**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

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**FORM 10-Q**

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** (Mark one)**

**x****                      ****QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period ended September 30, 2006**

**Or**

**o****                         ****TRANSITION REPORT PURSUANT TO SECTION13 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.**

(Exactname of Registrants as Specified in their Charters)

|                                           |   | **20-3738384**           |
|-------------------------------------------|--------|--------------------------|
| **Delaware**                              |   | **20-2076535**           |
| (State or other  jurisdiction of          |   | (IRS Employer            |
| incorporation or  organization)           |   | Identification  Numbers) |
|                                      |   |                     |
| **6200 S.  Syracuse Way, Suite 200**      |   | ** **               |
| **Greenwood  Village, CO**                |   | **80111**                |
| (Address of  principal executive offices) |   | (Zip Code)               |

 

Registrants’ telephone number, including area code:**303-495-1200**

Formername, former address and former fiscal year, if changed since last report:

**Not applicable**

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

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated  filer  o | Accelerated  filer  o | Non-accelerated filer  x |
|---------------------------------------|---------------------------------|------------------------------------|

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

Shares ofclass A common stock outstanding at November 1, 2006 – 9,262,853;shares of class B common stock outstanding at November 1, 2006 – 142,545;LP exchangeable units outstanding at November 1, 2006 – 32,107,500.

 

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**EMERGENCY MEDICAL SERVICES CORPORATION**

**INDEX TOQUARTERLY REPORT**

**ON FORM 10-Q**

**FOR THETHREE AND NINE MONTHS ENDED**

**SEPTEMBER 30, 2006**
|                                | ** **                                                                                  | **Page** |
|--------------------------------|---------------------------------------------------------------------------------------------|----------|
|                           |                                                                                        |     |
| Part I. Financial  Information | 4                                                                                           |
|                           |                                                                                        |     |
| Item 1.                        | Financial Statements  (Unaudited):                                                          | 4        |
|                           |                                                                                        |     |
|                           | Statements  of Operations and Comprehensive Income (Loss)                                   | 4        |
|                           |                                                                                        |     |
|                           | Consolidated Balance  Sheets                                                                | 5        |
|                           |                                                                                        |     |
|                           | Statements of Cash  Flows                                                                   | 6        |
|                           |                                                                                        |     |
|                           | Notes to  Financial Statements                                                              | 7        |
|                           |                                                                                        |     |
| Item 2.                        | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 23       |
|                           |                                                                                        |     |
| Item 3.                        | Quantitative  and Qualitative Disclosures About Market Risk                                 | 33       |
|                           |                                                                                        |     |
| Item 4.                        | Controls and  Procedures                                                                    | 34       |
|                           |                                                                                        |     |
| Part II. Other  Information    | 35                                                                                          |
|                           |                                                                                        |     |
| Item 1.                        | Legal Proceedings                                                                           | 35       |
|                           |                                                                                        |     |
| Item  1A.                      | Risk  Factors                                                                               | 35       |
|                           |                                                                                        |     |
| Item 2.                        | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 36       |
|                           |                                                                                        |     |
| Item 6.                   | Exhibits                                                                                    | 37       |
|                           |                                                                                        |     |
| Signatures                     | 38                                                                                          |

 

3

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**EMERGENCYMEDICAL SERVICES CORPORATION**

**PART I. FINANCIAL INFORMATION**

**FOR THETHREE AND NINE MONTHS ENDED**

**SEPTEMBER 30, 2006**

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

**Emergency Medical Services Corporation**

**Statements of Operations and Comprehensive Income (Loss)**

**(unaudited)**

**(in thousands, except share and per share data)**
| ** **                                                                             | ** ** | ** **             | ** ** | ** **             | ** ** | ** **             | ** ** | ** **             | ** ** | ** ** | **Predecessor**      | ** ** |
|----------------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|------------------------|------------|------------------------|------------|------------|----------------------|------------|
| ** **                                                                             | ** ** | **Consolidated**       | ** ** | **Consolidated**       | ** ** | **Consolidated**       | ** ** | **Consolidated**       | ** ** | ** ** | **combined**         | ** ** |
| ** **                                                                             | ** ** | **three months**  | ** ** | **three months**  | ** ** | **nine months**   | ** ** | **eight months**  | ** ** | ** ** | **one month**   | ** ** |
| ** **                                                                             | ** ** | **ended**              | ** ** | **ended**              | ** ** | **ended**              | ** ** | **ended**              | ** ** | ** ** | **ended**            | ** ** |
| ** **                                                                             | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | ** ** | **January 31,** | ** ** |
| ** **                                                                             | ** ** | **2006**               | ** ** | **2005**               | ** ** | **2006**               | ** ** | **2005**               | ** ** | ** ** | **2005**             | ** ** |
| Net revenue                                                                            |       | $                      | 485,697    |                   | $          | 456,245                |       | $                      | 1,433,272  |       | $                    | 1,187,653  |   |   | $ | 143,069 |   |
| Compensation and  benefits                                                             |       | 333,406                |       | 319,292                |       | 990,380                |       | 822,595                |       |       | 103,191              |       |
| Operating expenses                                                                     |       | 80,513                 |       | 66,156                 |       | 216,170                |       | 168,700                |       |       | 18,469               |       |
| Insurance expense                                                                      |       | 12,111                 |       | 21,048                 |       | 54,222                 |       | 60,382                 |       |       | 7,768                |       |
| Selling, general and  administrative expenses                                          |       | 14,660                 |       | 15,654                 |       | 42,669                 |       | 38,248                 |       |       | 4,283                |       |
| Depreciation and  amortization expense                                                 |       | 16,841                 |       | 14,843                 |       | 49,045                 |       | 38,811                 |       |       | 3,894                |       |
| Restructuring charges                                                                  |       | 267                    |       | —                 |       | 1,186                  |       | —                 |       |       | —               |       |
| Laidlaw compensation  charges                                                          |       | —                 |       | —                 |       | —                 |       | —                 |       |       | 14,440               |       |
| Income (loss)  from operations                                                         |       | 27,899                 |       | 19,252                 |       | 79,600                 |       | 58,917                 |       |       | (8,976               | )          |
| Interest expense                                                                       |       | (11,532                | )          | (12,824                | )          | (34,269                | )          | (34,407                | )          |       | (1,169               | )          |
| Realized gain (loss) on  investments                                                   |       | 88                     |       | (34                    | )          | (437                   | )          | (40                    | )          |       | 13                   |       |
| Interest and other  income                                                             |       | 532                    |       | 91                     |       | 1,664                  |       | 189                    |       |       | (4                   | )          |
| Loss on early debt  extinguishment                                                     |       | (184                   | )          | —                 |       | (377                   | )          | —                 |       |       | —               |       |
| Income (loss)  before income taxes and equity in earnings of unconsolidated subsidiary |       | 16,803                 |       | 6,485                  |       | 46,181                 |       | 24,659                 |       |       | (10,136              | )          |
| Income tax (expense)  benefit                                                          |       | (6,540                 | )          | (3,479                 | )          | (17,956                | )          | (10,657                | )          |       | 4,060                |       |
| Income (loss)  before equity in earnings of unconsolidated subsidiary                  |       | 10,263                 |       | 3,006                  |       | 28,225                 |       | 14,002                 |       |       | (6,076               | )          |
| Equity in earnings of  unconsolidated subsidiary                                       |       | 21                     |       | —                 |       | 38                     |       | —                 |       |       | —               |       |
| Net income  (loss)                                                                     |       | 10,284                 |       | 3,006                  |       | 28,263                 |       | 14,002                 |       |       | (6,076               | )          |
| Other comprehensive  income (loss), net of tax:                                        |       |                   |       |                   |       |                   |       |                   |       |       |                 |       |
| Unrealized  holding gains (losses) during the period                                   |       | 1,568                  |       | (1,010                 | )          | 1,109                  |       | (646                   | )          |       | 321                  |       |
| Comprehensive income  (loss)                                                           |       | $                      | 11,852     |                   | $          | 1,996                  |       | $                      | 29,372     |       | $                    | 13,356     |   |   | $ | (5,755 | ) |
|                                                                                   |       |                   |       |                   |       |                   |       |                   |       |       |                 |       |
| Basic net income per  common share                                                     |       | $                      | 0.25       |                   | $          | 0.11                   |       | $                      | 0.68       |       | $                    | 0.39       |   |   |   |   |
| Diluted net income per  common share                                                   |       | $                      | 0.24       |                   | $          | 0.11                   |       | $                      | 0.67       |       | $                    | 0.38       |   |   |   |   |
| Average common shares  outstanding, basic                                              |       | 41,502,978             |       | 33,319,242             |       | 41,499,172             |       | 33,171,280             |       |       |                 |       |
| Average common shares outstanding, diluted                                             |       | 42,525,620             |       | 34,233,022             |       | 42,431,108             |       | 33,705,808             |       |       |                 |       |

 

The accompanying notes arean integral part of these financial statements.

4

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**Emergency Medical Services Corporation**

**Consolidated Balance Sheets**

**(in thousands, except share and per share data)**
| ** **                                                                                               | ** ** | **Unaudited**          | ** ** | ** **            | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                               | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                               | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| **Assets**                                                                                               | ** ** | ** **             | ** ** | ** **            | ** ** |
| Current assets:                                                                                          |       |                   |       |                  |       |
| Cash and cash equivalents                                                                                |       | $                      | 22,464     |                  | $          | 18,048 |   |
| Insurance collateral                                                                                     |       | 38,313                 |       | 29,766                |       |
| Trade and other accounts receivable, net                                                                 |       | 403,814                |       | 411,184               |       |
| Parts and supplies inventory                                                                             |       | 18,581                 |       | 18,449                |       |
| Prepaids and other current assets                                                                        |       | 16,508                 |       | 14,413                |       |
| Current deferred tax assets                                                                              |       | 7,349                  |       | 23,436                |       |
| Total current assets                                                                                     |       | 507,029                |       | 515,296               |       |
| Non-current  assets:                                                                                     |       |                   |       |                  |       |
| Property, plant and equipment, net                                                                       |       | 143,654                |       | 138,037               |       |
| Intangible assets, net                                                                                   |       | 68,864                 |       | 78,183                |       |
| Non-current deferred tax assets                                                                          |       | 118,147                |       | 118,408               |       |
| Insurance collateral                                                                                     |       | 162,233                |       | 131,907               |       |
| Goodwill                                                                                                 |       | 261,466                |       | 251,168               |       |
| Other long-term assets                                                                                   |       | 33,512                 |       | 34,029                |       |
| Total assets                                                                                             |       | $                      | 1,294,905  |                  | $          | 1,267,028 |   |
| **Liabilities  and Equity**                                                                              | ** ** | ** **             | ** ** | ** **            | ** ** |
| Current  liabilities:                                                                                    |       |                   |       |                  |       |
| Accounts payable                                                                                         |       | $                      | 62,513     |                  | $          | 56,290 |   |
| Accrued liabilities                                                                                      |       | 213,335                |       | 214,481               |       |
| Current portion of long-term debt                                                                        |       | 5,234                  |       | 6,664                 |       |
| Total current liabilities                                                                                |       | 281,082                |       | 277,435               |       |
| Long-term debt                                                                                           |       | 476,218                |       | 495,520               |       |
| Insurance  reserves and other long-term liabilities                                                      |       | 162,114                |       | 149,089               |       |
| Total liabilities                                                                                        |       | 919,414                |       | 922,044               |       |
| Equity:                                                                                                  |       |                   |       |                  |       |
| Preferred stock ($0.01 par value; 20,000,000 shares  authorized, none issued and outstanding)            |       | —                 |       | —                |       |
| Class A common stock ($0.01 par value; 100,000,000  shares authorized, 9,262,853 issued and outstanding) |       | 93                     |       | 92                    |       |
| Class B common stock ($0.01 par value; 40,000,000  shares authorized, 142,545 issued and outstanding)    |       | 1                      |       | 1                     |       |
| Class B special voting stock ($0.01 par value; 1  share authorized, issued and outstanding               |       | —                 |       | —                |       |
| LP exchangeable units (32,107,500 shares issued and  outstanding)                                        |       | 212,361                |       | 212,361               |       |
| Additional paid-in capital                                                                               |       | 114,071                |       | 112,937               |       |
| Retained earnings                                                                                        |       | 48,330                 |       | 20,067                |       |
| Accumulated other comprehensive income (loss)                                                            |       | 635                    |       | (474                  | )          |
| Total equity                                                                                             |       | 375,491                |       | 344,984               |       |
| Total  liabilities and equity                                                                            |       | $                      | 1,294,905  |                  | $          | 1,267,028 |   |

 

The accompanying notes arean integral part of these financial statements.

5

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**EmergencyMedical Services Corporation**

**Statements of Cash Flows**

**(unaudited)**

**(in thousands)**
| ** **                                                                                           | ** ** | ** **             | ** ** | ** **             | ** ** | ** ** | **Predecessor**      | ** ** |
|------------------------------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|------------|----------------------|------------|
| ** **                                                                                           | ** ** | **Consolidated**       | ** ** | **Consolidated**       | ** ** | ** ** | **combined**         | ** ** |
| ** **                                                                                           | ** ** | **nine months**   | ** ** | **eight months**  | ** ** | ** ** | **one month**   | ** ** |
| ** **                                                                                           | ** ** | **ended**              | ** ** | **ended**              | ** ** | ** ** | **ended**            | ** ** |
| ** **                                                                                           | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | ** ** | **January 31,** | ** ** |
| ** **                                                                                           | ** ** | **2006**               | ** ** | **2005**               | ** ** | ** ** | **2005**             | ** ** |
| **Cash  Flows from Operating Activities**                                                            | ** ** | ** **             | ** ** | ** **             | ** ** | ** ** | ** **           | ** ** |
| Net income  (loss)                                                                                   |       | $                      | 28,263     |                   | $          | 14,002     |                 |       | $ | (6,076 | ) |
| Adjustments to  reconcile net income (loss) to net cash provided by (used in) operating  activities: |       |                   |       |                   |       |       |                 |       |
| Depreciation and amortization                                                                        |       | 50,615                 |       | 40,464                 |       |       | 3,876                |       |
| Gain on disposal of property, plant and equipment                                                    |       | (762                   | )          | (480                   | )          |       | (25                  | )          |
| Stock compensation expense                                                                           |       | 1,031                  |       | 1,395                  |       |       | —               |       |
| Equity in earnings of unconsolidated subsidiary                                                      |       | (38                    | )          | —                 |       |       | —               |       |
| Loss on early debt extinguishment                                                                    |       | 377                    |       | —                 |       |       | —               |       |
| Non-cash Laidlaw allocated compensation expense                                                      |       | —                 |       | —                 |       |       | 14,440               |       |
| Deferred income taxes                                                                                |       | 17,368                 |       | 2,462                  |       |       | (4,060               | )          |
| Changes in operating assets/liabilities, net of  acquisitions:                                       |       |                   |       |                   |       |       |                 |       |
| Trade and other accounts receivable                                                                  |       | 4,793                  |       | 4,801                  |       |       | (20,771              | )          |
| Parts and supplies inventory                                                                         |       | (132                   | )          | (261                   | )          |       | —               |       |
| Prepaids and other current assets                                                                    |       | (2,076                 | )          | 2,661                  |       |       | (6,194               | )          |
| Accounts payable and accrued liabilities                                                             |       | 13,804                 |       | 18,628                 |       |       | 12,358               |       |
| Insurance accruals                                                                                   |       | 10,351                 |       | 17,003                 |       |       | 1,772                |       |
| Net cash provided by (used in) operating activities                                                  |       | 123,594                |       | 100,675                |       |       | (4,680               | )          |
| **Cash  Flows from Investing Activities**                                                            | ** ** | ** **             | ** ** | ** **             | ** ** | ** ** | ** **           | ** ** |
| Purchases of  property, plant and equipment                                                          |       | (43,297                | )          | (34,947                | )          |       | (3,914               | )          |
| Proceeds from  sale of property, plant and equipment                                                 |       | 903                    |       | 565                    |       |       | 24                   |       |
| Acquisition of  business, net of cash received                                                       |       | (11,587                | )          | —                 |       |       | —               |       |
| Insurance  collateral                                                                                |       | (31,773                | )          | (46,014                | )          |       | 12,534               |       |
| Other investing  activities                                                                          |       | (1,860                 | )          | (464                   | )          |       | (1,828               | )          |
| EMS LP purchase  of AMR and EmCare                                                                   |       | —                 |       | (828,775               | )          |       | —               |       |
| Net cash (used in) provided by investing activities                                                  |       | (87,614                | )          | (909,635               | )          |       | 6,816                |       |
| **Cash  Flows from Financing Activities**                                                            | ** ** | ** **             | ** ** | ** **             | ** ** | ** ** | ** **           | ** ** |
| Borrowings under  senior secured credit facility                                                     |       | —                 |       | 350,000                |       |       | —               |       |
| Proceeds from  issuance of senior subordinated notes                                                 |       | —                 |       | 250,000                |       |       | —               |       |
| Borrowings under  revolving credit facility                                                          |       | —                 |       | 25,200                 |       |       | —               |       |
| Debt issue costs                                                                                     |       | —                 |       | (18,396                | )          |       | —               |       |
| EMS LP issuance  of partnership equity                                                               |       | —                 |       | 222,655                |       |       | —               |       |
| EMS LP  partnership equity issuance costs                                                            |       | —                 |       | (1,726                 | )          |       | —               |       |
| Issuance of EMSC  equity                                                                             |       | 104                    |       | —                 |       |       | —               |       |
| Payment of EMSC  equity issuance costs                                                               |       | (2,408                 | )          | —                 |       |       | —               |       |
| Repayments of  capital lease obligations and other debt                                              |       | (25,389                | )          | (25,922                | )          |       | (2,021               | )          |
| Increase  (decrease) in bank overdrafts                                                              |       | (3,871                 | )          | 997                    |       |       | 1,942                |       |
| Advances from Laidlaw                                                                                |       | —                 |       | —                 |       |       | 8,656                |       |
| Increase in  other non-current liabilities                                                           |       | —                 |       | 1,634                  |       |       | 55                   |       |
| Net cash (used in) provided by financing activities                                                  |       | (31,564                | )          | 804,442                |       |       | 8,632                |       |
|                                                                                                 |       |                   |       |                   |       |       |                 |       |
| Change in cash  and cash equivalents                                                                 |       | 4,416                  |       | (4,518                 | )          |       | 10,768               |       |
| Cash and cash  equivalents, beginning of period                                                      |       | 18,048                 |       | 14,631                 |       |       | 3,863                |       |
| Cash and cash  equivalents, end of period                                                            |       | $                      | 22,464     |                   | $          | 10,113     |                 |       | $ | 14,631 |   |

 

Theaccompanying notes are an integral part of these financial statements.

