                                                 | )          | (3.4                                                    | )          | (34,356 | ) | (3.3 | ) | (32,204 | ) | (3.4 | ) |
| Interest expense                                |       | (11,395                                                   | )          | (2.2                                                      | )          | (11,445                                                 | )          | (2.4                                                    | )          | (22,629 | ) | (2.2 | ) | (22,737 | ) | (2.4 | ) |
| Realized gain (loss) on investments             |       | 22                                                        |       | 0.0                                                       |       | (306                                                    | )          | (0.1                                                    | )          | 59 |   | 0.0 |   | (525 | ) | (0.1 | ) |
| Interest and other income                       |       | 532                                                       |       | 0.1                                                       |       | 780                                                     |       | 0.2                                                     |       | 1,189 |   | 0.1 |   | 1,132 |   | 0.1 |   |
| Loss on early debt extinguishment               |       | —                                                    |       | —                                                    |       | (193                                                    | )          | (0.0                                                    | )          | — |   | — |   | (193 | ) | (0.0 | ) |
| Income tax expense                              |       | (9,012                                                    | )          | (1.7                                                      | )          | (6,788                                                  | )          | (1.4                                                    | )          | (19,474 | ) | (1.9 | ) | (11,416 | ) | (1.2 | ) |
| Equity in earnings in unconsolidated subsidiary |       | 101                                                       |       | 0.0                                                       |       | 2                                                       |       | 0.0                                                     |       | 255 |   | 0.0 |   | 17 |   | 0.0 |   |
| Net  income                                     |       | $                                                         | 15,095     |                                                      | 2.9        | %                                                       | $          | 10,718                                                  |       | 2.2 | % | $ | 31,726 |   | 3.1 | % | $ | 17,979 |   | 1.9 | % |

 

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**Unaudited Reconciliation ofAdjusted EBITDA to Cash Flows Provided by Operating Activities**

**(dollarsin thousands)**

|                                                      | ** ** | **For the six months ended  June 30,** | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                           | ** ** | **2007**                                                        | ** ** | **2006** | ** ** |
| Adjusted EBITDA                                      |       | $                                                               | 106,682    |   | $ | 83,905 |   |
| Interest paid                                        |       | (21,609                                                         | )          | (21,671 | ) |
| Change in  accounts receivable                       |       | (63,934                                                         | )          | 31,881 |   |
| Change in other  operating assets/liabilities        |       | (3,718                                                          | )          | 18,164 |   |
| Equity based  compensation                           |       | 800                                                             |       | 629 |   |
| Dividends  received                                  |       | 416                                                             |       | — |   |
| Gain on disposal  of property, plant & equipment |       | (181                                                            | )          | (717 | ) |
| Other                                                |       | 824                                                             |       | 224 |   |
| Cash flows  provided by operating activities         |       | $                                                               | 19,280     |   | $ | 112,415 |   |

 

**Unaudited Segment Results ofOperations and as a Percentage of Net Revenue**

**(dollarsin thousands)**

**AMR**
| ** **                                                  | ** ** | **Three months ended  June 30, 2007** | ** ** | **Three months ended  June 30, 2006** | ** ** | **Six months ended  June 30, 2007** | ** ** | **Six months ended  June 30, 2006** | ** ** |
|-------------------------------------------------------------|------------|-----------------------------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                  | ** ** | ** **                                                | ** ** | **% of net  revenue**                           | ** ** | ** **                                              | ** ** | **% of net  revenue**                         | ** ** | ** ** | ** ** | **% of net  revenue** | ** ** | ** ** | ** ** | **% of net  revenue** | ** ** |
| Net revenue                                                 |       | $                                                         | 295,304    |                                                      | 100.0      | %                                                       | $          | 293,860                                                 |       | 100.0 | % | $ | 603,412 |   | 100.0 | % | $ | 589,172 |   | 100.0 | % |
| Compensation and benefits                                   |       | 187,608                                                   |       | 63.5                                                      |       | 189,570                                                 |       | 64.5                                                    |       | 380,009 |   | 63.0 |   | 379,719 |   | 64.4 |   |
| Operating expenses                                          |       | 65,955                                                    |       | 22.3                                                      |       | 60,488                                                  |       | 20.6                                                    |       | 135,607 |   | 22.5 |   | 119,127 |   | 20.2 |   |
| Insurance expense                                           |       | 8,951                                                     |       | 3.0                                                       |       | 10,284                                                  |       | 3.5                                                     |       | 19,293 |   | 3.2 |   | 23,694 |   | 4.0 |   |
| Selling, general and administrative expenses                |       | 10,145                                                    |       | 3.4                                                       |       | 8,766                                                   |       | 3.0                                                     |       | 19,392 |   | 3.2 |   | 19,332 |   | 3.3 |   |
| Restructuring charges                                       |       | —                                                    |       | —                                                    |       | 919                                                     |       | 0.3                                                     |       | 2,242 |   | 0.4 |   | 919 |   | 0.2 |   |
| Interest income from restricted assets                      |       | (719                                                      | )          | (0.2                                                      | )          | (611                                                    | )          | (0.2                                                    | )          | (1,440 | ) | (0.2 | ) | (1,222 | ) | (0.2 | ) |
| Adjusted EBITDA                                             |       | 23,364                                                    |       | 7.9                                                       |       | 24,444                                                  |       | 8.3                                                     |       | 48,309 |   | 8.0 |   | 47,603 |   | 8.1 |   |
| Reconciliation of Adjusted EBITDA to income from operations |       |                                                      |       |                                                      |       |                                                    |       |                                                    |       |   |   |   |   |   |   |   |   |
| Adjusted EBITDA                                             |       | 23,364                                                    |       | 7.9                                                       |       | 24,444                                                  |       | 8.3                                                     |       | 48,309 |   | 8.0 |   | 47,603 |   | 8.1 |   |
| Depreciation and amortization expense                       |       | (13,711                                                   | )          | (4.6                                                      | )          | (13,051                                                 | )          | (4.4                                                    | )          | (27,461 | ) | (4.6 | ) | (25,661 | ) | (4.4 | ) |
| Interest income from restricted assets                      |       | (719                                                      | )          | (0.2                                                      | )          | (611                                                    | )          | (0.2                                                    | )          | (1,440 | ) | (0.2 | ) | (1,222 | ) | (0.2 | ) |
| Income from operations                                      |       | $                                                         | 8,934      |                                                      | 3.0        | %                                                       | $          | 10,782                                                  |       | 3.7 | % | $ | 19,408 |   | 3.2 | % | $ | 20,720 |   | 3.5 | % |

