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**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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**FORM 10-Q**

 

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**(Markone)**
| **x**                                                  | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|--------------------------------------------------------|---------------------------------------------------------------------------------------------------------|
|                                                   |
| **For  the quarterly period ended June 30, 2009** |
|                                                   |
| **Or**                                                 |
|                                                   |
| **o**                                                  | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For the transition period from               to**

 

**Commission file numbers:**

**001-32701**

**333-127115**

 

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**EMERGENCY MEDICAL SERVICES CORPORATION**

**EMERGENCY MEDICAL SERVICES L.P.**

(Exact name of Registrants as Specified in their Charters)

 

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

 

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

 

Former name, former address and former fiscal year, if changed sincelast report:

**Not applicable**

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past90 days.    Yes  x    No  o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).

o  Yes   o  No

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 
|   | Large accelerated filer  o      |                                           | Accelerated filer x          |
|--------|-------------------------------------------|------------------------------------------------|------------------------------|
|   | Non-accelerated  filer   o | (Do not check if a  smaller reporting company) | Smaller reporting  company o |
|   |                                      |                                           |

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

 

       Shares of class A common stock outstanding at July 28,2009 — 10,511,354; shares of class B common stock outstanding at July 28,2009 — 142,545; LP exchangeable units outstanding at July 28, 2009 —32,107,500.

 

 

 

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**EMERGENCYMEDICAL SERVICES CORPORATION**

**INDEXTO QUARTERLY REPORT**

**ONFORM 10-Q**

**FORTHE THREE AND SIX MONTHS ENDED**

**JUNE30, 2009**

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

 

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**EMERGENCYMEDICAL SERVICES CORPORATION**

**PART I. FINANCIAL INFORMATION**

**FORTHE THREE AND SIX MONTHS ENDED**

**JUNE30, 2009**

 

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

 

**EmergencyMedical Services Corporation**

**Consolidated Statements of Operationsand Comprehensive Income**

**(unaudited; in thousands, exceptshare and per share data)**

 
| ** **                                                                      | ** ** | **Quarter ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|---------------------------------------------------------------------------------|------------|---------------------------------|------------|------------------------------------|------------|
| ** **                                                                      | ** ** | **2009**                        | ** ** | **2008**                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| Net revenue                                                                     |       | $                               | 637,291    |                               | $          | 571,079 |   | $ | 1,250,313 |   | $ | 1,136,865 |   |
| Compensation and benefits                                                       |       | 438,628                         |       | 400,501                            |       | 865,162 |   | 794,852 |   |
| Operating expenses                                                              |       | 82,173                          |       | 83,704                             |       | 166,845 |   | 166,927 |   |
| Insurance expense                                                               |       | 28,357                          |       | 17,568                             |       | 50,861 |   | 38,531 |   |
| Selling, general and administrative expenses                                    |       | 16,279                          |       | 15,520                             |       | 31,315 |   | 30,112 |   |
| Depreciation and amortization expense                                           |       | 16,157                          |       | 17,446                             |       | 32,925 |   | 35,163 |   |
| Income from operations                                                          |       | 55,697                          |       | 36,340                             |       | 103,205 |   | 71,280 |   |
| Interest income from restricted assets                                          |       | 1,120                           |       | 1,735                              |       | 2,386 |   | 3,490 |   |
| Interest expense                                                                |       | (10,279                         | )          | (10,354                            | )          | (20,469 | ) | (20,270 | ) |
| Realized gain on investments                                                    |       | 847                             |       | 1,571                              |       | 1,486 |   | 2,243 |   |
| Interest and other income                                                       |       | 423                             |       | 287                                |       | 940 |   | 589 |   |
| Income before income taxes and equity in earnings of  unconsolidated subsidiary |       | 47,808                          |       | 29,579                             |       | 87,548 |   | 57,332 |   |
| Income tax expense                                                              |       | (18,885                         | )          | (11,348                            | )          | (34,611 | ) | (22,032 | ) |
| Income before equity in earnings of unconsolidated  subsidiary                  |       | 28,923                          |       | 18,231                             |       | 52,937 |   | 35,300 |   |
| Equity in earnings of unconsolidated subsidiary                                 |       | 96                              |       | 104                                |       | 153 |   | 54 |   |
| Net income                                                                      |       | 29,019                          |       | 18,335                             |       | 53,090 |   | 35,354 |   |
| Other comprehensive income (loss), net of tax:                                  |       |                            |       |                               |       |   |   |   |   |
| Unrealized holding losses during the period                                     |       | (1,377                          | )          | (3,107                             | )          | (2,534 | ) | (1,760 | ) |
| Unrealized gains (losses) on derivative financial instruments                   |       | 916                             |       | 2,165                              |       | 1,267 |   | (760 | ) |
| Comprehensive income                                                            |       | $                               | 28,558     |                               | $          | 17,393 |   | $ | 51,823 |   | $ | 32,834 |   |
|                                                                            |       |                            |       |                               |       |   |   |   |   |
| Basic earnings per common share                                                 |       | $                               | 0.69       |                               | $          | 0.44 |   | $ | 1.26 |   | $ | 0.85 |   |
| Diluted earnings per common share                                               |       | $                               | 0.67       |                               | $          | 0.43 |   | $ | 1.23 |   | $ | 0.82 |   |
| Weighted average common shares outstanding, basic                               |       | 42,354,667                      |       | 41,573,893                         |       | 42,140,632 |   | 41,572,162 |   |
| Weighted average common shares outstanding, diluted                             |       | 43,334,340                      |       | 43,022,034                         |       | 43,215,657 |   | 43,052,668 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