6

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**Emergency Medical Services Corporation**

**Notes to Unaudited FinancialStatements**

**(in thousands, except share and per share data)**

**1.****        ****General**

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

The accompanying interimconsolidated financial statements for Emergency Medical Services Corporation (“EMSC”or the “Company”) have been prepared in accordance with U. S. generallyaccepted accounting principles (“GAAP”) for interim reporting, and accordingly,do not include all of the disclosures required for annual financial statements.In the opinion of management, all adjustments considered necessary for fairpresentation have been included. All such adjustments are of a normal,recurring nature. Operating results for the three and nine month periods endedSeptember 30, 2006 are not necessarily indicative of the results that maybe expected for the full year ending December 31, 2006. 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, 2005.

The consolidated financialstatements of EMSC include those of its direct subsidiary, Emergency MedicalServices L.P. (“EMS LP”), a Delaware limited partnership. EMS LP acquiredAmerican Medical Response, Inc. and its subsidiaries (“AMR”) and EmCareHoldings Inc. and its subsidiaries (“EmCare”) from Laidlaw International, Inc.(“Laidlaw”) on February 10, 2005, with an effective transaction date afterthe close of business January 31, 2005. On December 21, 2005, theCompany effected a reorganization and issued class A common stock in an initialpublic offering. For comparative purposes, the Company has included theconsolidated results of operations and cash flows for the eight months endedSeptember 30, 2005, subsequent to the effective date of the acquisition,and the combination of AMR and EmCare financial information for the one monthended January 31, 2005, prior to the effective date of the acquisition (“Predecessor”).The comparability of these periods has been affected by a number of factors,including the acquisition of AMR and EmCare, and by the initial public offeringof EMSC in December 2005. Laidlaw fees allocated to the Predecessor companiesfor the one month ended January 31, 2005 have been included as a componentof selling, general and administrative expenses and amount to $1,083. Costsincurred to replace the services previously performed by Laidlaw are includedin the current period statements of operations.

The Company is party to amanagement agreement with a wholly-owned subsidiary of Onex Corporation, theCompany’s principal equityholder. In exchange for an annual management fee of$1.0 million, the Onex subsidiary provides the Company with corporate financeand strategic planning consulting services. For the three and nine months endedSeptember 30, 2006, the Company expensed $250 and $750, respectively, inrespect of this fee; and for the three and eight months endedSeptember 30, 2005, the Company expensed $250 and $695, respectively, inrespect of this fee.

Certain prior period amountshave been reclassified to conform to the current period presentation.

**2.****        ****Summary of SignificantAccounting Policies**

***Consolidation***

The consolidated financialstatements include all wholly-owned subsidiaries of EMSC, including AMR andEmCare and their respective subsidiaries. All significant intercompanytransactions and balances have been eliminated.

***Use of Estimates***

The preparation of financialstatements requires management to make estimates and assumptions relating tothe reporting of results of operations, financial condition and relateddisclosure of contingent assets and liabilities at the date of the financialstatements. Actual results may differ from those estimates under differentassumptions or conditions.

***Insurance***

Insurance collateral iscomprised principally of government and investment grade securities and cashdeposits with third parties and supports the Company’s insurance program andreserves. Certain of these investments, if sold or otherwise liquidated, wouldhave to be replaced by other suitable financial assurances and are, therefore,considered restricted. Investment income/loss earned on these investments isreported as a component of insurance expense in the statements of operations.

Insurance reserves areestablished for automobile, workers compensation, general liability andprofessional liability claims utilizing policies with both fully-insured andself-insured components. This includes the use of an off-shore captiveinsurance program through a wholly-owned subsidiary for certain professionalliability (malpractice) programs for EmCare. 

7

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**Emergency Medical Services Corporation**

**Notes to Unaudited FinancialStatements**

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

In those instances where the Company has obtainedthird-party insurance coverage, the Company generally retains liability for thefirst $1 to $2 million of a loss.

The Company establishesreserves for claims based upon an assessment of actual claims and claimsincurred but not reported. The reserves are established based on quarterlyconsultation with third-party independent actuaries using actuarial principlesand assumptions that consider a number of factors, including historical claimpayment patterns (including legal costs) and changes in case reserves and theassumed rate of inflation in healthcare costs and property damage repairs.

The Company’s most recentactuarial valuation was completed in September 2006. As a result of this andprevious actuarial valuations, the Company recorded reductions in itsprovisions for insurance liabilities of approximately $4.8 million and $9.8million in the three and nine months ended September 30, 2006,respectively, related to its reserves for losses in prior years. During thethree and nine months ended September 30, 2005, the Company recordedreductions in insurance liabilities of approximately $1.7 million and $3.7million, respectively, as a result of an actuarial studies.

The long-term portion of insurancereserves amounted to $155.9 million and $144.1 million as of September 30, 2006and December 31, 2005, respectively.

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

The Company determines itsallowances based on payor reimbursement schedules, historical write-offexperience and other economic data. The allowances for contractual discountsand uncompensated care are reviewed monthly. Account balances are charged offagainst the uncompensated care allowance when it is probable the receivablewill not be recovered. Write-offs to the contractual allowance occur whenpayment is received. The allowance for uncompensated care is relatedprincipally to receivables recorded for self-pay patients.

***Revenue Recognition***

Revenue is recognized at thetime of service and is recorded net of provisions for contractual discounts andestimated uncompensated care. Provisions for contractual discounts andestimated uncompensated care as a percentage of gross revenue are as follows:
| ** **                                  | ** ** | **Consolidated**                                           | ** ** | ** **                                                 | **Predecessor  combined** | ** **                                                |
|---------------------------------------------|------------|------------------------------------------------------------|------------|------------------------------------------------------------|---------------------------|-----------------------------------------------------------|
| ** **                                  | ** ** | **Three months ended  September 30,  2006** | ** ** | **Three months ended  September 30,  2005** | ** **                | **Nine months ended  September 30,  2006** | ** ** | **Eight months ended  September 30,  2005** | ** ** | ** ** | **one month ended  January 31,  2005** | ** ** |
| Gross revenue                               |       | 100                                                        | %          | 100                                                        | %                         | 100                                                       | % | 100 | % |   | 100 | % |
| Provision for  contractual discounts        |       | 41                                                         | %          | 40                                                         | %                         | 42                                                        | % | 40 | % |   | 40 | % |
| Provision for estimated  uncompensated care |       | 20                                                         | %          | 20                                                         | %                         | 20                                                        | % | 19 | % |   | 19 | % |

Healthcare reimbursement iscomplex and may involve lengthy delays. Third-party payors are continuing theirefforts to control expenditures for healthcare, including proposals to revisereimbursement policies. The Company has from time to time experienced delays inreimbursement from third-party payors. In addition, third-party payors maydisallow, in whole or in part, claims for reimbursement based on determinationsthat certain amounts are not reimbursable under plan coverage, determinationsof medical necessity, or the need for additional information. Laws andregulations governing the Medicare and Medicaid programs are very complex andsubject to interpretation. As a result, there is a reasonable possibility thatrecorded estimates will change materially in the short-term. Retroactiveadjustments may change the amounts realized from third-party payors and areconsidered in the recognition of revenue on an estimated basis in the periodthe related services are rendered. Such amounts are adjusted in future periods,as adjustments become known.

The Company also providesservices to patients who have no insurance or other third-party payor coverage.In certain circumstances, federal law requires providers to render services toany patient who requires emergency care regardless of their ability to pay.

***Equity Structure***

On December 21, 2005,the Company effected a reorganization and issued 8.1 million shares ofclass A common stock in an initial public offering. Pursuant to thereorganization, EMS LP, the former top-tier holding company of AMR and EmCare,became the consolidated subsidiary of EMSC, a newly formed corporation. Toeffect the reorganization, the holders 

8

----

**Emergency Medical Services Corporation**

**Notes to Unaudited FinancialStatements**

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

of the capital stock of the sole general partner ofEMS LP contributed that capital stock to the Company in exchange for class Bcommon stock; the general partner was merged into the Company and the Companybecame the sole general partner of EMS LP. Concurrently, the holders of class Bunits of EMS LP contributed their units to the Company in exchange for sharesof the Company’s class A common stock, and the holders of certain class A unitsof EMS LP contributed their units to the Company in exchange for shares of theCompany’s class B common stock.

The Company holds 22.7% ofthe 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 LP partnershipagreement, the Company has agreed to maintain the economic equivalency of theLP exchangeable units and the class B common stock, and the holders of the LPexchangeable units have no general voting rights. The LP exchangeable units,when considered with the class B special voting stock, have the same rights,privileges and characteristics of the Company’s class B common stock. The LPexchangeable units are intended to be economically equivalent to the class Bcommon stock of the Company in that the LP exchangeable units carry the rightto vote (by virtue of the class B special voting stock) with the holders ofclass B common stock as if one class, and entitle holders to receive distributionsonly if the equivalent dividends are declared on the Company’s class B commonstock. Accordingly, the Company accounts for the LP exchangeable units as ifthe LP exchangeable units were shares of its common stock, including reportingthe LP exchangeable units in the equity section of the Company’s balance sheetand including the number of outstanding LP exchangeable units in both its basicand diluted earnings per share calculations.

***Recent Accounting Pronouncements***

In July 2006, the FASBissued Interpretation No. 48 (“FIN 48”), *Accountingfor Uncertainty in Income Taxes*, an interpretation of FASB StatementNo. 109, effective for fiscal years beginning after December 15,2006. FIN 48 creates a single model to address uncertainty in tax positions,prescribes the minimum recognition threshold, and provides guidance onderecognition, measurement, classification, interest and penalties, accountingin interim periods, disclosure and transition. FIN 48 also has expandeddisclosure requirements, which include a tabular rollforward of the beginningand ending aggregate unrecognized tax benefits, as well as specific detailrelated to tax uncertainties for which it is reasonably possible the amount ofunrecognized tax benefit will significantly increase or decrease within twelvemonths. The adoption of FIN 48 is not expected to have a material impact on theCompany’s financial statements.

**3.****        ****Acquisitions**

During the nine months endedSeptember 30, 2006, the Company acquired three entities for a total cost of$12.7 million, which was paid primarily in cash.  On July 8, 2006, the Company acquired AirAmbulance Specialists, Inc. (“AASI”), a privately held fixed wing air ambulancecompany, with an effective date of July 1, 2006.  AASI is based in Centennial, Colorado.   The Company also purchased two localambulance service providers.  SilverSpring Ambulance Service, Inc. (“Silver Spring”), based primarily in theWashington D.C. market, was acquired in July 2006.  Lifeline Medical Services, Inc. (“Lifeline”),based in the south Florida market, was acquired in June 2006.  The Company is in the process of completingthe purchase price allocation of these acquisitions and preliminarily hasrecorded $12.4 million of goodwill as of September 30, 2006.

**4.****        ****Accrued Liabilities**

Accrued liabilities were asfollows at September 30, 2006 and December 31, 2005:

9

----

**Emergency Medical Services Corporation**

**Notes to Unaudited FinancialStatements**

**(inthousands, except share and per share data)**
| ** **                                  | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Accrued wages  and benefits                 |       | $                            | 65,615     |                        | $          | 61,646 |   |
| Accrued paid  time-off                      |       | 22,996                       |       | 21,673                      |       |
| Current portion  of self-insurance reserves |       | 56,991                       |       | 58,379                      |       |
| Accrued  restructuring                      |       | 1,808                        |       | 1,732                       |       |
| Current portion  of compliance and legal    |       | 4,700                        |       | 14,244                      |       |
| Accrued billing and  collection fees        |       | 4,866                        |       | 4,176                       |       |
| Accrued profit  sharing                     |       | 18,023                       |       | 10,260                      |       |
| Accrued interest                            |       | 5,373                        |       | 12,335                      |       |
| Other                                       |       | 32,963                       |       | 30,036                      |       |
| Total accrued  liabilities                  |       | $                            | 213,335    |                        | $          | 214,481 |   |

 

**5.****        ****Long-Term Debt**

Long-term debt consisted ofthe following at September 30, 2006 and December 31, 2005:
|                                                                                     | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Senior  subordinated notes due 2015 (10%)                                           |       | $                            | 250,000    |                        | $          | 250,000 |   |
| Senior secured  term loan due 2012 (7.3% at September 30, 2006)                |       | 227,048                      |       | 248,250                     |       |
| Notes due at  various dates from 2006 to 2022 with interest rates from 6% to 10%    |       | 1,912                        |       | 856                         |       |
| Capital lease  obligations due at various dates from 2006 to 2007 (see note 5) |       | 2,492                        |       | 3,078                       |       |
|                                                                                |       | 481,452                      |       | 502,184                     |       |
| Less current  portion                                                               |       | (5,234                       | )          | (6,664                      | )          |
| Total long-term debt                                                                |       | $                            | 476,218    |                        | $          | 495,520 |   |

 

The Company made anunscheduled $9.4 million payment on the senior secured term loan during thethird quarter of 2006 and wrote off $184 of unamortized debt issuancecosts.  The Company also made anunscheduled $10.0 million payment on the senior secured term loan during thesecond quarter of 2006 and wrote off $193 of unamortized debt issuance costs.

**6.****        ****Commitments andContingencies**

***Lease Commitments***

The Company leases variousfacilities and equipment under operating lease agreements. In addition, theCompany leases certain vehicles under capital leases. Assets under capitallease are capitalized using inherent interest rates at the inception of eachlease. Capital leases are collateralized by the leased vehicles.

***Services***

The Company is subject tothe Medicare and Medicaid fraud and abuse laws which prohibit, among otherthings, any false claims, or any bribe, kick-back or rebate in return for thereferral of Medicare and Medicaid patients. Violation of these prohibitions mayresult in civil and criminal penalties and exclusion from participation in theMedicare 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 investigations described below, management believesthat the outcome of any of these investigations would not have a materialadverse effect on the Company.

10

----

**Emergency Medical Services Corporation**

**Notes to Unaudited FinancialStatements**

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

Like other ambulancecompanies, AMR has provided discounts to its healthcare facility customers(nursing homes and hospitals) in certain circumstances.  The Company has attempted to comply withapplicable law where such discounts are provided. During the first quarter offiscal 2004, the Company was advised by the U.S. Department of Justice (“DOJ”)that it was investigating certain business practices at AMR. The specificpractices at issue were (1) whether ambulance transports involvingMedicare eligible patients complied with the “medical necessity” requirementimposed by Medicare regulations, (2) whether patient signatures, whenrequired, were properly obtained from Medicare eligible patients, and(3) whether discounts in violation of the federal Anti-Kickback Statutewere provided by AMR in exchange for referrals involving Medicare eligiblepatients. In connection with the third issue, the government alleged thatcertain of AMR’s hospital and nursing home contracts in effect in Texas inperiods prior to 2002 contained discounts in violation of the federalAnti-Kickback Statute. The Company negotiated a settlement with the governmentpursuant to which the Company paid $9 million and obtained a release from theU.S. Government of all claims related to such conduct alleged to have occurredin Texas in periods prior to 2002.  Inconnection with the settlement, AMR entered into a Corporate Integrity Agreement(“CIA”) which will be effective for a period of five years beginning September12, 2006.  Pursuant to the CIA, AMR isrequired to maintain a compliance program which includes, among other elements,the appointment of a compliance officer and committee; training of employeesnationwide; contractual safeguards nationwide, including tracking ofcontractual arrangements in Texas; review by an independent review organizationand reporting of certain reportable events. Under the provisions of the purchase agreement for the acquisition ofAMR, EMSC and Laidlaw shared responsibility for the settlement amount andcertain of the costs associated with the CIA. The net difference in what was reserved as part of purchase accountingand what was ultimately paid in settlement of this matter was recorded as areduction of goodwill.