 

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**EmCare**
| ** **                                                   | ** ** | ** **                                                      | ** ** | ** **                                                      | ** ** | ** **                                                    | ** ** | ** **                                                    | ** ** |
|--------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|---------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                   | ** ** | **Three months ended   June 30, 2007** | ** ** | **Three months ended   June 30, 2006** | ** ** | **Six months ended   June 30, 2007** | ** ** | **Six months ended   June 30, 2006** | ** ** |
| ** **                                                   | ** ** | ** **                                                      | ** ** | **% of net   revenue**                           | ** ** | ** **                                                    | ** ** | **% of net   revenue**                         | ** ** | ** ** | ** ** | **% of net   revenue** | ** ** | ** ** | ** ** | **% of net   revenue** | ** ** |
| Net revenue                                                  |       | $                                                               | 221,408    |                                                            | 100.0      | %                                                             | $          | 184,591                                                       |       | 100.0 | % | $ | 436,619 |   | 100.0 | % | $ | 358,403 |   | 100.0 | % |
|                                                         |       |                                                            |       |                                                            |       |                                                          |       |                                                          |       |   |   |   |   |   |   |   |   |
| Compensation and  benefits                                   |       | 169,701                                                         |       | 76.6                                                            |       | 141,357                                                       |       | 76.6                                                          |       | 332,232 |   | 76.1 |   | 277,255 |   | 77.4 |   |
|                                                         |       |                                                            |       |                                                            |       |                                                          |       |                                                          |       |   |   |   |   |   |   |   |   |
| Operating expenses                                           |       | 10,307                                                          |       | 4.7                                                             |       | 8,715                                                         |       | 4.7                                                           |       | 20,651 |   | 4.7 |   | 16,530 |   | 4.6 |   |
|                                                         |       |                                                            |       |                                                            |       |                                                          |       |                                                          |       |   |   |   |   |   |   |   |   |
| Insurance expense                                            |       | 8,525                                                           |       | 3.9                                                             |       | 10,282                                                        |       | 5.6                                                           |       | 18,484 |   | 4.2 |   | 21,102 |   | 5.9 |   |
| Selling, general and  administrative expenses                |       | 4,756                                                           |       | 2.1                                                             |       | 4,404                                                         |       | 2.4                                                           |       | 8,814 |   | 2.0 |   | 8,677 |   | 2.4 |   |
| Interest income from  restricted assets                      |       | (941                                                            | )          | (0.4                                                            | )          | (751                                                          | )          | (0.4                                                          | )          | (1,935 | ) | (0.4 | ) | (1,463 | ) | (0.4 | ) |
|                                                         |       |                                                            |       |                                                            |       |                                                          |       |                                                          |       |   |   |   |   |   |   |   |   |
| Adjusted EBITDA                                              |       | 29,060                                                          |       | 13.1                                                            |       | 20,584                                                        |       | 11.2                                                          |       | 58,373 |   | 13.4 |   | 36,302 |   | 10.1 |   |
| Reconciliation of  Adjusted EBITDA to income from operations |       |                                                            |       |                                                            |       |                                                          |       |                                                          |       |   |   |   |   |   |   |   |   |
| Adjusted EBITDA                                              |       | 29,060                                                          |       | 13.1                                                            |       | 20,584                                                        |       | 11.2                                                          |       | 58,373 |   | 13.4 |   | 36,302 |   | 10.1 |   |
| Depreciation and  amortization                               |       | (3,866                                                          | )          | (1.7                                                            | )          | (3,309                                                        | )          | (1.8                                                          | )          | (6,895 | ) | (1.6 | ) | (6,543 | ) | (1.8 | ) |
| Interest income from  restricted assets                      |       | (941                                                            | )          | (0.4                                                            | )          | (751                                                          | )          | (0.4                                                          | )          | (1,935 | ) | (0.4 | ) | (1,463 | ) | (0.4 | ) |
| Income from operations                                       |       | $                                                               | 24,253     |                                                            | 11.0       | %                                                             | $          | 16,524                                                        |       | 9.0 | % | $ | 49,543 |   | 11.3 | % | $ | 28,296 |   | 7.9 | % |

 

***Three months ended June 30, 2007 compared to the threemonths ended June 30, 2006***

***Consolidated***

Our results forthe three months ended June 30, 2007 reflect an increase in net revenue of$38.3 million and an increase in net income of $4.4 million compared to thethree months ended June 30, 2006.  Theincrease in net income is attributable primarily to an increase of $7.4 millionin Adjusted EBITDA partially offset by increases in depreciation andamortization expense and income tax expense. Basic and diluted earnings per share were $0.36 and $0.35, respectively,for the three months ended June 30, 2007. Basic and diluted earnings per share were $0.26 and $0.25, respectively,for the same period in 2006.