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**EmergencyMedical Services Corporation**

**Consolidated Balance Sheets**

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

 
| ** **                                                                                                                                                      | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                      | ** ** | **2009**          | ** ** | **2008**              | ** ** |
| ** **                                                                                                                                                      | ** ** | **(Unaudited)**   | ** ** | ** **            | ** ** |
| **Assets**                                                                                                                                                      | ** ** | ** **        | ** ** | ** **            | ** ** |
| Current  assets:                                                                                                                                                |       |              |       |                  |       |
| Cash  and cash equivalents                                                                                                                                      |       | $                 | 267,139    |                  | $          | 146,173 |   |
| Insurance  collateral                                                                                                                                           |       | 49,174            |       | 55,052                |       |
| Trade  and other accounts receivable, net                                                                                                                       |       | 471,627           |       | 472,501               |       |
| Parts  and supplies inventory                                                                                                                                   |       | 21,267            |       | 21,160                |       |
| Prepaids  and other current assets                                                                                                                              |       | 34,387            |       | 28,378                |       |
| Current  deferred tax assets                                                                                                                                    |       | 90,385            |       | 91,910                |       |
| Total  current assets                                                                                                                                           |       | 933,979           |       | 815,174               |       |
| Non-current  assets:                                                                                                                                            |       |              |       |                  |       |
| Property,  plant and equipment, net                                                                                                                             |       | 121,198           |       | 124,869               |       |
| Intangible  assets, net                                                                                                                                         |       | 77,587            |       | 76,141                |       |
| Non-current  deferred tax assets                                                                                                                                |       | 5,327             |       | 36,351                |       |
| Insurance  collateral                                                                                                                                           |       | 124,921           |       | 119,644               |       |
| Goodwill                                                                                                                                                        |       | 335,451           |       | 346,013               |       |
| Other  long-term assets                                                                                                                                         |       | 22,292            |       | 23,027                |       |
| Total  assets                                                                                                                                                   |       | $                 | 1,620,755  |                  | $          | 1,541,219 |   |
| **Liabilities and Equity**                                                                                                                                      | ** ** | ** **        | ** ** | ** **            | ** ** |
| Current  liabilities:                                                                                                                                           |       |              |       |                  |       |
| Accounts  payable                                                                                                                                               |       | $                 | 64,777     |                  | $          | 57,318 |   |
| Accrued  liabilities                                                                                                                                            |       | 264,466           |       | 257,918               |       |
| Current  portion of long-term debt                                                                                                                              |       | 4,025             |       | 4,905                 |       |
| Total  current liabilities                                                                                                                                      |       | 333,268           |       | 320,141               |       |
| Long-term  debt                                                                                                                                                 |       | 451,868           |       | 453,600               |       |
| Insurance  reserves and other long-term liabilities                                                                                                             |       | 230,269           |       | 228,439               |       |
| Total  liabilities                                                                                                                                              |       | 1,015,405         |       | 1,002,180             |       |
| Equity:                                                                                                                                                         |       |              |       |                  |       |
| Preferred  stock ($0.01 par value; 20,000,000 shares authorized, 0 issued and  outstanding)                                                                     |       | —            |       | —                |       |
| Class A  common stock ($0.01 par value; 100,000,000 shares authorized, 10,467,280****and 9,606,766 issued and outstanding in 2009 and 2008,  respectively) |       | 105               |       | 96                    |       |
| Class B  common stock ($0.01 par value; 40,000,000 shares authorized, 142,545 issued  and outstanding in 2009 and 2008)                                    |       | 1                 |       | 1                     |       |
| Class B  special voting stock ($0.01 par value; 1 share authorized, issued and  outstanding in 2009 and 2008)                                              |       | —            |       | —                |       |
| LP  exchangeable units (32,107,500 shares issued and outstanding in 2009 and  2008)                                                                             |       | 212,361           |       | 212,361               |       |
| Additional  paid-in capital                                                                                                                                     |       | 138,849           |       | 124,370               |       |
| Retained  earnings                                                                                                                                              |       | 256,893           |       | 203,803               |       |
| Accumulated  other comprehensive loss                                                                                                                           |       | (2,859            | )          | (1,592                | )          |
| Total  equity                                                                                                                                                   |       | 605,350           |       | 539,039               |       |
| Total  liabilities and equity                                                                                                                                   |       | $                 | 1,620,755  |                  | $          | 1,541,219 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