 On April 17, 2006, the Office ofInspector General for the United States Department of Health and HumanServices, or OIG, finalized its draft report requesting that an AMRMassachusetts subsidiary reimburse the Medicare program for approximately $1.8million in alleged overpayments from Medicare for services performed betweenJuly 1, 2002 and December 31, 2002. The OIG claimsthat these payments were made for services that did not meet Medicaremedical necessity and reimbursement requirements. The Company disagrees withthe OIG’s finding and has filed an administrative appeal. If the Company isunsuccessful in the administrative appeal it may be required to makea substantial repayment, which could include fines and penalties.

On December 13, 2005, alawsuit purporting to be a class action was commenced against AMR in Spokane,Washington in Washington State Court, Spokane County. The complaint allegesthat AMR billed patients and third party payors for transports it conductedbetween 1998 and 2005 at higher rates than contractually permitted. The courthas certified a class in this case, but the size and membership of the classhas not yet been determined. At this time, AMR does not believe that anyincorrect billings are material in amount.

***Other Legal Matters***

EmCare is currently adefendant in a collective action lawsuit brought by a number of nursepractitioners and physician assistants under the Fair Labor Standards Act. Thesuit was filed on February 25, 2003, in the United States District Courtfor the Eastern District of Texas. The plaintiffs are seeking to recoverovertime pay for the hours they worked in excess of 40 in a workweek andreclassification as non-exempt employees. The Court has determined as a matterof law that the plaintiffs are entitled to overtime pay for hours they workedin excess of 40 in a work week, and will determine the amount of damagespayable to plaintiffs at trial. Management believes the outcome of this lawsuitwill not have a material adverse effect on the Company.

AMR and the City ofStockton, California are parties to litigation regarding the terms and enforceabilityof a memorandum of understanding and a related joint venture agreement betweenthe parties to present a joint bid in response to a request for proposals toprovide emergency ambulance services in the County of San Joaquin, California.The suit was filed on June 28, 2005, in the United States District Courtfor the Eastern District of California. The parties were unable to agree on thefinal terms of a joint bid. AMR has been awarded the San Joaquin contract.While we are unable at this time to estimate the amount of potential damages,we believe that Stockton may claim as damages a portion of our profit on thecontract or the profit Stockton might have realized had the joint ventureproceeded.

11

----

**Emergency Medical Services Corporation**

**Notes to Unaudited FinancialStatements**

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

**7.****        ****Restructuring Charges**

As part of a plan tore-align certain west coast operations of AMR, the Company recorded arestructuring charge of $919 during the second quarter of 2006. Leasetermination costs accounted for $52 and the remaining $867 related to one-timetermination benefits. The plan is expected to be completed by December 2007.

The Company restructuredcertain billing office functions of AMR during the third quarter of 2006 andrecorded a restructuring charge of $267, all of which related to one-timetermination benefits. These payments are expected to be made by March 2007.

**8.****        ****Equity Based Compensation**

The Company adopted theprovisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(revised 2004) *Share-Based Payment*(“SFAS 123R”) on January 1, 2006 using the prospective transition method.Prior to January 1, 2006, the Company recorded the expense of stock optionawards over the period in which the options vest consistent with the provisionsof SFAS No. 123 *Accounting for StockBased Compensation.*The stock options are valued using theBlack-Scholes valuation method on the date of grant.

Under the Company’s EquityOption Plan, key employees were granted options that permit the individuals topurchase class A common shares and vest ratably generally over a period of fouryears. In addition, certain performance measures must be met for 50% of theoptions to become exercisable. Options with similar provisions were granted tonon-employee directors. The Company recorded a compensation charge of $300 and$898 for the three months and nine months ended September 30, 2006,respectively, and $384 and $684 for the three months and eight months endedSeptember 30, 2005, respectively.

For the three and eightmonths ended September 30, 2005, the Company recorded a charge, as a componentof compensation and benefits expense, associated with partnership units andcertain options to purchase partnership units issued to employees and officersof the Company which totaled $1.8 million.

In June 2006, the board ofdirectors adopted an equity compensation program for non-employee directors ofthe Company, other than the Chair of the Compliance Committee (“Directors’ Plan”).Non-employee directors were granted 8,000 Restricted Stock Units (“RSUs”) onJune 1, 2006, each RSU representing one share of the Company’s class Acommon stock. Immediately following each annual stockholder meeting, eachnon-employee director will receive a grant of RSUs having a fair market valueof $100 on the date of grant, based on the closing price of the Company’s classA common stock on the business day immediately preceding the grant date. TheDirectors’ Plan allows directors to defer income from the grant of RSUs. TheRSUs vest immediately prior to the election of directors at the next followingannual stockholder meeting, and will be paid in shares of the Company’s class Acommon stock (one share for each RSU). Each non-employee director (other thanthe Chair of the Compliance Committee) is also entitled to an annual cashretainer of $50 to be paid in four quarterly installments. The Directors’ Planand RSU grants on June 1, 2006 are both subject to stockholder approval atthe 2007 annual stockholder meeting. In connection with this Directors’ Plan,the Company expensed $100 and $133 for the three months and nine months endedSeptember 30, 2006, respectively.

**9.****        ****Net Income Per Common Share**

The calculation of basic netincome per common share and diluted net income per common share is presentedbelow for the three and eight months ended September 30, 2005 (there areno adjustments to net income for the three and nine months endedSeptember 30, 2006 and the only dilutive instruments for these periods areunexercised options and RSUs):

12

----

**Emergency Medical Services Corporation**

**Notes to Unaudited FinancialStatements**

**(inthousands, except share and per share data)**
|                                                                          | ** ** | **Three months ended  September 30,  2005** | ** ** | **Eight months ended  September 30,  2005** | ** ** |
|--------------------------------------------------------------------------|------------|------------------------------------------------------------|------------|------------------------------------------------------------|------------|
| ***Basic  earnings per common share computation***                       |       |                                                       |       |                                                       |       |
| **Numerator:**                                                           |       |                                                       |       |                                                       |       |
| Net income                                                               |       | $                                                          | 3,006      |                                                       | $          | 14,002 |   |
| Reduction  (accretion) of put right                                      |       | 609                                                        |       | (1,213                                                     | )          |
| Net income  available to stockholders                                    |       | $                                                          | 3,615      |                                                       | $          | 12,789 |   |
| **Denominator:**                                                         |       |                                                       |       |                                                       |       |
| Basic average  shares outstanding Common stock and LP exchangeable units |       | 33,319,242                                                 |       | 33,171,280                                                 |       |
| Basic earnings  per common share                                         |       | $                                                          | 0.11       |                                                       | $          | 0.39 |   |
| ***Diluted  earnings per common share computation***                     |       |                                                       |       |                                                       |       |
| **Numerator:**                                                           |       |                                                       |       |                                                       |       |
| Net income                                                               |       | $                                                          | 3,006      |                                                       | $          | 14,002 |   |
| Reduction  (accretion) of put right                                      |       | 609                                                        |       | (1,213                                                     | )          |
| Net income  available to stockholders                                    |       | $                                                          | 3,615      |                                                       | $          | 12,789 |   |
| **Denominator:**                                                         |       |                                                       |       |                                                       |       |
| Basic average  shares outstanding                                        |       | 33,319,242                                                 |       | 33,171,280                                                 |       |
| Incremental  shares from assumed exercise of stock options               |       | 913,780                                                    |       | 534,528                                                    |       |
| Diluted average  common shares outstanding                               |       | 34,233,022                                                 |       | 33,705,808                                                 |       |
| Diluted earnings per  common share                                       |       | $                                                          | 0.11       |                                                       | $          | 0.38 |   |

 

**10.**** ****Segment Information**

The Company is organizedaround two separately managed business units: healthcare transportationservices and emergency management services, which have been identified asoperating segments. The healthcare transportation services reportable segmentfocuses on providing a full range of medical transportation services from basicpatient transit to the most advanced emergency care and pre-hospitalassistance. The emergency management services reportable segment providesoutsourced business services to hospitals primarily for emergency departments,urgent care centers and for certain inpatient departments. The Chief ExecutiveOfficer has been identified as the chief operating decision maker (“CODM”) forpurposes of SFAS No. 131 *Disclosuresabout Segments of an Enterprise and Related Information* (“SFAS 131”),as he assesses the performance of the business units and decides how toallocate resources to the business units. Pre-tax income from continuingoperations before interest, taxes and depreciation and amortization (“EBITDA”)is the measure of profit and loss that the CODM uses to assess performance andmake decisions. The accounting policies for reported segments are the same asfor the Company as a whole.

13

----

**Emergency Medical Services Corporation**

**Notes to Unaudited FinancialStatements**

**(inthousands, except share and per share data)**
| ** **                                       | ** ** | **Consolidated**             | ** ** | ** **                   | **Predecessor  combined** | ** **                  |
|--------------------------------------------------|------------|------------------------------|------------|------------------------------|---------------------------|-----------------------------|
| ** **                                       | ** ** | **Three months  ended** | ** ** | **Three months  ended** | ** **                | **Nine months  ended** | ** ** | **Eight months  ended** | ** ** | ** ** | **one month  ended** | ** ** |
| ** **                                       | ** ** | **September 30,**       | ** ** | **September 30,**       | ** **                | **September 30,**      | ** ** | **September 30,** | ** ** | ** ** | **January 31,** | ** ** |
| ** **                                       | ** ** | **2006**                     | ** ** | **2005**                     | ** **                | **2006**                    | ** ** | **2005** | ** ** | ** ** | **2005** | ** ** |
| **Healthcare  Transportation Services**          | ** ** | ** **                   | ** ** | ** **                   | ** **                | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                          |       | $                            | 299,300    |                         | $                         | 291,910                     |   | $ | 888,472 |   | $ | 761,712 |   |   | $ | 93,788 |   |
| Segment EBITDA                                   |       | 24,317                       |       | 22,665                       |                      | 71,920                      |   | 67,813 |   |   | 1,074 |   |
| **Emergency  Management Services**               | ** ** | ** **                   | ** ** | ** **                   | ** **                | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                          |       | 186,397                      |       | 164,335                      |                      | 544,800                     |   | 425,941 |   |   | 49,281 |   |
| Segment EBITDA                                   |       | 20,423                       |       | 11,430                       |                      | 56,725                      |   | 29,915 |   |   | (6,156 | ) |
| **Total**                                        | ** ** | ** **                   | ** ** | ** **                   | ** **                | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total revenue                                    |       | 485,697                      |       | 456,245                      |                      | 1,433,272                   |   | 1,187,653 |   |   | 143,069 |   |
| Total EBITDA                                     |       | 44,740                       |       | 34,095                       |                      | 128,645                     |   | 97,728 |   |   | (5,082 | ) |
| Total capital  expenditures                      |       | 14,742                       |       | 14,915                       |                      | 43,297                      |   | 34,947 |   |   | 3,914 |   |
|                                             |       |                         |       |                         |                      |                        |   |   |   |   |   |   |
| **Reconciliation  of EBITDA to Net Income**      | ** ** | ** **                   | ** ** | ** **                   | ** **                | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| EBITDA                                           |       | $                            | 44,740     |                         | $                         | 34,095                      |   | $ | 128,645 |   | $ | 97,728 |   |   | $ | (5,082 | ) |
| Depreciation and  amortization expense           |       | (16,841                      | )          | (14,843                      | )                         | (49,045                     | ) | (38,811 | ) |   | (3,894 | ) |
| Interest expense                                 |       | (11,532                      | )          | (12,824                      | )                         | (34,269                     | ) | (34,407 | ) |   | (1,169 | ) |
| Realized gain  (loss) on investments             |       | 88                           |       | (34                          | )                         | (437                        | ) | (40 | ) |   | 13 |   |
| Interest and  other income                       |       | 532                          |       | 91                           |                      | 1,664                       |   | 189 |   |   | (4 | ) |
| Loss on early  debt extinguishment               |       | (184                         | )          | —                       |                      | (377                        | ) | — |   |   | — |   |
| Income tax  expense                              |       | (6,540                       | )          | (3,479                       | )                         | (17,956                     | ) | (10,657 | ) |   | 4,060 |   |
| Equity in earnings  of unconsolidated subsidiary |       | 21                           |       | —                       |                      | 38                          |   | — |   |   | — |   |
| Net income (loss)                                |       | $                            | 10,284     |                         | $                         | 3,006                       |   | $ | 28,263 |   | $ | 14,002 |   |   | $ | (6,076 | ) |

 

**11.**** ****Guarantors of Debt**

EMS LPfinanced the acquisition of AMR and EmCare in part by issuing$250.0 million principal amount of senior subordinated notes and borrowing$370.2 million under its senior secured credit facility. Its wholly-ownedsubsidiaries, EMSC Management, Inc. (f/k/a AMR HoldCo, Inc.) and EmCare HoldCo,Inc., are the issuers of the senior subordinated notes and the borrowers underthe senior secured credit facility. As part of the transaction, AMR and itssubsidiaries became wholly-owned subsidiaries of EMSC Management, Inc. andEmCare and its subsidiaries became wholly-owned subsidiaries of EmCare HoldCo,Inc. The senior subordinated notes and the senior secured credit facilityinclude a full, unconditional and joint and several guarantee by EMSC, EMS LPand EMSC’s domestic subsidiaries. The senior subordinated notes and seniorsecured credit facility do not include a guarantee by the Company’s captiveinsurance subsidiary. All of the operating income and cash flow of EMSC, EMSLP, EMSC Management, Inc. and EmCare HoldCo, Inc. is generated by AMR, EmCareand their subsidiaries. As a result, funds necessary to meet the debt serviceobligations under the senior secured notes and senior secured credit facilitydescribed above are provided by the distributions or advances from thesubsidiary companies, AMR and EmCare. Investments in subsidiary operatingcompanies are accounted for on the equity method. Accordingly, entriesnecessary to consolidate EMSC, EMS LP, EMSC Management, Inc., EmCare HoldCo,Inc. and all of their subsidiaries are reflected in theEliminations/Adjustments column. Separate complete financial statements of theissuers, EMS LP and subsidiary guarantors would not provide additional materialinformation that would be useful in assessing the financial composition of theissuers, EMS LP or the subsidiary guarantors. The condensed consolidating andcombining financial statements for EMSC, EMS LP, the issuers, the guarantorsand the non-guarantor are as follows:

14

----

**EmergencyMedical Services Corporation**

**Notes toUnaudited Financial Statements**

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

 

**ConsolidatingStatement of Operations**

**For the three months ended September 30, 2006**
| ** **                                                       | ** ** | ** ** | ** ** | ** **      | ** ** | **Issuer**      | ** ** | ** **            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|-----------------|------------|-----------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                       | ** ** | ** ** | ** ** | ** **      | ** ** | **EMSC**        | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | ** ** | ** ** | ** **      | ** ** | **Management,** | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **Inc.**        | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| Net revenue                                                      |       | $          | —     |            | $          | —          |       | $                     | —     |           | $          | —            |       | $                 | 485,697    |       | $          | 9,645 |   | $ | (9,645 | ) | $ | 485,697 |   |
| Compensation and benefits                                        |       | —     |       | —          |       | —          |       | —                |       | 333,406        |       | —            |       | —            |       | 333,406    |       |
| Operating expenses                                               |       | —     |       | —          |       | —          |       | —                |       | 80,513         |       | —            |       | —            |       | 80,513     |       |
| Insurance expense                                                |       | —     |       | —          |       | —          |       | —                |       | 12,023         |       | 9,733             |       | (9,645            | )          | 12,111     |       |
| Selling, general and  administrative expenses                    |       | —     |       | —          |       | —          |       | —                |       | 14,660         |       | —            |       | —            |       | 14,660     |       |
| Depreciation and  amortization expense                           |       | —     |       | —          |       | —          |       | —                |       | 16,841         |       | —            |       | —            |       | 16,841     |       |
| Restructuring charge                                             |       | —     |       | —          |       | —          |       | —                |       | 267            |       | —            |       | —            |       | 267        |       |
| Income  from operations                                          |       | —     |       | —          |       | —          |       | —                |       | 27,987         |       | (88               | )          | —            |       | 27,899     |       |
| Interest expense                                                 |       | —     |       | —          |       | —          |       | —                |       | (11,532        | )          | —            |       | —            |       | (11,532    | )          |
| Realized gain on investments                                     |       | —     |       | —          |       | —          |       | —                |       | —         |       | 88                |       | —            |       | 88         |       |
| Interest and other  income                                       |       | —     |       | —          |       | —          |       | —                |       | 532            |       | —            |       | —            |       | 532        |       |
| Loss on early debt  extinguishment                               |       | —     |       | —          |       | —          |       | —                |       | (184           | )          | —            |       | —            |       | (184       | )          |
| Income  before income taxes                                      |       | —     |       | —          |       | —          |       | —                |       | 16,803         |       | —            |       | —            |       | 16,803     |       |
| Income tax expense                                               |       | —     |       | —          |       | —          |       | —                |       | (6,540         | )          | —            |       | —            |       | (6,540     | )          |
| Income  before equity in earnings of unconsolidated subsidiaries |       | —     |       | —          |       | —          |       | —                |       | 10,263         |       | —            |       | —            |       | 10,263     |       |
| Equity in earnings of unconsolidated  subsidiaries               |       | 10,284     |       | 10,284          |       | 2,372           |       | 7,912                 |       | 21             |       | —            |       | (30,852           | )          | 21         |       |
| Net income                                                       |       | $          | 10,284     |            | $          | 10,284          |       | $                     | 2,372      |           | $          | 7,912             |       | $                 | 10,284     |       | $          | — |   | $ | (30,852 | ) | $ | 10,284 |   |