*Netrevenue. *For the threemonths ended June 30, 2007 we generated net revenue of $516.7 million comparedto net revenue of $478.5 million for the three months ended June 30, 2006,representing an increase of 8.0%.  Theincrease is attributable primarily to increases in rates and volumes onexisting contracts and increased volume from net new contracts.

*AdjustedEBITDA.*Adjusted EBITDA was $52.4 million, or 10.1% of netrevenue, for the three months ended June 30, 2007 compared to $45.0 million, or9.4% of net revenue, for the three months ended June 30, 2006. The increase isattributable primarily to the net impact of revenue growth during the periodand continued improvement in insurance claims costs.

*Depreciationand amortization expense.*Depreciation and amortizationexpense for the three months ended June 30, 2007 was $17.6 million, or 3.4% ofnet revenue, compared to $16.4 million, or 3.4% of net revenue, for the threemonths ended June 30, 2006.  Theincrease is attributable to amortization expense on additional contractintangible assets recorded on acquisitions since June 30, 2006 and depreciationexpense related to growth in capital expenditures during 2006.

*Interestexpense.*Interest expense for both the three months endedJune 30, 2007 and the three months ended June 30, 2006 was $11.4 million.

*Incometax expense. *Incometax expense increased by $2.2 million for the three months ended June 30, 2007

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compared to the sameperiod in 2006, resulting primarily from increased operating income.  Oureffective tax rate for the three months ended June 30, 2007 was 37.5% and38.8% for the same period in 2006.

***AMR***

*Netrevenue. *Net revenuefor the three months ended June 30, 2007 was $295.3 million, an increase of$1.4 million, or 0.5%, from $293.9 million for the same period in 2006. Theincrease in net revenue was due primarily to an increase in our net revenue perweighted transport of approximately 4.1%, or $11.5 million, of which 3.7%was due to revenue from our fixed wing air transportation services businessacquired in July 2006 and from our Medicaid managed transportation business inTexas, a contract under which we began providing services in June 2006. Net revenue per transport also increased due to rate increases in severalmarkets, partially offset by Medicare rate reductions.  Net revenuedecreased $14.2 million from a reduction of approximately 33,600 transports duringthe three months ended June 30, 2007 compared with the same period in 2006,which was primarily the result of the loss of a portion of AMR’s 9-1-1 contractwith Los Angeles County in June 2006 and the restructuring of our operations inLos Angeles in the first quarter of 2007. In addition, in December 2006 AMR exited the East Michigan market,resulting in a reduction of approximately 9,400 ambulance transports, 6,000wheelchair transports and $2.7 million in net revenue during the three monthsended June 30, 2007 compared with the same period in 2006.  Excluding the impact of the Los Angelesreductions and the East Michigan exit, ambulance transport volume increased3.0%, offset in part by a 16.4% decrease in wheelchair transports, resulting inan increase in other markets of approximately 18,200 weighted transportscompared with the same period in 2006.

*Compensationand benefits. *Compensationand benefit costs for the three months ended June 30, 2007 were $187.6 million,or 63.5% of net revenue, compared to $189.6 million, or 64.5% of net revenue,for the three months ended June 30, 2006. Ambulance crew wages per ambulanceunit hour increased by approximately 2.7%, or $2.8 million, principally fromannual wage rate increases.  Ambulance unit hours decreased period overperiod by 3.7%, which decreased compensation costs by $3.9 million.  Thedecrease is due primarily to the reduction in Los Angeles volumes and the EastMichigan exit and the associated decrease in ambulance unit hours, partiallyoffset by unit hour increases related to increased volume in othermarkets.  Non-crew wages increased by $1.3 million, or 2.6%, due to annualsalary increases and additional compensation expenses incurred under our fixedwing transportation services business and our Texas Medicaid managedtransportation contract.  Benefit costs decreased by $1.4 million for thethree months ended June 30, 2007, and decreased 0.8% as a percentage ofsalaries, compared to the same period in 2006, primarily due to reduced claimscosts incurred under our self-insured health plans.

*Operatingexpenses. *Operatingexpenses for the three months ended June 30, 2007 were $66.0 million, or 22.3%of net revenue, compared to $60.5 million, or 20.6% of net revenue, for thethree months ended June 30, 2006. Operating expenses per weighted transportincreased 12.9% in the three months ended June 30, 2007 compared to the sameperiod in 2006. This change is due to $7.5 million of operating expensesincurred under our fixed wing transportation services business and our TexasMedicaid managed transportation contract, under which we began providingservices in June 2006.

*Insuranceexpense. *Insuranceexpense for the three months ended June 30, 2007 was $9.0 million, or 3.0% ofnet revenue, compared to $10.3 million, or 3.5% of net revenue, for the sameperiod in 2006. The decrease is due to the continued improvement in current andprior year ultimate claims costs resulting in a reduction of prior yearinsurance provisions of $4.1 million during the quarter ended June 30, 2007,compared to a $3.9 million reduction recorded during the same period in 2006.

*Selling,general and administrative. *Selling,general and administrative expense for the three months ended June 30, 2007 was$10.1 million, or 3.4% of net revenue, compared to $8.8 million, or 3.0% of netrevenue, for the three months ended June 30, 2006.