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**EmergencyMedical Services Corporation**

**Consolidated Statements of Cash Flows**

**(unaudited;in thousands)**

 
| ** **                                                                         | ** ** | **Quarter  ended June 30,** | ** ** | **Six  months ended June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------|------------|--------------------------------|------------|
| ** **                                                                         | ** ** | **2009**                    | ** ** | **2008**                       | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Cash Flows from Operating Activities**                                           | ** ** | ** **                  | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  income                                                                        |       | $                           | 29,019     |                           | $          | 18,335 |   | $ | 53,090 |   | $ | 35,354 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |                        |       |                           |       |   |   |   |   |
| Depreciation  and amortization                                                     |       | 16,661                      |       | 17,973                         |       | 33,741 |   | 36,269 |   |
| Loss  (gain) on disposal of property, plant and equipment                          |       | 38                          |       | (90                            | )          | 36 |   | (103 | ) |
| Equity-based  compensation expense                                                 |       | 1,104                       |       | 562                            |       | 1,754 |   | 1,124 |   |
| Equity  in earnings of unconsolidated subsidiary                                   |       | (96                         | )          | (104                           | )          | (153 | ) | (54 | ) |
| Dividends  received                                                                |       | —                      |       | —                         |       | 713 |   | — |   |
| Deferred  income taxes                                                             |       | 17,333                      |       | 8,266                          |       | 31,928 |   | 18,622 |   |
| Changes  in operating assets/liabilities, net of acquisitions:                     |       |                        |       |                           |       |   |   |   |   |
| Trade  and other accounts receivable                                               |       | 3,499                       |       | 12,556                         |       | 874 |   | (13,752 | ) |
| Parts  and supplies inventory                                                      |       | (87                         | )          | 6                              |       | (107 | ) | (14 | ) |
| Prepaids  and other current assets                                                 |       | 12,530                      |       | 1,294                          |       | 4,690 |   | (4,638 | ) |
| Accounts  payable and accrued liabilities                                          |       | 20,120                      |       | 3,100                          |       | 11,620 |   | (10,289 | ) |
| Insurance  accruals                                                                |       | (1,124                      | )          | (3,741                         | )          | 2,753 |   | (7,140 | ) |
| Net  cash provided by operating activities                                         |       | 98,997                      |       | 58,157                         |       | 140,939 |   | 55,379 |   |
| **Cash Flows from Investing Activities**                                           | ** ** | ** **                  | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Purchases  of property, plant and equipment                                        |       | (12,878                     | )          | (7,653                         | )          | (20,085 | ) | (10,180 | ) |
| Proceeds  from sale of property, plant and equipment                               |       | 39                          |       | 157                            |       | 60 |   | 220 |   |
| Acquisition  of businesses, net of cash received                                   |       | (133                        | )          | (6,679                         | )          | (133 | ) | (19,957 | ) |
| Net  change in insurance collateral                                                |       | (15,243                     | )          | 12,731                         |       | (1,933 | ) | 14,856 |   |
| Other  investing activities                                                        |       | 27                          |       | 1,975                          |       | (643 | ) | 2,628 |   |
| Net  cash provided by (used in) investing activities                               |       | (28,188                     | )          | 531                            |       | (22,734 | ) | (12,433 | ) |
| **Cash Flows from Financing Activities**                                           | ** ** | ** **                  | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| EMSC  issuance of class A common stock                                             |       | 3,825                       |       | 33                             |       | 4,723 |   | 45 |   |
| Repayments  of capital lease obligations and other debt                            |       | (1,453                      | )          | (1,570                         | )          | (2,612 | ) | (16,721 | ) |
| Increase  (decrease) in bank overdrafts                                            |       | (190                        | )          | (287                           | )          | 650 |   | 3,835 |   |
| Borrowings  under revolving credit facility                                        |       | —                      |       | —                         |       | — |   | 14,000 |   |
| Net  cash provided by (used in) financing activities                               |       | 2,182                       |       | (1,824                         | )          | 2,761 |   | 1,159 |   |
| Change  in cash and cash equivalents                                               |       | 72,991                      |       | 56,864                         |       | 120,966 |   | 44,105 |   |
| Cash  and cash equivalents, beginning of period                                    |       | 194,148                     |       | 16,155                         |       | 146,173 |   | 28,914 |   |
| Cash  and cash equivalents, end of period                                          |       | $                           | 267,139    |                           | $          | 73,019 |   | $ | 267,139 |   | $ | 73,019 |   |
|                                                                               |       |                        |       |                           |       |   |   |   |   |
| **Non-cash Activities**                                                            | ** ** | ** **                  | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Capital  lease obligations incurred                                                |       | $                           | —     |                           | $          | 682 |   | $ | — |   | $ | 682 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