 

15

----

**EmergencyMedical Services Corporation**

**Notes toUnaudited Financial Statements**

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

**ConsolidatingStatement of Operations**

**For the three months ended September 30, 2005**
| ** **                                                       | ** ** | ** ** | ** ** | ** **      | ** ** | **Issuer**      | ** ** | ** **            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|-----------------|------------|-----------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                       | ** ** | ** ** | ** ** | ** **      | ** ** | **EMSC**        | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | ** ** | ** ** | ** **      | ** ** | **Management,** | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **Inc.**        | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| Net revenue                                                      |       | $          | —     |            | $          | —          |       | $                     | —     |           | $          | —            |       | $                 | 456,245    |       | $          | 2,839 |   | $ | (2,839 | ) | $ | 456,245 |   |
| Compensation and  benefits                                       |       | —     |       | —          |       | —          |       | —                |       | 319,292        |       | —            |       | —            |       | 319,292    |       |
| Operating  expenses                                              |       | —     |       | —          |       | —          |       | —                |       | 66,156         |       | —            |       | —            |       | 66,156     |       |
| Insurance expense                                                |       | —     |       | —          |       | —          |       | —                |       | 21,082         |       | 2,805             |       | (2,839            | )          | 21,048     |       |
| Selling, general  and administrative expenses                    |       | —     |       | —          |       | —          |       | —                |       | 15,654         |       | —            |       | —            |       | 15,654     |       |
| Depreciation and  amortization expense                           |       | —     |       | —          |       | —          |       | —                |       | 14,843         |       | —            |       | —            |       | 14,843     |       |
| Income from  operations                                          |       | —     |       | —          |       | —          |       | —                |       | 19,218         |       | 34                |       | —            |       | 19,252     |       |
| Interest expense                                                 |       | —     |       | —          |       | —          |       | —                |       | (12,824        | )          | —            |       | —            |       | (12,824    | )          |
| Realized loss on  investments                                    |       | —     |       | —          |       | —          |       | —                |       | —         |       | (34               | )          | —            |       | (34        | )          |
| Interest and  other income                                       |       | —     |       | —          |       | —          |       | —                |       | 91             |       | —            |       | —            |       | 91         |       |
| Income before  income taxes                                      |       | —     |       | —          |       | —          |       | —                |       | 6,485          |       | —            |       | —            |       | 6,485      |       |
| Income tax  expense                                              |       | —     |       | —          |       | —          |       | —                |       | (3,479         | )          | —            |       | —            |       | (3,479     | )          |
| Income before  equity in earnings of unconsolidated subsidiaries |       | —     |       | —          |       | —          |       | —                |       | 3,006          |       | —            |       | —            |       | 3,006      |       |
| Equity in  earnings of unconsolidated subsidiaries               |       | —     |       | 3,006           |       | 501             |       | 2,505                 |       | —         |       | —            |       | (6,012            | )          | —     |       |
| Net income                                                       |       | $          | —     |            | $          | 3,006           |       | $                     | 501        |           | $          | 2,505             |       | $                 | 3,006      |       | $          | — |   | $ | (6,012 | ) | $ | 3,006 |   |

 

16

----

**EmergencyMedical Services Corporation**

**Notes toUnaudited Financial Statements**

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

**ConsolidatingStatement of Operations**

**For the nine months ended September 30, 2006**
| ** **                                                       | ** ** | ** ** | ** ** | ** **      | ** ** | **Issuer**      | ** ** | ** **            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|-----------------|------------|-----------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                       | ** ** | ** ** | ** ** | ** **      | ** ** | **EMSC**        | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | ** ** | ** ** | ** **      | ** ** | **Management,** | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **Inc.**        | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| Net revenue                                                      |       | $          | —     |            | $          | —          |       | $                     | —     |           | $          | —            |       | $                 | 1,433,272  |       | $          | 28,950 |   | $ | (28,950 | ) | $ | 1,433,272 |   |
| Compensation and  benefits                                       |       | —     |       | —          |       | —          |       | —                |       | 990,380        |       | —            |       | —            |       | 990,380    |       |
| Operating  expenses                                              |       | —     |       | —          |       | —          |       | —                |       | 216,170        |       | —            |       | —            |       | 216,170    |       |
| Insurance expense                                                |       | —     |       | —          |       | —          |       | —                |       | 54,659         |       | 28,513            |       | (28,950           | )          | 54,222     |       |
| Selling, general  and administrative expenses                    |       | —     |       | —          |       | —          |       | —                |       | 42,669         |       | —            |       | —            |       | 42,669     |       |
| Depreciation and  amortization expense                           |       | —     |       | —          |       | —          |       | —                |       | 49,045         |       | —            |       | —            |       | 49,045     |       |
| Restructuring  charge                                            |       | —     |       | —          |       | —          |       | —                |       | 1,186          |       | —            |       | —            |       | 1,186      |       |
| Income from operations                                           |       | —     |       | —          |       | —          |       | —                |       | 79,163         |       | 437               |       | —            |       | 79,600     |       |
| Interest expense                                                 |       | —     |       | —          |       | —          |       | —                |       | (34,269        | )          | —            |       | —            |       | (34,269    | )          |
| Realized loss on  investments                                    |       | —     |       | —          |       | —          |       | —                |       | —         |       | (437              | )          | —            |       | (437       | )          |
| Interest and  other income                                       |       | —     |       | —          |       | —          |       | —                |       | 1,664          |       | —            |       | —            |       | 1,664      |       |
| Loss on early  debt extinguishment                               |       | —     |       | —          |       | —          |       | —                |       | (377           | )          | —            |       | —            |       | (377       | )          |
| Income before income taxes                                       |       | —     |       | —          |       | —          |       | —                |       | 46,181         |       | —            |       | —            |       | 46,181     |       |
| Income tax  expense                                              |       | —     |       | —          |       | —          |       | —                |       | (17,956        | )          | —            |       | —            |       | (17,956    | )          |
| Income before equity in earnings of unconsolidated  subsidiaries |       | —     |       | —          |       | —          |       | —                |       | 28,225         |       | —            |       | —            |       | 28,225     |       |
| Equity in  earnings of unconsolidated subsidiaries               |       | 28,263     |       | 28,263          |       | 7,723           |       | 20,540                |       | 38             |       | —            |       | (84,789           | )          | 38         |       |
| Net income                                                       |       | $          | 28,263     |            | $          | 28,263          |       | $                     | 7,723      |           | $          | 20,540            |       | $                 | 28,263     |       | $          | — |   | $ | (84,789 | ) | $ | 28,263 |   |

 

17

----

**EmergencyMedical Services Corporation**

**Notes toUnaudited Financial Statements**

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

**ConsolidatingStatement of Operations**

**For the eight months ended September 30, 2005**
| ** **                                                       | ** ** | ** ** | ** ** | ** **      | ** ** | **Issuer**      | ** ** | ** **            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|-----------------|------------|-----------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                       | ** ** | ** ** | ** ** | ** **      | ** ** | **EMSC**        | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | ** ** | ** ** | ** **      | ** ** | **Management,** | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **Inc.**        | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| Net revenue                                                      |       | $          | —     |            | $          | —          |       | $                     | —     |           | $          | —            |       | $                 | 1,187,653  |       | $          | 25,264 |   | $ | (25,264 | ) | $ | 1,187,653 |   |
| Compensation and  benefits                                       |       | —     |       | —          |       | —          |       | —                |       | 822,595        |       | —            |       | —            |       | 822,595    |       |
| Operating  expenses                                              |       | —     |       | —          |       | —          |       | —                |       | 168,700        |       | —            |       | —            |       | 168,700    |       |
| Insurance expense                                                |       | —     |       | —          |       | —          |       | —                |       | 60,422         |       | 25,224            |       | (25,264           | )          | 60,382     |       |
| Selling, general  and administrative expenses                    |       | —     |       | —          |       | —          |       | —                |       | 38,248         |       | —            |       | —            |       | 38,248     |       |
| Depreciation and  amortization expense                           |       | —     |       | —          |       | —          |       | —                |       | 38,811         |       | —            |       | —            |       | 38,811     |       |
| Income from  operations                                          |       | —     |       | —          |       | —          |       | —                |       | 58,877         |       | 40                |       | —            |       | 58,917     |       |
| Interest expense                                                 |       | —     |       | —          |       | —          |       | —                |       | (34,407        | )          | —            |       | —            |       | (34,407    | )          |
| Realized loss on  investments                                    |       | —     |       | —          |       | —          |       | —                |       | —         |       | (40               | )          | —            |       | (40        | )          |
| Interest and  other income                                       |       | —     |       | —          |       | —          |       | 14                    |       | 175            |       | —            |       | —            |       | 189        |       |
| Income before  income taxes                                      |       | —     |       | —          |       | —          |       | 14                    |       | 24,645         |       | —            |       | —            |       | 24,659     |       |
| Income tax  expense                                              |       | —     |       | —          |       | —          |       | —                |       | (10,657        | )          | —            |       | —            |       | (10,657    | )          |
| Income before  equity in earnings of unconsolidated subsidiaries |       | —     |       | —          |       | —          |       | 14                    |       | 13,988         |       | —            |       | —            |       | 14,002     |       |
| Equity in  earnings of unconsolidated subsidiaries               |       | —     |       | 14,002          |       | 6,793           |       | 7,195                 |       | —         |       | —            |       | (27,990           | )          | —     |       |
| Net income                                                       |       | $          | —     |            | $          | 14,002          |       | $                     | 6,793      |           | $          | 7,209             |       | $                 | 13,988     |       | $          | — |   | $ | (27,990 | ) | $ | 14,002 |   |

 

18

----

**EmergencyMedical Services Corporation**

**Notes toUnaudited Financial Statements**

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

**Consolidating Balance Sheet**

**As ofSeptember 30, 2006**
| ** **                                | ** ** | ** ** | ** ** | ** **      | ** ** | **Issuer**      | ** ** | ** **            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|------------|------------|-----------------|------------|-----------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                | ** ** | ** ** | ** ** | ** **      | ** ** | **EMSC**        | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
| ** **                                | ** ** | ** ** | ** ** | ** **      | ** ** | **Management,** | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                                | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **Inc.**        | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| **Assets**                                | ** ** | ** ** | ** ** | ** **      |       |            |       |                  |       |           |       |              |       |              |       |       |       |
| Current assets:                           |       |       |       |            |       |            |       |                  |       |           |       |              |       |              |       |       |       |
| Cash  and cash equivalents                |       | $          | —     |            | $          | —          |       | $                     | —     |           | $          | —            |       | $                 | 22,411     |       | $          | 53 |   | $ | — |   | $ | 22,464 |   |
| Insurance  collateral                     |       | —     |       | —          |       | —          |       | —                |       | 24,207         |       | 14,106            |       | —            |       | 38,313     |       |
| Trade  and other accounts receivable, net |       | —     |       | —          |       | —          |       | —                |       | 402,819        |       | 995               |       | —            |       | 403,814    |       |
| Parts  and supplies inventory             |       | —     |       | —          |       | —          |       | —                |       | 18,581         |       | —            |       | —            |       | 18,581     |       |
| Other  current assets                     |       | —     |       | —          |       | —          |       | —                |       | 25,058         |       | 2,050             |       | (10,600           | )          | 16,508     |       |
| Current  deferred tax assets              |       | —     |       | —          |       | —          |       | —                |       | 4,128          |       | 3,221             |       | —            |       | 7,349      |       |
| Current  assets                           |       | —     |       | —          |       | —          |       | —                |       | 497,204        |       | 20,425            |       | (10,600           | )          | 507,029    |       |
| Non-current assets:                       |       |       |       |            |       |            |       |                  |       |           |       |              |       |              |       |       |       |
| Property,  plant, and equipment, net      |       | —     |       | —          |       | —          |       | —                |       | 143,654        |       | —            |       | —            |       | 143,654    |       |
| Intercompany  receivable                  |       | —     |       | 114,165         |       | 279,389         |       | 190,060               |       | —         |       | —            |       | (583,614          | )          | —     |       |
| Intangible  assets, net                   |       | —     |       | —          |       | —          |       | —                |       | 68,864         |       | —            |       | —            |       | 68,864     |       |
| Non-current  deferred tax assets          |       | —     |       | —          |       | —          |       | —                |       | 119,279        |       | (1,132            | )          | —            |       | 118,147    |       |
| Insurance  collateral                     |       | —     |       | —          |       | —          |       | —                |       | 62,008         |       | 100,225           |       | —            |       | 162,233    |       |
| Goodwill                                  |       | —     |       | —          |       | —          |       | —                |       | 261,008        |       | 458               |       | —            |       | 261,466    |       |
| Other  long-term assets                   |       | —     |       | —          |       | 8,948           |       | 4,038                 |       | 20,526         |       | —            |       | —            |       | 33,512     |       |
| Investment  and advances in subsidiaries  |       | 375,491    |       | 261,326         |       | 207,913         |       | 53,399                |       | 7,355          |       | —            |       | (905,484          | )          | —     |       |
| Assets                                    |       | $          | 375,491    |            | $          | 375,491         |       | $                     | 496,250    |           | $          | 247,497           |       | $                 | 1,179,898  |       | $          | 119,976 |   | $ | (1,499,698 | ) | $ | 1,294,905 |   |
| **Liabilities and Equity**                | ** ** | ** ** | ** ** |            |       |            |       |                  |       |           |       |              |       |              |       |       |       |
| Current liabilities:                      |       |       |       |            |       |            |       |                  |       |           |       |              |       |              |       |       |       |
| Accounts  payable                         |       | $          | —     |            | $          | —          |       | $                     | —     |           | $          | —            |       | $                 | 62,513     |       | $          | — |   | $ | — |   | $ | 62,513 |   |
| Accrued  liabilities                      |       | —     |       | —          |       | 3,174           |       | 2,199                 |       | 207,902        |       | 60                |       | —            |       | 213,335    |       |
| Current  portion of long-term debt        |       | —     |       | —          |       | 1,656           |       | 744                   |       | 2,834          |       | —            |       | —            |       | 5,234      |       |
| Current  liabilities                      |       | —     |       | —          |       | 4,830           |       | 2,943                 |       | 273,249        |       | 60                |       | —            |       | 281,082    |       |
| Long-term debt                            |       | —     |       | —          |       | 283,507         |       | 191,141               |       | 1,570          |       | —            |       | —            |       | 476,218    |       |
| Other long-term  liabilities              |       | —     |       | —          |       | —          |       | —                |       | 60,153         |       | 112,561           |       | (10,600           | )          | 162,114    |       |
| Intercompany                              |       | —     |       | —          |       | —          |       | —                |       | 583,614        |       | —            |       | (583,614          | )          | —     |       |
| Liabilities                               |       | —     |       | —          |       | 288,337         |       | 194,084               |       | 918,586        |       | 112,621           |       | (594,214          | )          | 919,414    |       |
| Equity:                                   |       |       |       |            |       |            |       |                  |       |           |       |              |       |              |       |       |       |
| Class A common stock                      |       | 93         |       | —          |       | —          |       | —                |       | —         |       | 30                |       | (30               | )          | 93         |       |
| Class B common stock                      |       | 1          |       | —          |       | —          |       | —                |       | —         |       | —            |       | —            |       | 1          |       |
| Partnership equity                        |       | 212,361    |       | 326,526         |       | 189,394         |       | 22,945                |       | 212,361        |       | —            |       | (751,226          | )          | 212,361    |       |
| Additional paid-in  capital               |       | 114,071    |       | —          |       | —          |       | —                |       | —         |       | 6,690             |       | (6,690            | )          | 114,071    |       |
| Retained earnings                         |       | 48,330     |       | 48,330          |       | 18,519          |       | 29,833                |       | 48,316         |       | —            |       | (144,998          | )          | 48,330     |       |
| Comprehensive income  (loss)              |       | 635        |       | 635             |       | —          |       | 635                   |       | 635            |       | 635               |       | (2,540            | )          | 635        |       |
| Equity                                    |       | 375,491    |       | 375,491         |       | 207,913         |       | 53,413                |       | 261,312        |       | 7,355             |       | (905,484          | )          | 375,491    |       |
| Liabilities and Equity                    |       | $          | 375,491    |            | $          | 375,491         |       | $                     | 496,250    |           | $          | 247,497           |       | $                 | 1,179,898  |       | $          | 119,976 |   | $ | (1,499,698 | ) | $ | 1,294,905 |   |

 