*Restructuringcharges. *Norestructuring charges were recorded during the three months ended June 30,2007.  Restructuring charges of $0.9million were recorded during the three months ended June 30, 2006, related tothe re-alignment of certain west coast operations.

*Depreciationand amortization. *Depreciationand amortization expense for the three months ended June 30, 2007 was $13.7million, or 4.6% of net revenue, compared to $13.1 million, or 4.4% of netrevenue, for the same period in 2006. The increase is attributable to higherdepreciation expense related to growth in capital expenditures

24

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during 2006.

***EmCare***

*Netrevenue.* Net revenuefor the three months ended June 30, 2007 was $221.4 million, an increase of$36.8 million, or 19.9%, from $184.6 million for the three months ended June30, 2006. The increase was due primarily to an increase in patient visits fromnet new hospital contracts and net revenue increases in existing contracts.Following March 31, 2006, we added 41 net new contracts which accounted for anet revenue increase of $20.8 million for the three months ended June 30,2007.  Of the 41 net new contracts addedsince March 31, 2006, 40 were added in 2006 resulting in an increase in 2007net revenue of $16.7 million.  During2007, EmCare added 31 new contracts and terminated 30 contracts resulting in anincrease in net revenue of $4.1 million. Net revenue under our “same store” contracts (contracts in existence forthe entirety of both years) increased $16.0 million for the quarter ended June30, 2007 due to a 5.6% increase in net revenue per patient visit from rateincreases from our third-party payors and retroactive revenue adjustments of 2.9%in the quarter.  Current year same storepatient visits increased 1.5% over same store patient visits in the priorperiod.

*Compensationand benefits. *Compensationand benefits costs for the three months ended June 30, 2007 were $169.7million, or 76.6% of net revenue, compared to $141.4 million, or 76.6% of netrevenue, for the same period in 2006. Provider compensation and benefits costsincreased $13.8 million from net new contract additions. “Same store” providercompensation and benefits costs increased $11.5 million due to a 9.6% increasein provider compensation per patient visit primarily due to increases in netrevenue per patient visit.

*Operatingexpenses. *Operatingexpenses for the three months ended June 30, 2007 were $10.3 million, or 4.7%of net revenue, compared to $8.7 million, or 4.7% of net revenue, for the sameperiod in 2006.  Operating expensesincreased primarily due to additional patient visits from net new contracts andadditional off-hours radiology coverage for new contracts.

*Insuranceexpense. *Professionalliability insurance expense for the three months ended June 30, 2007 was $8.5million, or 3.9% of net revenue, compared to $10.3 million, or 5.6% of netrevenue, for the three months ended June 30, 2006. The decrease is due to thecontinued improvement in current and prior year ultimate claims costs.  As a result, a reduction of prior yearinsurance provisions of $4.6 million was recorded during the three months endedJune 30, 2007 compared to a $1.4 million reduction for the three months endedJune 30, 2006.

*Selling,general and administrative. *Selling,general and administrative expense for the three months ended June 30, 2007 was$4.8 million, or 2.1% of net revenue, compared to $4.4 million, or 2.4% of netrevenue, for the three months ended June 30, 2006.

*Depreciationand amortization. *Depreciationand amortization expense for the three months ended June 30, 2007 was $3.9million, or 1.7% of net revenue, compared to $3.3 million, or 1.8% of netrevenue, for the three months ended June 30, 2006.  Depreciation and amortization expenseincreased due to increased amortization expense from additional contractintangible assets recorded on acquisitions since June 30, 2006.

***Six months ended June 30, 2007 compared to the six monthsended June 30, 2006***

***Consolidated***

Our results forthe six months ended June 30, 2007 reflect an increase in net revenue of $92.5million and an increase in net income of $13.7 million compared to the sixmonths ended June 30, 2006. The increase in net income is attributableprimarily to an increase of $22.8 million in Adjusted EBITDA, partially offsetby increases in depreciation and amortization expense and income tax expense.Basic and diluted earnings per share were $0.76 and $0.74, respectively, forthe six months ended June 30, 2007. Basic and diluted earnings per share were$0.43 and $0.42, respectively, for the same period in 2006.

*Netrevenue. *For the sixmonths ended June 30, 2007 we generated net revenue of $1,040.0 millioncompared to net revenue of $947.6 million for the six months ended June 30,2006, representing an increase of 9.8%. The

25

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increase is attributableprimarily to increases in rates and volumes on existing contracts and increasedvolume from net new contracts.

*AdjustedEBITDA. *AdjustedEBITDA was $106.7 million, or 10.3% of net revenue, for the six months endedJune 30, 2007 compared to $83.9 million, or 8.9% of net revenue, for the sixmonths ended June 30, 2006. The increase is attributable primarily to the netimpact of revenue growth during the period and continued improvement ininsurance claims costs.

*Depreciationand amortization expense. *Depreciationand amortization expense for the six months ended June 30, 2007 was $34.4million, or 3.3% of net revenue, compared to $32.2 million, or 3.4% of netrevenue, for the six months ended June 30, 2006. The increase isattributable to higher depreciation expense related to growth in capitalexpenditures during 2006 and amortization expense recorded on additionalcontract intangible assets on acquisitions since June 30, 2006.

*Interestexpense. *Interestexpense for the six months ended June 30, 2007 was $22.6 million compared to$22.7 million for the six months ended June 30, 2006.  The decreaserelates to unscheduled repayments of $19.4 million of our senior secured creditfacility in 2006, partially offset by higher interest rates.