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**EmergencyMedical Services Corporation**

**Notes to Unaudited ConsolidatedFinancial Statements**

**(inthousands, 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 six month periods ended June 30,2009 are not necessarily indicative of the results that may be expected for thefull year ending December 31, 2009. For further information, see theCompany’s consolidated financial statements, including the accounting policiesand notes thereto, included in the Company’s Annual Report on Form 10-Kfor the fiscal year ended December 31, 2008.

 

The consolidatedfinancial statements of EMSC include those of its direct subsidiary, EmergencyMedical Services L.P. (“EMS LP”), a Delaware limited partnership. The Company’sbusiness is conducted primarily through two operating subsidiaries, AmericanMedical Response, Inc. (“AMR”), its healthcare transportation servicessegment, and EmCare Holdings Inc. (“EmCare”), its outsourced hospital-basedphysician services segment.

 

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 each of the three and sixmonths ended June 30, 2009 and 2008, the Company expensed $250 and $500,respectively, in respect of this fee.

 

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

 

***Consolidation***

 

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

 

***Use of Estimates***

 

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

 

***Insurance***

 

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.

 

Insurance reserves areestablished for automobile, workers compensation, general liability andprofessional liability claims utilizing policies with both fully-insured and self-insuredcomponents. This includes the use of an off-shore captive insurance programthrough a wholly-owned subsidiary for certain professional liability(malpractice) programs for EmCare. In those instances where the Company hasobtained third-party insurance coverage, the Company generally retainsliability for the first $1 to $2 million of the loss. Insurance reservescover known claims and incidents within the level of Company retention that mayresult in the assertion of additional claims, as well as claims from unknownincidents that may be asserted arising from activities through the balance 

 

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sheet date.

 

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 June 2009. As a result of thisactuarial valuation, the Company recorded an increase of $4.4 million duringthe three months ended June 30, 2009 in its provision for insuranceliabilities related to reserves for losses in prior years.  A total increase of $5.2 million was recordedduring the six months ended June 30, 2009. As a result of the actuarial valuation completed in June 2008, theCompany recorded reductions in its provision for insurance liabilities ofapproximately $3.4 million during the three months ended June 30, 2008 and$6.2 million during the six months ended June 30, 2008.

 

The long-term portion ofinsurance reserves was $137.4 million and $139.0 million as of June 30,2009 and December 31, 2008, respectively.

 

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

 

The Company estimates itsallowances based on payor reimbursement schedules, historical collections andwrite-off experience and other economic data. The allowances for contractualdiscounts and uncompensated care are reviewed monthly. Account balances arecharged off against the uncompensated care allowance when it is probable thereceivable will not be recovered. Write-offs to the contractual allowance occurwhen payment is received. The allowance for uncompensated care is relatedprincipally to receivables recorded for self-pay patients.  The Company’s accounts receivable andallowances are as follows:

 
| ** **                           | ** ** | **June 30,   2009** | ** ** | **December 31,   2008** | ** ** |
|--------------------------------------|------------|--------------------------|------------|------------------------------|------------|
| Gross  trade accounts receivable     |       | $                        | 1,911,707  |                         | $          | 1,792,546 |   |
| Allowance  for contractual discounts |       | 955,926                  |       | 885,401                      |       |
| Allowance  for uncompensated care    |       | 559,241                  |       | 514,475                      |       |
| Net  trade accounts receivable       |       | 396,540                  |       | 392,670                      |       |
| Other  receivables, net              |       | 75,087                   |       | 79,831                       |       |
| Net  accounts receivable             |       | $                        | 471,627    |                         | $          | 472,501 |   |