19

----

**EmergencyMedical Services Corporation**

**Notes toUnaudited Financial Statements**

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

**ConsolidatingBalance Sheet**

**As of December 31, 2005**
| ** **                               | ** ** | ** ** | ** ** | ** **      | ** ** | **Issuer**      | ** ** | ** **            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|------------------------------------------|------------|------------|------------|-----------------|------------|-----------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                               | ** ** | ** ** | ** ** | ** **      | ** ** | **EMSC**        | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
| ** **                               | ** ** | ** ** | ** ** | ** **      | ** ** | **Management,** | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                               | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **Inc.**        | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| **Assets**                               | ** ** | ** ** | ** ** | ** **      | ** ** | ** **      | ** ** | ** **            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
| Current assets:                          |       |       |       |            |       |            |       |                  |       |           |       |              |       |              |       |       |       |
| Cash and cash equivalents                |       | $          | —     |            | $          | —          |       | $                     | —     |           | $          | —            |       | $                 | 18,001     |       | $          | 47 |   | $ | — |   | $ | 18,048 |   |
| Insurance collateral                     |       | —     |       | —          |       | —          |       | —                |       | 16,092         |       | 13,674            |       | —            |       | 29,766     |       |
| Trade and other accounts receivable, net |       | —     |       | —          |       | —          |       | —                |       | 408,675        |       | 2,529             |       | (20               | )          | 411,184    |       |
| Parts and supplies inventory             |       | —     |       | —          |       | —          |       | —                |       | 18,449         |       | —            |       | —            |       | 18,449     |       |
| Other current assets                     |       | —     |       | —          |       | —          |       | —                |       | 15,057         |       | 302               |       | (946              | )          | 14,413     |       |
| Current deferred tax assets              |       | —     |       | —          |       | —          |       | —                |       | 20,441         |       | 2,995             |       | —            |       | 23,436     |       |
| Current assets                           |       | —     |       | —          |       | —          |       | —                |       | 496,715        |       | 19,547            |       | (966              | )          | 515,296    |       |
| Non-current  assets:                     |       |       |       |            |       |            |       |                  |       |           |       |              |       |              |       |       |       |
| Property, plant, and equipment, net      |       | —     |       | —          |       | —          |       | —                |       | 138,037        |       | —            |       | —            |       | 138,037    |       |
| Intercompany receivable                  |       | 1,973      |       | 113,400         |       | 296,207         |       | 199,529               |       | 14,863         |       | —            |       | (625,972          | )          | —     |       |
| Intangible assets, net                   |       | —     |       | —          |       | —          |       | —                |       | 78,183         |       | —            |       | —            |       | 78,183     |       |
| Non-current deferred tax assets          |       | —     |       | —          |       | —          |       | —                |       | 119,538        |       | (1,130            | )          | —            |       | 118,408    |       |
| Insurance collateral                     |       | —     |       | —          |       | —          |       | —                |       | 63,934         |       | 67,973            |       | —            |       | 131,907    |       |
| Goodwill                                 |       | —     |       | —          |       | —          |       | —                |       | 250,710        |       | 458               |       | —            |       | 251,168    |       |
| Other long-term assets                   |       | 65         |       | —          |       | 10,443          |       | 4,420                 |       | 19,101         |       | —            |       | —            |       | 34,029     |       |
| Investment and advances in subsidiaries  |       | 345,354    |       | 231,954         |       | 200,868         |       | 31,072                |       | 6,246          |       | —            |       | (815,494          | )          | —     |       |
| Assets                                   |       | $          | 347,392    |            | $          | 345,354         |       | $                     | 507,518    |           | $          | 235,021           |       | $                 | 1,187,327  |       | $          | 86,848 |   | $ | (1,442,432 | ) | $ | 1,267,028 |   |
| **Liabilities  and Equity**              | ** ** | ** ** | ** ** | ** **      | ** ** | ** **      | ** ** | ** **            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
| Current  liabilities:                    |       |       |       |            |       |            |       |                  |       |           |       |              |       |              |       |       |       |
| Accounts payable                         |       | $          | —     |            | $          | —          |       | $                     | —     |           | $          | —            |       | $                 | 56,290     |       | $          | — |   | $ | — |   | $ | 56,290 |   |
| Accrued liabilities                      |       | 2,408      |       | —          |       | 6,857           |       | 5,478                 |       | 162,456        |       | 37,282            |       | —            |       | 214,481    |       |
| Current portion of long-term debt        |       | —     |       | —          |       | 2,415           |       | 1,085                 |       | 3,164          |       | —            |       | —            |       | 6,664      |       |
| Current liabilities                      |       | 2,408      |       | —          |       | 9,272           |       | 6,563                 |       | 221,910        |       | 37,282            |       | —            |       | 277,435    |       |
| Long-term debt                           |       | —     |       | —          |       | 297,378         |       | 197,372               |       | 770            |       | —            |       | —            |       | 495,520    |       |
| Other long-term  liabilities             |       | —     |       | —          |       | —          |       | —                |       | 106,735        |       | 43,320            |       | (966              | )          | 149,089    |       |
| Intercompany                             |       | —     |       | —          |       | —          |       | —                |       | 625,972        |       | —            |       | (625,972          | )          | —     |       |
| Liabilities                              |       | 2,408      |       | —          |       | 306,650         |       | 203,935               |       | 955,387        |       | 80,602            |       | (626,938          | )          | 922,044    |       |
| Equity:                                  |       |       |       |            |       |            |       |                  |       |           |       |              |       |              |       |       |       |
| Class A common  stock                    |       | 92         |       | —          |       | —          |       | —                |       | —         |       | 30                |       | (30               | )          | 92         |       |
| Class B common  stock                    |       | 1          |       | —          |       | —          |       | —                |       | —         |       | —            |       | —            |       | 1          |       |
| Partnership  equity                      |       | 212,361    |       | 325,761         |       | 190,073         |       | 22,288                |       | 212,361        |       | —            |       | (750,483          | )          | 212,361    |       |
| Additional  paid-in capital              |       | 112,937    |       | —          |       | —          |       | —                |       | —         |       | 6,690             |       | (6,690            | )          | 112,937    |       |
| Retained earnings                        |       | 20,067     |       | 20,067          |       | 10,795          |       | 9,272                 |       | 20,053         |       | —            |       | (60,187           | )          | 20,067     |       |
| Comprehensive  income (loss)             |       | (474       | )          | (474            | )          | —          |       | (474                  | )          | (474           | )          | (474              | )          | 1,896             |       | (474       | )          |
| Equity                                   |       | 344,984    |       | 345,354         |       | 200,868         |       | 31,086                |       | 231,940        |       | 6,246             |       | (815,494          | )          | 344,984    |       |
| Liabilities and  Equity                  |       | $          | 347,392    |            | $          | 345,354         |       | $                     | 507,518    |           | $          | 235,021           |       | $                 | 1,187,327  |       | $          | 86,848 |   | $ | (1,442,432 | ) | $ | 1,267,028 |   |

 

20

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**EmergencyMedical Services Corporation**

**Notes toUnaudited Financial Statements**

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

**CondensedConsolidating Statement of Cash Flows**

**For the nine months ended September 30, 2006**
| ** **                                              | ** ** | ** ** | ** ** | ** **      | ** ** | **Issuer**      | ** ** | ** **           | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
|---------------------------------------------------------|------------|------------|------------|-----------------|------------|-----------------|------------|----------------------|------------|----------------|------------|--------------------|------------|------------|------------|
| ** **                                              | ** ** | ** ** | ** ** | ** **      | ** ** | **EMSC**        | ** ** | **Issuer**           | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
| ** **                                              | ** ** | ** ** | ** ** | ** **      | ** ** | **Management,** | ** ** | **EmCare**           | ** ** | **Subsidiary** | ** ** | **Subsidiary**     | ** ** | ** ** | ** ** |
| ** **                                              | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **Inc.**        | ** ** | **HoldCo Inc.** | ** ** | **Guarantors** | ** ** | **Non-guarantors** | ** ** | **Total**  | ** ** |
| **Cash  Flows from Operating Activities**               | ** ** | ** ** | ** ** | ** **      | ** ** | ** **      | ** ** | ** **           | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
| Net cash provided by operating activities               |       | $          | —     |            | $          | —          |       | $                    | —     |           | $          | —             |       | $          | 98,004     |   | $ | 25,590 |   | $ | 123,594 |   |
| **Cash  Flows from Investing Activities**               | ** ** | ** ** | ** ** | ** **      | ** ** | ** **      | ** ** | ** **           | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
| Purchase of  property, plant and equipment              |       | —     |       | —          |       | —          |       | —               |       | (43,297        | )          | —             |       | (43,297    | )          |
| Proceeds from  sale of property, plant and equipment    |       | —     |       | —          |       | —          |       | —               |       | 903            |       | —             |       | 903        |       |
| Acquisition of  business                                |       | —     |       | —          |       | —          |       | —               |       | (11,587        | )          | —             |       | (11,587    | )          |
| Insurance  collateral                                   |       | —     |       | —          |       | —          |       | —               |       | (6,189         | )          | (25,584            | )          | (31,773    | )          |
| Net change in  deposits and other assets                |       | —     |       | —          |       | —          |       | —               |       | (1,860         | )          | —             |       | (1,860     | )          |
| Net cash used in investing activities                   |       | —     |       | —          |       | —          |       | —               |       | (62,030        | )          | (25,584            | )          | (87,614    | )          |
| **Cash  Flows from Financing Activities**               | ** ** | ** ** | ** ** | ** **      | ** ** | ** **      | ** ** | ** **           | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
| Issuance of EMSC  equity                                |       | 104        |       | —          |       | —          |       | —               |       | —         |       | —             |       | 104        |       |
| EMSC equity  issuance costs                             |       | (2,408     | )          | —          |       | —          |       | —               |       | —         |       | —             |       | (2,408     | )          |
| Repayments of  capital lease obligations and other debt |       | —     |       | —          |       | —          |       | —               |       | (25,389        | )          | —             |       | (25,389    | )          |
| Net intercompany  borrowings (payments)                 |       | 2,304      |       | —          |       | —          |       | —               |       | (2,304         | )          | —             |       | —     |       |
| Decrease in bank  overdrafts                            |       | —     |       | —          |       | —          |       | —               |       | (3,871         | )          | —             |       | (3,871     | )          |
| Net cash used in financing activities                   |       | —     |       | —          |       | —          |       | —               |       | (31,564        | )          | —             |       | (31,564    | )          |
| Increase in cash  and cash equivalents                  |       | —     |       | —          |       | —          |       | —               |       | 4,410          |       | 6                  |       | 4,416      |       |
| Cash and cash  equivalents, beginning of period         |       | —     |       | —          |       | —          |       | —               |       | 18,001         |       | 47                 |       | 18,048     |       |
| Cash and cash  equivalents, end of period               |       | $          | —     |            | $          | —          |       | $                    | —     |           | $          | —             |       | $          | 22,411     |   | $ | 53 |   | $ | 22,464 |   |

 

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**EmergencyMedical Services Corporation**

**Notes toUnaudited Financial Statements**

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

**CondensedConsolidating Statement of Cash Flows**

**For the eight months ended September 30, 2005**
| ** **                                              | ** ** | ** ** | ** ** | ** **      | ** ** | **Issuer**      | ** ** | ** **           | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
|---------------------------------------------------------|------------|------------|------------|-----------------|------------|-----------------|------------|----------------------|------------|----------------|------------|--------------------|------------|------------|------------|
| ** **                                              | ** ** | ** ** | ** ** | ** **      | ** ** | **EMSC**        | ** ** | **Issuer**           | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
| ** **                                              | ** ** | ** ** | ** ** | ** **      | ** ** | **Management,** | ** ** | **EmCare**           | ** ** | **Subsidiary** | ** ** | **Subsidiary**     | ** ** | ** ** | ** ** |
| ** **                                              | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **Inc.**        | ** ** | **HoldCo Inc.** | ** ** | **Guarantors** | ** ** | **Non-guarantors** | ** ** | **Total**  | ** ** |
| **Cash  Flows from Operating Activities**               | ** ** | ** ** | ** ** | ** **      | ** ** | ** **      | ** ** | ** **           | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
| Net cash provided by operating activities               |       | $          | —     |            | $          | —          |       | $                    | —     |           | $          | 14                 |       | $          | 76,497     |   | $ | 24,164 |   | $ | 100,675 |   |
| **Cash  Flows from Investing Activities**               | ** ** | ** ** | ** ** | ** **      | ** ** | ** **      | ** ** | ** **           | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
| EMS purchase of  AMR and EmCare                         |       | —     |       | (828,775        | )          | —          |       | —               |       | —         |       | —             |       | (828,775   | )          |
| Purchase of  property, plant and equipment              |       | —     |       | —          |       | —          |       | —               |       | (34,947        | )          | —             |       | (34,947    | )          |
| Proceeds from  sale of property, plant and equipment    |       | —     |       | —          |       | —          |       | —               |       | 565            |       | —             |       | 565        |       |
| Insurance collateral                                    |       | —     |       | —          |       | —          |       | —               |       | (12,079        | )          | (33,935            | )          | (46,014    | )          |
| Net change in  deposits and other assets                |       | —     |       | —          |       | —          |       | —               |       | (464           | )          | —             |       | (464       | )          |
| Net cash used in investing activities                   |       | —     |       | (828,775        | )          | —          |       | —               |       | (46,925        | )          | (33,935            | )          | (909,635   | )          |
| **Cash  Flows from Financing Activities**               | ** ** | ** ** | ** ** | ** **      | ** ** | ** **      | ** ** | ** **           | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
| Borrowings under  new senior secured credit facility    |       | —     |       | —          |       | 241,500         |       | 108,500              |       | —         |       | —             |       | 350,000    |       |
| Proceeds from  issuance of senior subordinated notes    |       | —     |       | —          |       | 172,500         |       | 77,500               |       | —         |       | —             |       | 250,000    |       |
| Borrowings under  new revolving credit facility         |       | —     |       | —          |       | 17,388          |       | 7,812                |       | —         |       | —             |       | 25,200     |       |
| Issuance of  partnership equity                         |       | —     |       | 222,655         |       | —          |       | —               |       | —         |       | —             |       | 222,655    |       |
| EMS LP equity  issuance costs                           |       | —     |       | (1,726          | )          | —          |       | —               |       | —         |       | —             |       | (1,726     | )          |
| Financing costs                                         |       | —     |       | —          |       | (12,693         | )          | (5,703               | )          | —         |       | —             |       | (18,396    | )          |
| Repayments of  capital lease obligations and other debt |       | —     |       | —          |       | (13,938         | )          | (6,262               | )          | (5,722         | )          | —             |       | (25,922    | )          |
| Net intercompany borrowings (payments)                  |       | —     |       | 612,674         |       | (404,757        | )          | (181,861             | )          | (26,056        | )          | —             |       | —     |       |
| Increase  (decrease) in bank overdrafts                 |       | —     |       | —          |       | —          |       | —               |       | 997            |       | —             |       | 997        |       |
| Increase (decrease)  in other non-current liabilities   |       | —     |       | —          |       | —          |       | —               |       | 1,634          |       | —             |       | 1,634      |       |
| Net cash provided by (used in) financing activities     |       | —     |       | 833,603         |       | —          |       | (14                  | )          | (29,147        | )          | —             |       | 804,442    |       |
| Increase in cash  and cash equivalents                  |       | —     |       | 4,828           |       | —          |       | —               |       | 425            |       | (9,771             | )          | (4,518     | )          |
| Cash and cash  equivalents, beginning of period         |       | —     |       | —          |       | —          |       | —               |       | 4,778          |       | 9,853              |       | 14,631     |       |
| Cash and cash  equivalents, end of period               |       | $          | —     |            | $          | 4,828           |       | $                    | —     |           | $          | —             |       | $          | 5,203      |   | $ | 82 |   | $ | 10,113 |   |

** **

**12. SubsequentEvents**

***On November 2, 2006, the Companyentered into an agreement to purchase all of the outstanding shares of capitalstock of EHR Management Co., a Delaware corporation(“EHR Management”). EHR Management is the management company forClinical Staffing Solutions, which provides hospitalist and specialty unitphysician coverage in Pennsylvania and New Jersey. Upon consummation of thetransaction, EHR Management would become a wholly-owned subsidiary ofEmCare. The closing of the transaction is subject to various customary closingconditions, and is expected to occur on or prior to November 10, 2006.***

***The Company has also approved arestructuring plan to streamline the regional operations of AMR for thepurposes of increasing efficiencies, improving customer service and producingcost savings. AMR’s fifteen operating divisions will be reorganized into eightdivisional offices located within existing operations. In connection with therestructuring, the Company will cease operations in the Detroit-Pontiac,Michigan area effective December 31, 2006.***

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**ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.**

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

Certain statements andinformation herein may be deemed to be “forward-looking statements” within themeaning 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 complex governmentregulation of our industry, both as it exists now and as it may change in thefuture; our ability to recruit and retain qualified physicians and otherhealthcare professionals, and enforce our non-compete agreements with ourphysicians; the loss of one or more members of our senior management team; theoutcome of government investigations of certain of our business practices; ourability to generate cash flow to service our debt obligations and fund the costof capital expenditures to maintain and upgrade our vehicle fleet and medicalequipment; 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 its subsidiaries,including Emergency Medical Services L.P., or EMS LP. The Company’s business isconducted primarily through two operating subsidiaries, American MedicalResponse, Inc., or AMR, and EmCare Holdings Inc, or EmCare. 

This Report should be readin conjunction with the Company’s consolidated financial statements and notesthereto included in our Annual Report on Form 10-K filed with the SEC onMarch 21, 2006. 

***Company Overview***

We are a leading provider ofemergency medical services in the United States. We operate our business andmarket our services under the AMR and EmCare brands. AMR is the leadingprovider of ambulance transport services in the United States. EmCare is theleading provider of outsourced emergency department staffing and managementservices in the United States. 

On February 10, 2005,an investor group led by Onex Partners LP and Onex Corporation, and includingmembers of management, purchased AMR and EmCare from Laidlaw International,Inc. 