*Incometax expense. *Incometax expense increased by $8.1 million for the six months ended June 30, 2007,compared to the same period in 2006, resulted primarily from increasedoperating income.  Our effective tax rate for the six months ended June30, 2007 was 38.2% compared with 38.9% for the same period in 2006.

***AMR***

*Netrevenue. *Net revenuefor the six months ended June 30, 2007 was $603.4 million, an increase of $14.2million, or 2.4%, from $589.2 million for the same period in 2006. The increasein net revenue was due primarily to an increase in our net revenue per weightedtransport of approximately 4.6%, or $26.8 million, of which 4.0% was dueto revenue from our fixed wing air transportation services business acquired inJuly 2006, and from our Medicaid managed transportation business in Texas, acontract under which we began providing services in June 2006.  Netrevenue per transport also increased due to rate increases in several marketspartially offset by Medicare rate reductions.  Net revenue decreased $27.3million from a reduction of approximately 68,000 transports during the sixmonths ended June 30, 2007 compared with the same period in 2006, which wasprimarily the result of the loss of a portion of AMR’s 9-1-1 contract with LosAngeles County in June 2006 and the restructuring of our operations in LosAngeles in the first quarter of 2007.  Inaddition, in December 2006 AMR exited the East Michigan market, resulting in areduction of approximately 19,100 ambulance transports, 12,100 wheelchairtransports and $5.6 million in net revenue during the six months ended June 30,2007 compared with the same period in 2006.  Excluding the impact of the Los Angeles reductions and East Michiganexit, ambulance transport volume increased 4.3%, offset in part by a 9.8%decrease in wheelchair transports, resulting in an increase of approximately 56,600weighted transports in its other markets compared with the same period in 2006.

*Compensationand benefits. *Compensationand benefit costs for the six months ended June 30, 2007 were $380.0 million,or 63.0% of net revenue, compared to $379.7 million, or 64.4% of net revenue,for the six months ended June 30, 2006. Ambulance crew wages per ambulance unithour increased by approximately 3.2%, or $6.6 million, principally from annualwage rate increases.  Ambulance unit hours decreased period over period by2.7%, which decreased compensation costs by $5.7 million.  The decrease isdue primarily to the reduction in Los Angeles volumes and the East Michiganexit and the associated decrease in ambulance unit hours, partially offset byunit hour increases related to increased volume in other markets. Non-crew wages increased by $3.9 million, or 4.1%, due to annual salaryincreases and additional compensation expenses incurred under our fixed wingtransportation services business and our Texas Medicaid managed transportationcontract.  Benefit costs decreased by $3.4 million for the six monthsended June 30, 2007, and decreased 1.3% as a percentage of salaries compared tothe same period in 2006, primarily due to reduced claims costs incurred underour self-insured health plans.

*Operatingexpenses. *Operatingexpenses for the six months ended June 30, 2007 were $135.6 million, or 22.5%of net revenue, compared to $119.1 million, or 20.2% of net revenue, for thesix months ended June 30, 2006. Operating expenses per weighted transportincreased 16.3% in the six months ended June 30, 2007 compared to the sameperiod in 2006. This change is due to $17.5 million of operating expensesincurred under our fixed wing

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transportation servicesbusiness and our Texas Medicaid managed transportation contract, under which webegan providing services in June 2006.

*Insuranceexpense. *Insuranceexpense for the six months ended June 30, 2007 was $19.3 million, or 3.2% ofnet revenue, compared to $23.7 million, or 4.0% of net revenue, for the sameperiod in 2006. The decrease is due to the continued improvement in current andprior year ultimate claims costs resulting in a reduction of prior yearinsurance provisions of $7.3 million during the six months ended June 30, 2007,compared to a $3.9 million reduction recorded during the same period in 2006.

*Selling,general and administrative. *Selling,general and administrative expense for the six months ended June 30, 2007 was$19.4 million, or 3.2% of net revenue, compared to $19.3 million, or 3.3% ofnet revenue, for the six months ended June 30, 2006.

*Restructuringcharges. *Restructuringcharges of $2.2 million were recorded during the six months ended June 30,2007, related to the closure of one of our billing offices and restructuringour operations in Los Angeles and Orange Counties in California.  Restructuring charges of $0.9 million wererecorded during the six months ended June 30, 2006, related to the re-alignmentof certain west coast operations.

*Depreciationand amortization. *Depreciationand amortization expense for the six months ended June 30, 2007 was $27.5million, or 4.6% of net revenue, compared to $25.7 million, or 4.4% of netrevenue, for the same period in 2006. The increase is attributable primarily tohigher depreciation expense related to growth in capital expenditures during2006.

***EmCare***

*Netrevenue.*Net revenue for the six months ended June 30, 2007was $436.6 million, an increase of $78.2 million, or 21.8%, from $358.4 millionfor the six months ended June 30, 2006. The increase was due primarily to anincrease in patient visits from net new hospital contracts and net revenueincreases in existing contracts. Following December 31, 2005, we added 44 netnew contracts which accounted for a net revenue increase of $40.4 million.  Of the 44 net new contracts added sinceDecember 31, 2005, 43 were added in 2006 resulting in an increase in 2007 netrevenue of $36.8 million.  For the sixmonths ended June 30, 2007, EmCare added 31 new contracts and terminated 30contracts resulting in an increase in net revenue of $3.6 million.  Net revenue under our “same store” contracts(contracts in existence for the entirety of both periods) increased $37.8million for the period ended June 30, 2007 due to a 6.3% increase in netrevenue per patient visit from rate increases from our third-party payors andretroactive revenue adjustments of 4.5% recorded in the period.  Current year same store patient visitsincreased 1.5% over same store patient visits in the prior period.

*Compensationand benefits. *Compensationand benefits costs for the six months ended June 30, 2007 were $332.2 million,or 76.1% of net revenue, compared to $277.3 million, or 77.4% of net revenue,for the same period in 2006. Provider compensation and benefit costs increased$26.5 million from net new contract additions. “Same store” providercompensation and benefit costs increased $22.2 million due to a 9.6% increasein provider compensation per patient visit primarily due to increases in netrevenue per patient visit.  The remainingvariance is related primarily to higher expense for incentive compensationplans.

*Operatingexpenses. *Operatingexpenses for the six months ended June 30, 2007 were $20.7 million, or 4.7% ofnet revenue, compared to $16.5 million, or 4.6% of net revenue, for the sameperiod in 2006.  Operating expensesincreased primarily due to additional patient visits from net new contracts andadditional off-hours radiology coverage for new contracts.

*Insuranceexpense. *Professionalliability insurance expense for the six months ended June 30, 2007 was $18.5million, or 4.2% of net revenue, compared to $21.1 million, or 5.9% of netrevenue, for the six months ended June 30, 2006. The decrease is due to thecontinued improvement in current and prior year ultimate claims costs.  As a result, a reduction of prior yearinsurance provisions of $6.6 million was recorded during the six months endedJune 30, 2007.  A reduction of $1.4million was recorded for the period ended June 30, 2006.

*Selling,general and administrative. *Selling,general and administrative expense for the six months ended June

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30, 2007 was $8.8million, or 2.0% of net revenue, compared to $8.7 million, or 2.4% of netrevenue, for the six months ended June 30, 2006.

*Depreciationand amortization. *Depreciationand amortization expense for the six months ended June 30, 2007 was $6.9million, or 1.6% of net revenue, compared to $6.5 million, or 1.8% of netrevenue, for the six months ended June 30, 2006.  Depreciation and amortization expense increaseddue to amortization expense recorded on additional contract intangible assetson acquisitions since June 30, 2006.

**CriticalAccounting Policies**

For a discussionof accounting policies that we consider critical to our business operations andthe understanding of our results of operations that affect the more significantjudgments and estimates used in the preparation of our unaudited condensedconsolidated financial statements, please refer to Item 7, “Management’sDiscussion and Analysis of Financial Condition and Results of Operations –Critical Accounting Policies” contained in our annual report on Form 10-K forthe year ended December 31, 2006 and incorporated by reference herein. Asof June 30, 2007, there were no significant changes in our critical accountingpolicies or estimation procedures.

**Liquidityand Capital Resources**

Our primary sourceof liquidity is cash flows provided by our operating activities. We can alsouse our revolving senior secured credit facility, described below, tosupplement cash flows provided by our operating activities if we decide to doso for strategic or operating reasons. Our liquidity needs are primarily toservice long-term debt and to fund working capital requirements, capitalexpenditures related to the acquisition of vehicles and medical equipment, technology-relatedassets and insurance-related deposits.

We believe ourcash and cash equivalents, cash provided by our operating activities, andamounts available under our senior secured credit facility will meet theliquidity requirements of our business through at least the next 12 months. Wehave available to us, upon compliance with customary conditions, $100.0 millionunder the revolving credit facility, less any letters of credit outstanding(which totaled $29.6 million at June 30, 2007). Further, we have a conditionalright under our senior secured credit facility to request new or existinglenders to provide up to an additional $100.0 million of term debt (in $20.0million increments).

**CashFlow**

The table belowsummarizes cash flow information derived from our statements of cash flows forthe periods indicated, amounts in thousands.

|                                  | ** ** | **Six months ended   June 30, 2007** | ** ** | **Six months ended   June 30, 2006** | ** ** |
|----------------------------------|------------|---------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| Net cash  provided by (used in): |       |                                                          |       |                                                          |       |
| Operating  activities            |       | $                                                             | 19,280     |                                                          | $          | 112,415 |   |
| Investing  activities            |       | (23,247                                                       | )          | (41,845                                                       | )          |
| Financing activities             |       | (5,885                                                        | )          | (18,958                                                       | )          |
|                                  |            |                                                               |            |                                                               |            |  |  |

 

*Operatingactivities*. Net cash provided by operating activities was$19.3 million for the six months ended June 30, 2007 compared to $112.4 millionfor the same period last year.  Operating cash flows were primarilyaffected by changes in accounts receivable, which increased operating cashflows by $31.9 million for the six months ended June 30, 2006 and decreasedoperating cash flows by $63.9 million for the six months ended June 30,2007.  The 2006 period was positively impacted by the collection ofhurricane-related and income tax receivables recorded in 2005.  The 2007period has been negatively impacted by increases in accounts receivable at ourEmCare segment related to a significant increase in revenue and delays inobtaining provider numbers from Medicare fiscal intermediaries required forbilling with resulting delays in the collection process.  Our AMR segmentwas negatively impacted in the 2007 period primarily due to the implementationof a new billing system in several markets.  We expect delays in ourcollection process to improve and to have no material effect on our financialcondition or results of operations.

*Investingactivities*. Net cash used in investing activities was $23.2million for the six months ended June 30,

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2007 compared to $41.8million for the same period in 2006. The $18.6 million decrease is attributableprincipally to reductions in capital expenditures and net insurancefunding.  Net cash used in investing activities during the six monthsended June 30, 2007 relates primarily to capital expenditures for the purchaseof new vehicles, medical equipment and technology-related assets, which totaled$22.7 million.