**AmericanMedical Response**

Over its more than 50 yearsof operating history, AMR has developed the largest network of ambulancetransport services in the United States based on net revenue and number oftransports. For the nine months ended September 30, 2006, approximately58% 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, stand-byevents and other services to communities and public safety agencies. 

**EmCare**

Over its 33 years ofoperating history, EmCare has become the largest provider of outsourcedemergency department staffing and related management services to healthcarefacilities based on number of contracts with hospitals and affiliated physiciangroups. 

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***Recent Developments***

 In July 2006, the FASB issued InterpretationNo. 48 (“FIN 48”), *Accounting forUncertainty in Income Taxes*, an interpretation of FASB StatementNo. 109, effective for fiscal years beginning after December 15,2006. FIN 48 creates a single model to address uncertainty in tax positions,prescribes the minimum recognition threshold, and provides guidance onderecognition, measurement, classification, interest and penalties, accountingin interim periods, disclosure and transition. FIN 48 also has expandeddisclosure requirements, which include a tabular rollforward of the beginningand ending aggregate unrecognized tax benefits, as well as specific detailrelated to tax uncertainties for which it is reasonably possible the amount ofunrecognized tax benefit will significantly increase or decrease within twelvemonths. The adoption of FIN 48 is not expected to have a material impact on ourfinancial statements. 

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

The key factors and measureswe use to evaluate our business focus on the number of patients we treat andtransport and the costs we incur to provide the necessary care andtransportation for each of our patients. 

We evaluate our revenue netof provisions for contractual payor discounts and provisions for uncompensatedcare. Medicaid, Medicare and certain other payors receive discounts from ourstandard charges, which we refer to as contractual discounts. In addition,individuals we treat and transport may be personally responsible for adeductible or co-pay under their third party payor coverage, and most of ourcontracts require us to treat and transport patients who have no insurance orother third party payor coverage. Due to the uncertainty regarding collectibilityof charges associated with services we provide to these patients, which werefer to as uncompensated care, our net revenue recognition is based onexpected cash collections. Our net revenue is gross billings after provisionsfor contractual discounts and estimated uncompensated care. Provisions forcontractual discounts and uncompensated care have increased historicallyprimarily as a result of increases in gross billing rates. 

In addition to continuallymonitoring our payor mix, we also analyze certain measures in each of ourbusiness segments. 

**AMR**

Approximately 90% of AMR’snet revenue for the nine months ended September 30, 2006, was transportrevenue derived from the treatment and transportation of patients based onbillings to third party payors and healthcare facilities. The balance of AMR’snet revenue is derived from fixed wing medical transportation services,Medicaid managed transportation services and direct billings to communities andgovernment agencies for the provision of training, dispatch center and otherservices. AMR’s measures for net revenue include transports (segregated intoambulance and wheelchair transports and in certain analyses weighted) and netrevenue per transport. 

The change from period toperiod in the number of transports is influenced by increases in transports inexisting markets from both new and existing facilities we serve fornon-emergency transports, the effects of general community conditions foremergency transports and the impact of newly acquired businesses. The generalcommunity conditions may include (1) the timing, location and severity ofannually recurring viruses, (2) severe weather that affects a region’shealth status and/or infrastructure and (3) community-specific demographicchanges. 

The costs we incur in ourAMR business segment consist primarily of compensation and benefits for medicalcrews and support personnel, direct and indirect operating costs to providetransportation services, and costs related to accident and insurance claims.AMR’s key cost measures 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 focused our riskmitigation efforts on employee training for proper patient handling techniques,development of clinical and medical equipment protocols, driving safety,implementation of technology to reduce auto incidents and other risk mitigationprocesses which we believe have resulted in a reduction in the frequency,severity and development of claims. We continue to see positive trends in ourclaims costs but cannot provide assurance that these trends will continue. 

Depreciation expense relatesprimarily to charges for usage of vehicles, computer hardware and software,equipment and other technologies. Amortization expense relates primarily tointangibles recorded for customer relationships. 

24

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**EmCare**

Of EmCare’s net revenue forthe nine months ended September 30, 2006, approximately 99% was derivedfrom our hospital contracts for emergency department staffing, hospitalist andradiology services and other management services. Of this revenue,approximately 75% was generated from billings to third party payors for patientvisits and approximately 25% was generated from billings to hospitals andaffiliated physician groups for professional services. EmCare’s key net revenuemeasures are patient visits, net revenue per patient visit, and number ofcontracts. 

 The change from period to period in the numberof patient visits under our “same facility” contracts is influenced by generalcommunity conditions as well as hospital-specific elements, many of which arebeyond our direct control. The general community conditions include(1) the timing, location and severity of influenza, allergens and otherannually recurring viruses and (2) severe weather that affects a region’shealth status and/or infrastructure. Hospital-specific elements include thetiming and extent of facility renovations, hospital staffing issues andregulations that affect patient flow through the hospital. 

The costs incurred in ourEmCare business segment consist primarily of compensation and benefits forphysicians and other professional providers, professional liability costs, andcontract and other support costs. EmCare’s key cost measures include providercompensation per patient visits and professional liability costs. 

We have developed extensiveprofessional liability risk mitigation processes, including risk assessments onmedical professionals and hospitals, extensive incident reporting and trackingprocesses, clinical fail-safe programs, training and education and other riskmitigation programs which we believe have resulted in a continued reduction inthe frequency, severity and development of claims. We continue to see positivetrends in our claims costs but cannot provide assurance that these trends willcontinue. 

Depreciation expense relatesprimarily to charges for computer hardware and software and other technologies.Amortization expense relates primarily to intangibles recorded for customerrelationships. 

***Factors Affecting Operating Results***

**Re-CapitalizationActivities**

On December 21, 2005,Emergency Medical Services Corporation completed its initial public offering of8,100,000 shares of class A common stock; trading of those shares commenced onthe New York Stock Exchange on December 16, 2005. We used a significantportion of the net proceeds of $101.9 million from this initial public offeringto repay $99.1 million of debt outstanding under our senior secured creditfacility and we used the balance for working capital, capital expenditures andother general corporate purposes. This reduction to the outstanding balance oflong-term debt in December 2005 will result in a corresponding decrease in ourcurrent and future interest costs. 

**Changes inNet New Contracts**

Our operating results areaffected directly by the number of net new contracts and related volumes wehave in a period, reflecting the effects of both new contracts and contractexpirations. We regularly bid for new contracts, frequently in a formalcompetitive bidding process that often requires written responses to a Requestfor Proposal, or RFP, and, in any fiscal period, certain of our contracts will expire.From time to time, we may elect not to seek extension or renewal of a contract,or may reduce certain services, if we determine that we cannot continue toprovide such services on favorable terms. With respect to expiring contracts wewould like to renew, we may be required to seek renewal through an RFP, and wemay not be successful in retaining any such contracts, or retaining them onterms that are as favorable as present terms. 

**Inflationand Fuel Costs**

Certain of our expenses,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. 

AMR’s recent operatingexpenses have been adversely affected by increasing fuel costs. Fuel costsrepresented approximately 12.8% of AMR’s operating expenses of $190.3 millionin the nine months ended September 30, 2006, an increase of 4.9% over thesame period in 2005. Further increases in fuel costs without mitigation throughfee and subsidy increases would continue to adversely affect AMR’s operatingresults. 

25

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**Results ofOperations**

**Nine andThree Months Ended September 30, 2006 Compared to Nine and Three MonthsEnded September 30, 2005**

The following tables presenta comparison of financial data, from our unaudited consolidated statements ofoperations for the nine and three months ended September 30, 2006, andfrom our unaudited consolidated (eight months ended September 30, 2005)and our unaudited combined (one month ended January 31, 2005 –Predecessor) statements of operations for the nine and three months endedSeptember 30, 2005, for EMSC and our two operating segments. The ninemonths ended September 30, 2005, represents the combination of thefinancial information for AMR and EmCare for the one month endedJanuary 31, 2005, prior to the effective date of the acquisition of AMRand EmCare, and the eight months ended September 30, 2005. Thecomparability of these periods has been affected by a number of factorsincluding the acquisition of AMR and EmCare by EMS LP in February 2005 and bythe initial public offering of EMSC in December 2005. Generally the results ofoperations of our segments are comparable except for certain capital costs suchas interest and amortization and Laidlaw acquisition-related compensationcharges. 

**Non-GAAPMeasures**

*EarningsBefore Interest, Taxes, Depreciation and Amortization (“EBITDA”)*

EBITDA is defined asoperating income plus depreciation and amortization expense. EBITDA is commonlyused by management and investors as a measure of leverage capacity, debtservice ability and liquidity. EBITDA is not considered a measure of financialperformance under U.S. generally accepted accounting principles, or GAAP, andthe items excluded from EBITDA are significant components in understanding andassessing our financial performance. EBITDA should not be considered inisolation or as an alternative to such GAAP measures as net income, cash flowsprovided by or used in operating, investing or financing activities or otherfinancial statement data presented in our financial statements as an indicatorof financial performance or liquidity. Since EBITDA is not a measure determinedin accordance with GAAP and is susceptible to varying calculations, EBITDA, aspresented, may not be comparable to other similarly titled measures of othercompanies. The table sets forth a reconciliation of EBITDA to income fromoperations and net income. 

26

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**Unaudited Results of Operations and as a Percentage of NetRevenue**

**(dollars in thousands)**

**EMSC**
| ** **                                       | ** ** | **Three months**  | ** ** | **Three months**  | ** ** | **Nine months**   | ** ** | **Nine months**   | ** ** |
|--------------------------------------------------|------------|------------------------|------------|------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                       | ** ** | **ended**              | ** ** | **ended**              | ** ** | **ended**              | ** ** | **ended**              | ** ** |
| ** **                                       | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                       | ** ** | **2006**               | ** ** | **2005**               | ** ** | **2006**               | ** ** | **2005**               | ** ** |
| ** **                                       | ** ** | ** **             | ** ** | **% of net** | ** ** | ** **             | ** ** | **% of net** | ** ** | ** ** | ** ** | **% of net** | ** ** | ** ** | ** ** | **% of net** | ** ** |
| ** **                                       | ** ** | ** **             | ** ** | **revenue**            | ** ** | ** **             | ** ** | **revenue**            | ** ** | ** ** | ** ** | **revenue** | ** ** | ** ** | ** ** | **revenue** | ** ** |
| Net revenue                                      |       | $                      | 485,697    |                   | 100.0      | %                      | $          | 456,245                |       | 100.0 | % | $ | 1,433,272 |   | 100.0 | % | $ | 1,330,722 |   | 100.0 | % |
| Compensation and  benefits                       |       | 333,406                |       | 68.6                   |       | 319,292                |       | 70.0                   |       | 990,380 |   | 69.1 |   | 925,786 |   | 69.6 |   |
| Operating  expenses                              |       | 80,513                 |       | 16.6                   |       | 66,156                 |       | 14.5                   |       | 216,170 |   | 15.1 |   | 187,169 |   | 14.1 |   |
| Insurance expense                                |       | 12,111                 |       | 2.5                    |       | 21,048                 |       | 4.6                    |       | 54,222 |   | 3.8 |   | 68,150 |   | 5.1 |   |
| Selling, general  and administrative expenses    |       | 14,660                 |       | 3.0                    |       | 15,654                 |       | 3.4                    |       | 42,669 |   | 3.0 |   | 42,531 |   | 3.2 |   |
| Restructuring  charges                           |       | 267                    |       | 0.1                    |       | —                 |       | —                 |       | 1,186 |   | 0.1 |   | — |   | — |   |
| Laidlaw  compensation charges                    |       | —                 |       | —                 |       | —                 |       | —                 |       | — |   | — |   | 14,440 |   | 1.1 |   |
| EBITDA                                           |       | 44,740                 |       | 9.2                    |       | 34,095                 |       | 7.5                    |       | 128,645 |   | 9.0 |   | 92,646 |   | 7.0 |   |
| Depreciation and  amortization expense           |       | 16,841                 |       | 3.5                    |       | 14,843                 |       | 3.3                    |       | 49,045 |   | 3.4 |   | 42,705 |   | 3.2 |   |
| Income from operations                           |       | 27,899                 |       | 5.7                    |       | 19,252                 |       | 4.2                    |       | 79,600 |   | 5.6 |   | 49,941 |   | 3.8 |   |
| Interest expense                                 |       | (11,532                | )          | (2.4                   | )          | (12,824                | )          | (2.8                   | )          | (34,269 | ) | (2.4 | ) | (35,576 | ) | (2.7 | ) |
| Realized (loss)  gain on investments             |       | 88                     |       | 0.0                    |       | (34                    | )          | (0.0                   | )          | (437 | ) | (0.0 | ) | (27 | ) | (0.0 | ) |
| Interest and  other income                       |       | 532                    |       | 0.1                    |       | 91                     |       | 0.0                    |       | 1,664 |   | 0.1 |   | 185 |   | 0.0 |   |
| Loss on early  debt extinguishment               |       | (184                   | )          | (0.0                   | )          | —                 |       | —                 |       | (377 | ) | (0.0 | ) | — |   | — |   |
| Income tax  expense                              |       | (6,540                 | )          | (1.3                   | )          | (3,479                 | )          | (0.8                   | )          | (17,956 | ) | (1.3 | ) | (6,597 | ) | (0.5 | ) |
| Equity in  earnings of unconsolidated subsidiary |       | 21                     |       | 0.0                    |       | —                 |       | —                 |       | 38 |   | 0.0 |   | — |   | — |   |
| Net income                                       |       | $                      | 10,284     |                   | 2.1        | %                      | $          | 3,006                  |       | 0.7 | % | $ | 28,263 |   | 2.0 | % | $ | 7,926 |   | 0.6 | % |

 

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**AMR**
| ** **                                    | ** ** | **Three months**  | ** ** | **Three months**  | ** ** | **Nine months**   | ** ** | **Nine months**   | ** ** |
|-----------------------------------------------|------------|------------------------|------------|------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                    | ** ** | **ended**              | ** ** | **ended**              | ** ** | **ended**              | ** ** | **ended**              | ** ** |
| ** **                                    | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                    | ** ** | **2006**               | ** ** | **2005**               | ** ** | **2006**               | ** ** | **2005**               | ** ** |
| ** **                                    | ** ** | ** **             | ** ** | **% of net** | ** ** | ** **             | ** ** | **% of net** | ** ** | ** ** | ** ** | **% of net** | ** ** | ** ** | ** ** | **% of net** | ** ** |
| ** **                                    | ** ** | ** **             | ** ** | **revenue**            | ** ** | ** **             | ** ** | **revenue**            | ** ** | ** ** | ** ** | **revenue** | ** ** | ** ** | ** ** | **revenue** | ** ** |
|                                          |       |                   |       |                   |       |                   |       |                   |       |   |   |   |   |   |   |   |   |
| Net revenue                                   |       | $                      | 299,300    |                   | 100.0      | %                      | $          | 291,910                |       | 100.0 | % | $ | 888,472 |   | 100.0 | % | $ | 855,500 |   | 100.0 | % |
| Compensation and  benefits                    |       | 190,601                |       | 63.7                   |       | 190,111                |       | 65.1                   |       | 570,320 |   | 64.2 |   | 549,477 |   | 64.2 |   |
| Operating  expenses                           |       | 71,132                 |       | 23.8                   |       | 58,752                 |       | 20.1                   |       | 190,259 |   | 21.4 |   | 166,247 |   | 19.4 |   |
| Insurance expense                             |       | 3,217                  |       | 1.1                    |       | 9,431                  |       | 3.2                    |       | 25,689 |   | 2.9 |   | 34,812 |   | 4.1 |   |
| Selling, general  and administrative expenses |       | 9,766                  |       | 3.3                    |       | 10,951                 |       | 3.8                    |       | 29,098 |   | 3.3 |   | 30,219 |   | 3.5 |   |
| Restructuring  charges                        |       | 267                    |       | 0.1                    |       | —                 |       | —                 |       | 1,186 |   | 0.1 |   | — |   | — |   |
| Laidlaw  compensation charges                 |       | —                 |       | —                 |       | —                 |       | —                 |       | — |   | — |   | 5,858 |   | 0.7 |   |
| EBITDA                                        |       | 24,317                 |       | 8.1                    |       | 22,665                 |       | 7.8                    |       | 71,920 |   | 8.1 |   | 68,887 |   | 8.1 |   |
| Depreciation and  amortization                |       | 13,571                 |       | 4.5                    |       | 12,082                 |       | 4.1                    |       | 39,232 |   | 4.4 |   | 34,945 |   | 4.1 |   |
| Income from  operations                       |       | $                      | 10,746     |                   | 3.6        | %                      | $          | 10,583                 |       | 3.6 | % | $ | 32,688 |   | 3.7 | % | $ | 33,942 |   | 4.0 | % |

 