*Financingactivities*. For the six months ended June 30, 2007, net cashused in financing activities was $5.9 million compared to $19.0 million for thesix months ended June 30, 2006.  The variance relates primarily to anunscheduled payment of approximately $10.0 million of the senior secured creditfacility in May 2006.

**ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

Our primaryexposure to market risk consists of changes in interest rates on certain of ourborrowings and changes in fuel prices. We have not entered into hedgingtransactions or used derivative instruments for speculative or trading purposesto mitigate related exposure.

As of June 30,2007, we had $485.1 million of debt, of which $225.3 million was variable ratedebt under our senior secured credit facility and the balance was fixed ratedebt, including $250.0 million aggregate principal amount of our seniorsubordinated notes. Over the past twelve months, prime interest rates have notchanged and LIBOR interest rates have increased by approximately 0.2%. We expectcontinuing changes to these interest rates. Increases and decreases in interestrates affect our interest costs for our variable rate debt. For comparativepurposes, for every 0.125% change in interest rates, our interest costs on oursenior secured credit facility will change by approximately $0.3 million peryear based on our outstanding indebtedness at June 30, 2007.

**ITEM 4.CONTROLS AND PROCEDURES**

***Evaluation of Disclosure Controls and Procedures***

We maintain asystem of disclosure controls and procedures (as defined in Rule 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) thatare designed to ensure that information required to be disclosed in the reportsthat we file under the Exchange Act is recorded, processed, summarized andreported within the time periods specified in the Securities and ExchangeCommission’s rules and forms. Disclosure controls and procedures include,without limitation, controls and procedures designed to ensure that informationrequired to be disclosed by an issuer in the reports that it files or furnishesunder the Exchange Act is accumulated and communicated to the issuer’smanagement, including its principal executive officer or officers and principalfinancial officer or officers, or persons performing similar functions, asappropriate to allow timely decisions regarding required disclosure. Indesigning and evaluating the disclosure controls and procedures, our managementrecognizes that any controls and procedures, no matter how well designed andoperated, can provide only reasonable assurance of achieving the desiredcontrol objectives, and management is required to apply its judgment inevaluating the cost-benefit relationship of possible controls and procedures.

Based on theirevaluation of our disclosure controls and procedures conducted within 90 daysof the date of filing this Report on Form 10-Q, our principal executive officerand our principal financial officer have concluded that, as of the date oftheir evaluation, our disclosure controls and procedures (as defined in Rules13a -15(e) and 15d -15(e) promulgated under the Exchange Act) are effective.

***Changes in Internal Control Over Financial Reporting***

There were nochanges in our internal control over financial reporting that occurred duringour fiscal quarter ended June 30, 2007 that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

We completed aconversion of our accounting and payroll systems on April 1, 2007 and haveimplemented a new billing system in several of our AMR markets. This newbilling system implementation has impacted our cash collections process at AMR.  We do not believe these system conversions haveaffected our internal controls over financial reporting.

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**EMERGENCYMEDICAL SERVICES CORPORATION**

**PART II. OTHER INFORMATION**

**FOR THETHREE AND SIX MONTHS ENDED**

**JUNE 30,2007**

**ITEM 1.LEGAL PROCEEDINGS**

As referenced inour Annual Report on Form 10-K for the fiscal year ended December 31, 2006, AMRreceived a subpoena from the United States Department of Justice, or DOJ, inDecember 2006, requesting copies of documents for the period from January 2000through the present. The subpoena required us to produce a broad range ofdocuments relating to the operations of certain AMR affiliates in New York. Wehave produced documents in response to the subpoena, and are continuing toproduce responsive documents.

For additionalinformation regarding legal proceedings, please refer to note 5, under thecaption “Commitments and Contingencies” of the notes accompanying theconsolidated financial statements included herein, to our Annual Report on Form10-K filed with the SEC on March 8, 2007 and to our Quarterly Report onForm 10-Q filed with the SEC on May 4, 2007.

**ITEM1A. RISK FACTORS**

There have been nomaterial changes from the risk factors disclosed in the “Risk Factors” sectionof the Company’s Annual Report on Form 10-K for the year ended December 31,2006.

**ITEM2.  UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS**

On April 7, 2007,the Board of Directors of EMSC approved the adoption of the EMSC Long-TermIncentive Plan (the “Plan”), subject to stockholder approval. The stockholdersof EMSC approved the Plan at our 2007 Annual Meeting.  The Plan provides for the grant of long-termincentives, including various equity-based incentives, to those persons withresponsibility for the success and growth of EMSC and its subsidiaries.  No future grants will be made under ourEquity Option Plan.  On June 14, 2007,our Board of Directors granted 20,000 shares of restricted stock pursuant tothe Plan, which shares vest ratably over a period of three years.  In addition, certain performance measuresmust be met for 50% of the shares to vest.

**ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

Our 2007 annualmeeting of stockholders was held on May 15, 2007 in Englewood, Colorado.  The matters submitted for a vote at themeeting and the related election results were as follows:

1.                                       Electionof three Class II directors to each hold office for a three year term:

For Steven B. Epstein:325,501,755; Withheld: 3,546,993

For Paul B. Iannini, M.D.:328,851,389; Withheld: 197,359

For James T. Kelly: 328,739,739; Withheld: 309,009

2.                                       Approvalof the Non-Employee Director Compensation Program:

For: 325,546,051; Against: 1,905,415; Abstain: 59,858;Broker Non-Vote: 1,537,424

3.                                       Approvalof the Long-Term Incentive Plan:

For: 322,270,331; Against: 5,229,119; Abstain: 11,875;Broker Non-Vote: 1,537,423

4.                                       Approvalof the 2007 Employee Stock Purchase Plan:

For: 325,729,657; Against: 1,778,818; Abstain: 2,850;Broker Non-Vote: 1,537,423

5.                                       Ratificationof the appointment of Ernst & Young LLP as the Company’s independentregistered public accounting firm for the fiscal year ending December 31,2007:

For: 328,908,186; Against: 134,361; Abstain: 6,200;Broker Non-Vote: 0

30

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**ITEM 6. EXHIBITS**
| 10.1.1 |   | Second Amendment to Employment Agreement between  Emergency Medical Services Corporation and William A. Sanger, dated as  of June 18, 2007.*                                                                                                                                       |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                         |
| 10.16  |   | Emergency Medical Services Corporation 2007  Long-Term Incentive Plan (incorporated by reference to Annex B of the Company’s  Definitive Proxy Statement on Form DEF14A filed on April 16, 2007).**                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                         |
| 10.17  |   | Emergency Medical Services Corporation 2007 Employee  Stock Purchase Program (incorporated by reference to Annex C of the Company’s  Definitive Proxy Statement on Form DEF14A filed on April 16, 2007).**                                                                              |
|   |   |                                                                                                                                                                                                                                                                                         |
| 31.1   |   | Certification of the Chief Executive Officer of  Emergency Medical Services Corporation pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.*                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                         |
| 31.2   |   | Certification of the Chief Executive Officer of Emergency  Medical Services Corporation, as general partner of Emergency Medical  Services L.P., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                         |
| 31.3   |   | Certification of the Chief Financial Officer of  Emergency Medical Services Corporation pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.*                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                         |
| 31.4   |   | Certification of the Chief Financial Officer of  Emergency Medical Services Corporation, as general partner of Emergency  Medical Services L.P., pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.*                                                                                |
|   |   |                                                                                                                                                                                                                                                                                         |
| 32.1   |   | Certification of the Chief Executive Officer and the  Chief Financial Officer of Emergency Medical Services Corporation pursuant to  18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.*                                                         |
|   |   |                                                                                                                                                                                                                                                                                         |
| 32.2   |   | Certification of the Chief Executive Officer and the  Chief Financial Officer of Emergency Medical Services Corporation, as general  partner of Emergency Medical Services L.P. pursuant to 18 U.S.C. Section  1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |

 

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*                    Filed withthis Report

**             Identifieseach management compensation plan or arrangement

31

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrants have duly caused this report to be signed on their behalf bythe undersigned, thereunto duly authorized.
|                     | ** ** | **EMERGENCY MEDICAL SERVICES CORPORATION** |
|---------------------|------------|--------------------------------------------|
|                |       | (registrant)                               |
|                |       |                                       |
| August 9, 2007 |       | By:                                        | /s/ William A. Sanger |
| Date                |       |                                       | William A. Sanger |
|                |       |                                       | Chairman and Chief Executive Officer |
|                |       |                                       |
| ** **          | ** ** | **EMERGENCY MEDICAL SERVICES L.P.**        |
|                |       | (registrant)                               |
|                |       |                                       |
|                |       | By:                                        | Emergency Medical Services Corporation, its   General Partner |
|                |       |                                       |
| August 9, 2007 |       | By:                                        | /s/ William A. Sanger |
| Date                |       |                                       | William A. Sanger |
|                |       |                                       | Chairman and Chief Executive Officer |

 

32

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**EXHIBIT INDEX**
| 10.1.1 |   | Second Amendment to Employment Agreement between  Emergency Medical Services Corporation and William A. Sanger, dated as  of June 18, 2007.*                                                                                                                                       |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                         |
| 10.16  |   | Emergency Medical Services Corporation 2007  Long-Term Incentive Plan (incorporated by reference to Annex B of the  Company’s Definitive Proxy Statement on Form DEF14A filed on April 16,  2007).**                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                         |
| 10.17  |   | Emergency Medical Services Corporation 2007 Employee  Stock Purchase Program (incorporated by reference to Annex C of the Company’s  Definitive Proxy Statement on Form DEF14A filed on April 16, 2007).**                                                                              |
|   |   |                                                                                                                                                                                                                                                                                         |
| 31.1   |   | Certification of the Chief Executive Officer of  Emergency Medical Services Corporation pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.*                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                         |
| 31.2   |   | Certification of the Chief Executive Officer of  Emergency Medical Services Corporation, as general partner of Emergency  Medical Services L.P., pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.*                                                                                |
|   |   |                                                                                                                                                                                                                                                                                         |
| 31.3   |   | Certification of the Chief Financial Officer of  Emergency Medical Services Corporation pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.*                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                         |
| 31.4   |   | Certification of the Chief Financial Officer of Emergency  Medical Services Corporation, as general partner of Emergency Medical  Services L.P., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                         |
| 32.1   |   | Certification of the Chief Executive Officer and the  Chief Financial Officer of Emergency Medical Services Corporation pursuant to  18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.*                                                         |
|   |   |                                                                                                                                                                                                                                                                                         |
| 32.2   |   | Certification of the Chief Executive Officer and the  Chief Financial Officer of Emergency Medical Services Corporation, as general  partner of Emergency Medical Services L.P. pursuant to 18 U.S.C. Section  1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |

 

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*                    Filed withthis Report

**             Identifieseach management compensation plan or arrangement

 

33

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