**EmCare**
| ** **                                    | ** ** | **Three months**  | ** ** | **Three months**  | ** ** | **Nine months**   | ** ** | **Nine months**   | ** ** |
|-----------------------------------------------|------------|------------------------|------------|------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                    | ** ** | **ended**              | ** ** | **ended**              | ** ** | **ended**              | ** ** | **ended**              | ** ** |
| ** **                                    | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                    | ** ** | **2006**               | ** ** | **2005**               | ** ** | **2006**               | ** ** | **2005**               | ** ** |
| ** **                                    | ** ** | ** **             | ** ** | **% of net** | ** ** | ** **             | ** ** | **% of net** | ** ** | ** ** | ** ** | **% of net** | ** ** | ** ** | ** ** | **% of net** | ** ** |
| ** **                                    | ** ** | ** **             | ** ** | **revenue**            | ** ** | ** **             | ** ** | **revenue**            | ** ** | ** ** | ** ** | **revenue** | ** ** | ** ** | ** ** | **revenue** | ** ** |
|                                          |       |                   |       |                   |       |                   |       |                   |       |   |   |   |   |   |   |   |   |
| Net revenue                                   |       | $                      | 186,397    |                   | 100.0      | %                      | $          | 164,335                |       | 100.0 | % | $ | 544,800 |   | 100.0 | % | $ | 475,222 |   | 100.0 | % |
| Compensation and  benefits                    |       | 142,805                |       | 76.6                   |       | 129,181                |       | 78.6                   |       | 420,060 |   | 77.1 |   | 376,309 |   | 79.2 |   |
| Operating  expenses                           |       | 9,381                  |       | 5.0                    |       | 7,404                  |       | 4.5                    |       | 25,911 |   | 4.8 |   | 20,922 |   | 4.4 |   |
| Insurance expense                             |       | 8,894                  |       | 4.8                    |       | 11,617                 |       | 7.1                    |       | 28,533 |   | 5.2 |   | 33,338 |   | 7.0 |   |
| Selling, general  and administrative expenses |       | 4,894                  |       | 2.6                    |       | 4,703                  |       | 2.9                    |       | 13,571 |   | 2.5 |   | 12,312 |   | 2.6 |   |
| Laidlaw  compensation charges                 |       | —                 |       | —                 |       | —                 |       | —                 |       | — |   | — |   | 8,582 |   | 1.8 |   |
| EBITDA                                        |       | 20,423                 |       | 11.0                   |       | 11,430                 |       | 7.0                    |       | 56,725 |   | 10.4 |   | 23,759 |   | 5.0 |   |
| Depreciation and  amortization                |       | 3,270                  |       | 1.8                    |       | 2,761                  |       | 1.7                    |       | 9,813 |   | 1.8 |   | 7,760 |   | 1.6 |   |
| Income from  operations                       |       | $                      | 17,153     |                   | 9.2        | %                      | $          | 8,669                  |       | 5.3 | % | $ | 46,912 |   | 8.6 | % | $ | 15,999 |   | 3.4 | % |

 

***Three months ended September 30, 2006, compared to the threemonths ended September 30, 2005***

***Consolidated***

*Net revenue.* For the three months endedSeptember 30, 2006 we generated net revenue of $485.7 million, compared tonet revenue of $456.2 million for the three months ended September 30,2005, representing a 6.5% increase. The increase is attributable primarily torate and volume increases on existing contracts and increased revenue from netnew contracts at AMR and EmCare.

*Depreciationand amortization expense*.Depreciation and amortization expense for the three months endedSeptember 30, 2006 was $16.8 million, or 3.5% of net revenue, compared to$14.8 million, or 3.3% of net revenue, for the three months endedSeptember 30, 2005.  The increase isattributable to the composition and timing of capital expenditures.

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*Incomefrom operations.*Income from operations was $27.9 million, or 5.7% of net revenue, for the threemonths ended September 30, 2006 compared to $19.3 million, or 4.2% of netrevenue, for the same period in 2005. The increase is attributable primarily tothe net impact of revenue growth during the quarter and continued improvementin insurance claims costs.

*Interestexpense.*Interestexpense for the three months ended September 30, 2006 was $11.5 millioncompared to $12.8 million for the same period in 2005. The decrease relates tothe repayment of approximately $99.1 million of our senior secured creditfacility in December 2005 following our initial public offering and unscheduledrepayments of $10.0 million and $9.4 million in May 2006 and July 2006,respectively, offset by rising interest rates.

*Income taxexpense.*Income taxexpense increased by $3.1 million for the three months ended September 30,2006, compared to the same period in 2005, resulting primarily from increasedoperating income. Our effective tax rate for the period was 38.9%.

***AMR***

*Net revenue.*Net revenue for thethree months ended September 30, 2006 was $299.3 million, an increase of$7.4 million, or 2.5%, from $291.9 million for the three months endedSeptember 30, 2005.  The increase innet revenue was due primarily to an increase in our net revenue per weightedtransport of approximately 2.9% (4.6% excluding hurricane-related revenuerecorded during the three months ended September 30, 2005).  Net revenue per weighted transport increased3.6% due to revenue from our recently acquired fixed wing air transportationservices business and from our Medicaid managed transportation business inTexas.  Net revenue per transport alsoincreased approximately 1% due to rate increases in several markets partiallyoffset by Medicare rate reductions and increases in our self-pay transport mixin certain markets.  The loss of aportion of AMR’s 9-1-1 contract with Los Angeles County resulted in a reductionof approximately 25,900 emergent transports and approximately $10.0 million innet revenue during the three months ended September 30, 2006 compared withthe same period last year.  Excluding theimpact of the Los Angeles County reduction, transport volume increasedapproximately 23,000 weighted transports, or 3.2%, compared with the samequarter last year.

*Compensationand benefits.*Compensationand benefits costs for the three months ended September 30, 2006 were$190.6 million, or 63.7% of net revenue, compared to $190.1 million, or 65.1%of net revenue, for the three months ended September 30, 2005. Ambulanceunit hours decreased period over period by 1.3%, primarily due to the reductionin Los Angeles County volume, partially offset by ambulance transport volumegrowth in other areas, decreasing compensation costs by $1.3 million. Ambulancecrew wages per ambulance unit hour increased by approximately 4.9%, or $5.1million, principally from annual salary increases and increased overtime due tostaffing shortages in certain markets. Benefits costs decreased by $1.6 million for the three months ended September 30,2006, or 1.3% as a percentage of salaries, compared to the same period lastyear, primarily due to reduced claims costs incurred under our self-insuredhealth plans.

*Operatingexpenses.*Operatingexpenses for the three months ended September 30, 2006 were $71.1 million,or 23.8% of net revenue, compared to $58.8 million, or 20.1% of net revenue,for the three months ended September 30, 2005. Operating expenses perweighted transport increased 21.6% in the three months ended September 30,2006 compared to the same period in 2005. The change is due primarily toadditional operating expenses incurred under our Texas Medicaid managedtransportation contract and our recently acquired fixed wing transportationservices business, which totaled $9.6 million for the three months endedSeptember 30, 2006.  Fuel costs increasedby $0.8 million and other operating costs, including medical supplies,occupancy and professional fees increased by $1.0 million.

*Insuranceexpense.*Insuranceexpense for the three months ended September 30, 2006 was $3.2 million, or1.1% of net revenue, compared to $9.4 million, or 3.2% of net revenue, for thesame period in 2005. The decrease is due to the continued improvement incurrent and prior year ultimate claims costs. As a result, a reduction of prior year insurance provisions of $4.8million was recorded during the quarter, compared to a $1.7 million reductionrecorded during the same period last year.

*Selling,general and administrative expenses.*Selling, general and administrative expense for the three months endedSeptember 30, 2006 was $9.8 million, or 3.3% of net revenue, compared to$11.0 million, or 3.8% of net revenue, for the three months endedSeptember 30, 2005. The decrease relates primarily to reductions inoverall spending.

*Restructuringcharges.*Restructuringcharges of $0.3 million were recorded during the three months endedSeptember 30, 2006, related to the re-alignment of certain billingoffices.

*Depreciationand amortization expense.* Depreciation and amortization expense for the three months endedSeptember 30, 2006 was $13.6 million, or 4.5% of net revenue, compared to$12.1 million, or 4.1% of net revenue, for the 

29

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three months ended September 30, 2005. Theincrease as a percentage of net revenue is attributable to the composition andtiming of capital expenditures.

***EmCare***

*Netrevenue.*Net revenuefor the three months ended September 30, 2006 was $186.4 million, anincrease of $22.1 million, or 13.4%, from $164.3 million for the three monthsended September 30, 2005. The increase was due primarily to an increase inpatient visits from net new hospital contracts and net revenue increases inexisting contracts. Following September 30, 2005, we added 20 net newcontracts which accounted for a net revenue increase of $8.1 million for thethree months ended September 30, 2006. Net revenue under our “samefacility” contracts (contracts in existence for the entirety of both fiscalperiods) increased $14.0 million in the three months ended September 30,2006 due to a 8.0% increase in net revenue per patient visit and a 1.8%increase in patient visits.

*Compensationand benefits.*Compensationand benefits costs for the three months ended September 30, 2006 were$142.8 million, or 76.6% of net revenue, compared to $129.2 million, or 78.6%of net revenue, for the three months ended September 30, 2005. Increasesare primarily from same facility provider compensation and benefits, whichincreased $7.0 million related to higher net patient revenue and a $6.0 millionincrease from net new contract additions.

*Operatingexpenses.*Operatingexpenses for the three months ended September 30, 2006 were $9.4 million,or 5.0% of net revenue, compared to $7.4 million, or 4.5% of net revenue, forthe three months ended September 30, 2005. Operating expenses increased primarilydue to additional off hours radiology coverage for new contracts and toprofessional fees related to Company initiatives.

*Insuranceexpense.*Professionalliability insurance expense for the three months ended September 30, 2006was $8.9 million, or 4.8% of net revenue, compared to $11.6 million, or 7.1% ofnet revenue, for the three months ended September 30, 2005. The decreaseis due to continued improvement in ultimate claims costs.

*Selling,general and administrative expenses.*Selling, general and administrative expense for the three months endedSeptember 30, 2006 was $4.9 million, or 2.6% of net revenue, compared to$4.7 million, or 2.9% of net revenue, for the three months endedSeptember 30, 2005.

*Depreciationand amortization expense.* Depreciation and amortization expense for the three months endedSeptember 30, 2006 was $3.3 million, or 1.8% of net revenue, compared to$2.8 million, or 1.7% of net revenue, for the three months endedSeptember 30, 2005. The increase as a percentage of net revenue isattributable to depreciation expense related to EmCare’s participation inCompany-wide shared services initiatives.

***Nine months ended September 30, 2006, compared to the nine monthsended September 30, 2005***

***Consolidated***

*Netrevenue.* For the ninemonths ended September 30, 2006, we generated net revenue of $1,433.3million, compared to net revenue of $1,330.7million for the nine months ended September 30,2005, representing a 7.7% increase. The increase is attributable primarily to rate and volume increases on existingcontracts and increased revenue from net new contracts.

*Depreciationand amortization expense*.Depreciation and amortization expense for the nine months endedSeptember 30, 2006 was $49.0million, or 3.4% of net revenue,compared to $42.7 million, or 3.2% of net revenue, for the nine months endedSeptember 30, 2005. The increase is attributable to additionalamortization expense on the contract intangible assets we recorded inconnection with the acquisition and the composition and timing of capitalexpenditures.

*Incomefrom operations.*Income from operations was $79.6million, or 5.6% of net revenue,for the nine months ended September 30, 2006 compared to $49.9 million, or 3.8% of net revenue, for the same period in2005. The increase isattributable primarily to the elimination of Laidlaw acquisition-relatedcompensation charges, continued improvement in insurance claims costs and thenet impact of revenue growth during the period.

*Interestexpense.*Interestexpense for the nine months ended September 30, 2006 was $34.3 million compared to $35.6 million for the same period in 2005. The decreaserelates to the repayment of approximately$99.1 million of our senior secured credit facility in December 2005 followingour initial public offering and unscheduled repayments of $10.0 million and$9.4 million in May 2006 and July 2006, respectively, offset by rising interestrates.

*Income taxexpense.*Income taxexpense increased by $11.4million for the nine months ended September 30, 2006, compared to the sameperiod in 2005, resulting primarily from increased operating income. The onemonth ended January 31, 

30

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2005 included one-time acquisition-related Laidlawcompensation charges which resulted in an operating loss for the month and anassociated income tax benefit. Our effective tax rate for the period was 38.9%.

***AMR***

*Netrevenue.*Net revenuefor the nine months ended September 30, 2006 was $888.5 million, an increase of $33.0 million, or 3.9%, from$855.5 million for the ninemonths ended September 30, 2005. The increase in net revenue was dueprimarily to an increase in our net revenue per weighted transport ofapproximately 3.6% (4.1% excludinghurricane-related revenue recorded during the three months ended September 30,2005).  Net revenue per weightedtransport increased 1.3% due to revenue from our recently acquired fixed wingair transportation services business and from our Medicaid managedtransportation business in Texas.  Netrevenue per transport also increased due to rate increases in several marketspartially offset by Medicare rate reductions and increase in our self-paytransport mix in certain markets.  Theloss of a portion of AMR’s 9-1-1 contract with Los Angeles County resulted in areduction of approximately 34,500 emergent transports and approximately $13.4 million in net revenue during the ninemonths ended September 30, 2006 compared with the same period last year.Excluding the impact of the Los Angeles County reduction, ambulance transportvolume increased 2.0%, offset by a 5.2% decrease in wheelchair transports forplanned reductions in certain markets, resulting in an increase ofapproximately 40,600 weightedtransports compared with the same period last year.

*Compensationand benefits.*Compensationand benefits costs for the nine months ended September 30, 2006 were $570.3 million, or 64.2% of net revenue, compared to $549.5 million, or 64.2% of net revenue, for the nine months endedSeptember 30, 2005. Ambulance unit hours increased period over period by 1.0%, primarily due contractual deploymentchanges, partially offset by the reduction in Los Angeles County volumes,increasing compensation costs by $3.2 million. Ambulance crew wages per ambulance unit hour increased byapproximately 5.4%, or $16.4 million principally from annual salaryincreases and increased overtime due to staffing shortages in certainmarkets.  Benefits costs increased by $0.9 million for the nine months endedSeptember 30, 2006, but decreased 0.7% as a percentage of salaries compared to the same period last yearprimarily due to reduced claims costs incurred under our self-insured healthplans.

*Operatingexpenses.*Operatingexpenses for the nine months ended September 30, 2006 were $190.3 million, or 21.4% of net revenue, compared to $166.2 million, or 19.4% of net revenue, for the nine months endedSeptember 30, 2005. Operating expenses per weighted transport increased14.1% in the nine months ended September 30, 2006 compared to the sameperiod in 2005. The change is due to additional operating expenses incurredwith our Texas Medicaid managed transportation contract and our recentlyacquired fixed wing transportation services business, which amounted to $10.2 millionfor the nine months ended September 30, 2006. Fuel costs increased by $4.1million and other operating costs, including medical supplies, occupancy andprofessional fees increased by $4.9million.

*Insuranceexpense.*Insuranceexpense for the nine months ended September 30, 2006 was $25.7 million, or2.9% of net revenue, compared to$34.8 million, or 4.1% of net revenue, for the same period in 2005.  The decrease is due to the continuedimprovement in current and prior year ultimate claims costs.  As a result, a reduction of prior yearinsurance provisions of $8.8 million was recorded during the nine months endedSeptember 30, 2006, compared to a $4.2 million reduction recorded during thesame period last year.

*Selling,general and administrative expenses.*Selling, general and administrative expense for the nine months endedSeptember 30, 2006 was $29.1 million, or 3.3% of net revenue, compared to$30.2 million, or 3.5% of netrevenue, for the nine months ended September 30, 2005.  The decrease relates primarily to reductionsin overall spending.

*Restructuringcharges.*Restructuringcharges of $1.2 million wererecorded during the nine months ended September 30, 2006, related to there-alignment of certain billing offices and to the re-alignment of certain westcoast operations.

*Laidlawcompensation charges.*AMRdid not incur Laidlaw compensation charges subsequent to the acquisition inFebruary 2005. The nine months ended September 30, 2005 includes $5.9million, or 0.7% of net revenue,for Laidlaw acquisition-related compensation charges incurred in January 2005.

*Depreciationand amortization expense.* Depreciation and amortization expense for the nine months endedSeptember 30, 2006, was $39.2million, or 4.4% of net revenue,compared to $34.9 million, or 4.1% of net revenue, for the nine months endedSeptember 30, 2005. The increase as a percentage of net revenue is attributable to additionalamortization expense related to the contract intangible asset we recorded inconnection with the acquisition and the composition and timing of capitalexpenditures.

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***EmCare***

*Netrevenue.*Net revenuefor the nine months ended September 30, 2006 was $544.8 million, anincrease of $69.6 million, or 14.6%, from $475.2 million for the nine monthsended September 30, 2005. The increase was due primarily to an increase inpatient visits from net new hospital contracts and net revenue increases inexisting contracts. Following September 30, 2005, we added 37 net newcontracts which accounted for a net revenue increase of $28.7 million for thenine months ended September 30, 2006. Net revenue under our “same facility”contracts (contracts in existence for the entirety of both fiscal periods)increased $40.9 million in the nine months ended September 30, 2006 due toa 3.7% increase in patient visits and a 7.1% increase in net revenue perpatient visit.

*Compensationand benefits.*Compensationand benefits costs for the nine months ended September 30, 2006 were$420.1 million, or 77.1% of net revenue, compared to $376.3 million, or 79.2%of net revenue, for the nine months ended September 30, 2005. Increasesare primarily from same facility provider compensation and benefits, which increased$20.6 million as a result of increased patient volume and higher net patientrevenue, and a $17.4 million increase from net new contract additions.

*Operatingexpenses.*Operatingexpenses for the nine months ended September 30, 2006 were $25.9 million,or 4.8% of net revenue, compared to $20.9 million, or 4.4% of net revenue, forthe nine months ended September 30, 2005. Operating expenses increased dueto additional off hours radiology coverage for new contracts and due toprofessional fees related to Company initiatives.

*Insuranceexpense.*Professionalliability insurance expense for the nine months ended September 30, 2006was $28.5 million, or 5.2% of net revenue, compared to $33.3 million, or 7.0%of net revenue, for the nine months ended September 30, 2005.  The decrease is due to the continuedimprovement in current and prior year ultimate claims costs.  As a result, a reduction of prior yearinsurance provisions of $1.4 million was recorded during the nine months endedSeptember 30, 2006.

*Selling,general and administrative expenses.*Selling, general and administrative expense for the nine months endedSeptember 30, 2006 was $13.6 million, or 2.5% of net revenue, compared to$12.3 million, or 2.6% of net revenue, for the nine months endedSeptember 30, 2005.

*Laidlawcompensation charges.*EmCaredid not incur Laidlaw compensation charges subsequent to the acquisition inFebruary 2005. The nine months ended September 30, 2005 includes $8.6million, or 1.8% of net revenue, for Laidlaw acquisition-related compensationcharges incurred in January 2005.

*Depreciationand amortization expense.* Depreciation and amortization expense for the nine months endedSeptember 30, 2006 was $9.8 million, or 1.8% of net revenue, compared to$7.8 million, or 1.6% of net revenue, for the nine months endedSeptember 30, 2005. The increase as a percentage of net revenue isattributable to additional amortization expense from the contract intangibleasset we recorded in connection with the acquisition, as well as depreciationexpense related to EmCare’s participation in Company-wide shared servicesinitiatives.

**CriticalAccounting Policies**

For a discussion ofaccounting 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 fiscal year ended December 31, 2005 and incorporated by referenceherein. As of September 30, 2006, there were no significant changes in ourcritical accounting policies or estimation procedures.

**Liquidityand Capital Resources**

We believe our cash and cashequivalents of $22.5 million at September 30, 2006, cash provided by ouroperating activities, and amounts available under our senior secured creditfacility will meet the liquidity requirements of our business through at leastthe next 12 months. We have available to us, upon compliance with customaryconditions, $100.0 million under the revolving credit facility, less anyletters of credit outstanding (which totaled $29.9 million at September 30, 2006).Further, we have a conditional right under our senior secured credit facilityto request new or existing lenders to provide up to an additional $100.0million of term debt (in $20.0 million increments).

Our primarysource of liquidity is cash flows provided by our operating activities. We canalso use 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

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requirements, capital expenditures related to theacquisition of vehicles and medical equipment, technology-related assets andinsurance-related deposits.

| Cash flow provided by (used in): | ** ** | **Nine months ended  September 30, 2006** | ** ** | **Nine months ended  September 30, 2005** | ** ** |
|-----------------------------------------------------------|------------|---------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| Operating activities                                      |       | $                                                             | 123,594    |                                                          | $          | 95,995 |   |
| Investing activities                                      |       | (87,614                                                       | )          | (902,819                                                      | )          |
| Financing activities                                      |       | $                                                             | (31,564    | )                                                             | $          | 813,074 |   |

**Cash Flow**

*Operatingactivities*. Operatingcash flows for the nine months ended September 30, 2006 were $123.6 million, compared to $96.0 million for the same nine month period lastyear.  Operating cash flows werepositively affected by increased net income, utilization of deferred taxassets, changes in accounts receivable and timing differences on insurancepremium payments and interest payments. Changes in working capital contributed $16.3 million for the nine months endedSeptember 30, 2006, which included a $4.8 million decrease in accounts receivable, and a $13.8 million increase in accounts payable andaccrued liabilities.  Working capital wasalso reduced in the 2006 period by a net payment of approximately $6.1 millionpursuant to a settlement agreement with the Department of Justice.  Working capital contributions to operatingcash flow were $11.2 million forthe nine months ended September 30, 2005 including an increase in accruedliabilities of $31.0 million,primarily due to an increase in accrued interest, offset in part by an increasein accounts receivable of $16.0million.

*Investingactivities*. Net cashused in investing activities was $87.6 million for the nine months ended September 30, 2006, compared to$902.8 million for the sameperiod in 2005. The $815.2million decrease is attributable principally to our net cash outflows of $828.8million to purchase AMR and EmCare from Laidlaw in February 2005. Net cash usedin investing activities during the nine months ended September 30, 2006relates primarily to capital expenditures for the purchase of new vehicles,medical equipment and technology-related assets, which totaled $43.3 million,and a $31.8 million change innet investments to fund insurance-related obligations.  Cash used to acquire businesses totaled $11.6million for the nine months ended September 30, 2006.

*Financingactivities*. For thenine months ended September 30, 2006, net cash used in financing activities was $31.6 million compared to net cash provided byfinancing activities of $813.1million for the nine months ended September 30, 2005. The $844.7 million decrease is attributable principallyto borrowings under our senior secured credit facility of $350.0 million, our issuance of $250.0 million principal amount of our seniorsubordinated notes, and equity proceeds of $222.7 million in connection with our acquisition of AMR and EmCare in the2005 period. We made unscheduled payments of $10 million of the senior securedcredit facility in May 2006 and $9.4 million in July 2006 and repaidoutstanding borrowings of $20.2million of the revolving credit facilities in the nine month period endedSeptember 30, 2005.

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK**

Our primary exposure tomarket risk consists of changes in interest rates on certain of our borrowingsand changes in fuel prices. We have not entered into hedging transactions orused derivative instruments for speculative or trading purposes to mitigaterelated exposure.

As of September 30,2006, we had $481.5million of debt, of which $227.0million was variable rate debt under our senior secured credit facility and thebalance was fixed rate debt, including $250.0 million aggregate principal amount of our senior subordinated notes.Over the past twelve months, prime and LIBOR interest rates have increased byapproximately 1.5% and 1.3%, respectively. Changes to these interestrates may continue to occur. Increases and decreases in interest rates affectour interest costs for our variable rate debt. For comparative purposes, forevery 0.125% change in interest rates, our interest costs on our senior securedcredit facility will change by approximately $0.3 million per year based on our outstanding indebtedness atSeptember 30, 2006.

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**ITEM 4. CONTROLS ANDPROCEDURES**

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

We maintain a system of disclosurecontrols and procedures (as defined in Rule 13a-14 and 15d-14 under theSecurities Exchange Act of 1934 (the “Exchange Act”)) that are designed toensure that information required to be disclosed in the reports that we fileunder the Exchange Act is recorded, processed, summarized and reported withinthe time periods specified in the Securities and Exchange Commission’s rulesand forms. Disclosure controls and procedures include, without limitation,controls and procedures designed to ensure that information required to bedisclosed by an issuer in the reports that it files or furnishes under theExchange Act is accumulated and communicated to the issuer’s management,including its principal executive officer or officers and principal financialofficer or officers, or persons performing similar functions, as appropriate toallow timely decisions regarding required disclosure. In designing andevaluating the disclosure controls and procedures, our management recognizesthat any controls and procedures, no matter how well designed and operated, canprovide only reasonable assurance of achieving the desired control objectives,and management is required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

Based on their evaluation ofour disclosure controls and procedures conducted within 90 days of the date offiling this Report on Form 10-Q, our principal executive officer and ourprincipal financial officer have concluded that, as of the date of their evaluation,our disclosure controls and procedures (as defined in Rules 13a-14(c) and15d-14(c) promulgated under the Exchange Act) are effective.

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

There were no changes in ourinternal control over financial reporting that occurred during our fiscalquarter ended September 30, 2006 that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

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**EMERGENCY MEDICAL SERVICES CORPORATION**

**PART II.OTHER INFORMATION**

**FOR THE THREE AND NINE MONTHS ENDED**

**SEPTEMBER 30, 2006**

**ITEM 1. LEGAL PROCEEDINGS**

As referenced in our AnnualReport on Form 10-K for the fiscal year ended December 31, 2005, during thefirst quarter of fiscal 2004 we were advised by the U.S. Department ofJustice (“DOJ”) that it was investigating certain business practices at AMR.The specific practices at issue were (1) whether ambulance transportsinvolving Medicare eligible patients complied with the “medical necessity”requirement imposed by Medicare regulations, (2) whether patientsignatures, when required, were properly obtained from Medicare eligiblepatients, and (3) whether discounts in violation of the federalAnti-Kickback Statute were provided by AMR in exchange for referrals involvingMedicare eligible patients. In connection with the third issue, the governmentalleged that certain of our hospital and nursing home contracts in effectin Texas in periods prior to 2002 contained discounts in violation of thefederal Anti-Kickback Statute.  Wenegotiated a settlement with the government pursuant to which we paid $9million and obtained a release from the U.S. Government of all claims relatedto such conduct alleged to have occurred in Texas in periods prior to2002.  In connection with the settlement,we entered into a Corporate Integrity Agreement (“CIA”) which will be effectivefor a period of five years beginning September 12, 2006.  Pursuant to the CIA, we are required tomaintain a compliance program which includes, among other elements, theappointment of a compliance officer and committee; training of employeesnationwide; contractual safeguards nationwide, including tracking ofcontractual arrangements in Texas; review by an independent review organizationand reporting of certain reportable events.  Under the provisions of our purchase agreement for the acquisition ofAMR, we and Laidlaw shared responsibility for the settlement amount and certainof the costs associated with the CIA.

For additional informationregarding legal proceedings, please refer to note 5, under the caption “Commitmentsand Contingencies” of the notes accompanying the consolidated financialstatements included herein and to our Annual Report on Form 10-K filed with theSEC on March 21, 2006.

**ITEM 1A. RISK FACTORS**

Other than with respect tothe risk factors below, there have been no material changes from the riskfactors disclosed in the “Risk Factors” sections of the Company’s Annual Reporton Form 10-K for the year ended December 31, 2005 and in the Company’sQuarterly Report for the quarter ended June 30, 2006.

***If we fail tocomply with the terms of our settlement agreements with the government, wecould be subject to additional litigation or other governmental actions whichcould be harmful to our business.***

In the last six years, wehave entered into five settlement agreements with the United States government.In June 2002, one of our subsidiaries, AMR of Massachusetts, entered into asettlement agreement to resolve a number of allegations, including allegationsrelated to billing and documentation practices. In February 2003, anothersubsidiary, AMR of South Dakota, entered into a settlement agreement to resolveallegations that it incorrectly billed for transports performed by otherproviders when an AMR paramedic accompanied the patient during transport, andthat it billed for certain non-emergency transports using emergency codes. InJuly 2004, our subsidiary, American Medical Response West, entered into asettlement agreement in connection with billing matters related to emergencytransports and specialized services. In August 2004, AMR entered into asettlement agreement on behalf of a subsidiary, Regional Emergency Services LP,or RES, to resolve allegations of violations of the False Claims Act by RES anda hospital system based on the absence of certificates of medical necessity andother non-compliant billing practices. In September 2006, AMR entered into a settlement agreement to resolveallegations that AMR subsidiaries provided discounts to healthcare facilitiesin Texas in periods prior to 2002 in violation of the federal Anti-KickbackStatute.

As part of the settlementAMR West entered into with the government, we entered into a CorporateIntegrity Agreement, or CIA, which is still in effect.  Pursuant to this CIA, we are required toestablish and maintain a compliance program which includes, among otherelements, the appointment of a compliance officer and committee, review by anindependent review organization, and reporting of overpayments and other “reportableevents.”  In connection with theSeptember 2006 settlement for AMR, we also became required to maintain acompliance program which includes the training of employees and contractualsafeguards nationwide (including tracking of contractual arrangements inTexas.)  AMR of Massachusetts enteredinto a CIA in connection with its June 2002 settlement, the term of which hasexpired.

We cannot assure you thatthe CIAs or the compliance program we initiated has prevented, or will prevent,any repetition of the conduct or allegations that were the subject of thesesettlement agreements, or that the government will not raise similarallegations in other jurisdictions or for other periods of time. If suchallegations are raised, or if we fail to

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comply with the terms of the CIAs, we may be subjectto fines and other contractual and regulatory remedies specified in the CIAs orby applicable laws, including exclusion from the Medicare program and otherfederal and state healthcare programs. Such actions could have a materialadverse effect on the conduct of our business, our financial condition or ourresults of operations.

***Our contractswith healthcare facilities and marketing practices are subject to the federalAnti-Kickback Statute, and we recently entered into a settlement for allegedviolations of that statute.***

We are subject to thefederal Anti-Kickback Statute, which prohibits the knowing and willful offer,payment, solicitation or receipt of any form of “remuneration” in return for,or to induce, the referral of business or ordering of services paid for byMedicare or other federal programs. “Remuneration” potentially includesdiscounts and in-kind goods or services, as well as cash. Certain federalcourts have held that the Anti-Kickback Statute can be violated if “one purpose”of a payment is to induce referrals. Violations of the Anti-Kickback Statutecan result in imprisonment, civil or criminal fines or exclusion from Medicareand other governmental programs.

In 1999, the Office ofInspector General of the Department of Health and Human Services, or the OIG,issued an Advisory Opinion indicating that discounts provided to healthfacilities on the transports for which they are financially responsiblepotentially violate the Anti-Kickback Statute when the ambulance company alsoreceives referrals of Medicare and other government-funded transports from thefacility. The OIG has clarified that not all discounts violate theAnti-Kickback Statute, but that the statute may be violated if part of thepurpose of the discount is to induce the referral of the transports paid for byMedicare or other federal programs, and the discount does not meet certain “safeharbor” conditions. In the Advisory Opinion and subsequent pronouncements, theOIG has provided guidance to ambulance companies to help them avoid unlawfuldiscounts.

Like other ambulancecompanies, we have provided discounts to our healthcare facility customers(nursing home and hospital) in certain circumstances. We have attempted tocomply with applicable law when such discounts are provided. However, thegovernment alleged that certain of our hospital and nursing home contracts ineffect in Texas in periods prior to 2002 contained discounts in violation ofthe federal Anti-Kickback Statute, and we entered into a settlement with thegovernment to resolve these allegations and entered into a CIA.

There can be no assurancethat other investigations or legal action related to our contracting practiceswill not be pursued against AMR in other jurisdictions or for different timeframes.   If we are found to haveviolated the Anti-Kickback Statute, we may be subject to civil or criminalpenalties, including exclusion from the Medicare or Medicaid programs, or maybe required to enter into settlement agreements with the government to avoidsuch sanctions. Typically, such settlement agreements require substantialpayments to the government in exchange for the government to release itsclaims, and may also require us to enter into a CIA.

In addition to AMR’scontracts with healthcare facilities, other marketing practices or transactionsentered into by AMR and EmCare may implicate the Anti-Kickback Statute.Although we have attempted to structure our past and current marketing initiativesand business relationships to comply with the Anti-Kickback Statute, we cannotassure you that the OIG or other authorities will not find that our marketingpractices and relationships violate the statute.

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OFPROCEEDS**

In June 2006, our board ofdirectors adopted an equity compensation program for non-employee directors,other than the Chair of the Compliance Committee, or the Directors’ Plan, inreliance upon the exemption provided by Section 4(2) of the Securities Act of1933. Non-employee directors were granted 8,000 Restricted Stock Units, orRSUs, on June 1, 2006, each RSU representing one share of our class A commonstock. Immediately following each annual stockholder meeting, each non-employeedirector will receive a grant of RSUs having a fair market value of $100,000 onthe date of grant, based on the closing price of our class A common stock onthe business day immediately preceding the grant date. The Directors’ Planallows directors to defer income from the grant of RSUs. The RSUs vestimmediately prior to the election of directors at the next following annualstockholder meeting, and will be paid in shares of our class A common stock(one share for each RSU). The Directors’ Plan and RSU grants on June 1, 2006are both subject to stockholder approval at the 2007 annual stockholdermeeting.

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**ITEM 6.EXHIBITS**
|     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 with this Report

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**SIGNATURES**

Pursuant to the requirements of Section 13 or15(d) of the Securities Exchange Act of 1934, the registrants have duly causedthis report to be signed on their behalf by the undersigned, thereunto dulyauthorized, on the 7th day of November, 2006.
|        |   | **EMERGENCY MEDICAL SERVICES  CORPORATION** |
|--------|--------|---------------------------------------------|
|   |   | (registrant)                                |
|   |   |                                        |
|   |   | By:                                         | /s/ William A. Sanger |
|   |   |                                        | William A. Sanger |
|   |   |                                        | Chairman and Chief Executive Officer |

 
|        |   | **EMERGENCY MEDICAL SERVICES L.P.** |
|--------|--------|-------------------------------------|
|   |   | (registrant)                        |
|   |   |                                |
|   |   | By:                                 | Emergency Medical Services Corporation, its  General Partner |
|   |   |                                |   |
|   |   | By:                                 | /s/ William A. Sanger |
|   |   |                                | William A. Sanger |
|   |   |                                | Chairman and Chief Executive Officer |

 

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**EXHIBITINDEX**
| Exhibit No.             | ** ** | **Description**                                                                                                                                                                                                                                                                              |
|------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |       |                                                                                                                                                                                                                                                                                         |
|     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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*                          Filedwith this Report

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