 

Other receivablesrepresent EmCare hospital subsidies and fees and AMR fees for stand-by andspecial events and subsidies from community organizations.

 

AMR contractualallowances are determined primarily on payor reimbursement schedules that areincluded and regularly updated in the billing systems, and by historicalcollection experience.  The billingsystems calculate the difference between payor specific gross billings andcontractually agreed to, or governmentally driven, reimbursement rates.  The allowance for uncompensated care at AMRis related principally to receivables recorded for self-pay patients.  AMR’s allowances on self-pay accountsreceivable are estimated on claim level, historical write-off experience.

 

Accounts receivableallowances at EmCare are estimated based on cash collection and write-offexperience at a facility level contract and facility specific payor mix.  These allowances are reviewed and adjustedmonthly through revenue provisions.  Inaddition, a look-back analysis is done, typically after 15 months, to compareactual cash collected on a date of service basis to the revenue recorded forthat period.  Any adjustment necessaryfor an overage or deficit in these allowances based on actual collections isrecorded through a revenue adjustment in the current period.

 

***Revenue Recognition***

 

Revenue is recognized atthe time of service and is recorded net of provisions for contractual discountsand estimated uncompensated care. Provisions for contractual discounts andestimated uncompensated care as a 

 

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percentage of grossrevenue and as a percentage of gross revenue less provision for contractualdiscounts are as follows:

 
| ** **                                                                                     | ** ** | **Quarter ended********June 30,** | ** ** | **Six months ended   June 30,** | ** ** |
|------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                                     | ** ** | **2009**                               | ** ** | **2008**                             | ** ** | **2009** | ** ** | **2008** | ** ** |
| Gross revenue                                                                                  |       | 100.0                                  | %          | 100.0                                | %          | 100.0 | % | 100.0 | % |
| Provision for contractual discounts                                                            |       | 49.4                                   | %          | 46.1                                 | %          | 48.7 | % | 45.9 | % |
| Revenue net of contractual discounts                                                           |       | 50.6                                   | %          | 53.9                                 | %          | 51.3 | % | 54.1 | % |
| Provision for uncompensated care as a percentage of  gross revenue                             |       | 20.4                                   | %          | 19.3                                 | %          | 20.0 | % | 19.0 | % |
| Provision  for uncompensated care as a percentage of gross revenue less contractual  discounts |       | 40.2                                   | %          | 35.8                                 | %          | 39.0 | % | 35.1 | % |

 

Healthcare reimbursementis complex and may involve lengthy delays. Third-party payors are continuingtheir efforts to control expenditures for healthcare, including proposals torevise reimbursement policies. The Company has from time to time experienceddelays in reimbursement from third-party payors. In addition, third-partypayors may disallow, in whole or in part, claims for reimbursement based ondeterminations that certain amounts are not reimbursable under plan coverage,determinations of medical necessity, or the need for additional information.Laws and regulations governing the Medicare and Medicaid programs are verycomplex and subject to interpretation. Revenue is recognized on an estimatedbasis in the period which related services are rendered. As a result, there isa reasonable possibility that recorded estimates will change materially in theshort-term. Such amounts, including adjustments between provisions forcontractual discounts and uncompensated care, are adjusted in future periods,as adjustments become known.  These adjustments were less than 1% of netrevenue for the three and six month periods ending June 30, 2009 and 2008.

 

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 sharesof class 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 of the capital stock of the sole generalpartner of EMS LP contributed that capital stock to the Company in exchange forclass B common stock; the general partner was merged into the Company and theCompany became the sole general partner of EMS LP. Concurrently, the holders ofclass B units of EMS LP contributed their units to the Company in exchange forshares of the Company’s class A common stock, and the holders of certain classA units of EMS LP contributed their units to the Company in exchange for sharesof the Company’s class B common stock.

 

As of June 30, 2009,the Company holds 24.8% of the equity interests in EMS LP. LP exchangeableunits, held by persons affiliated with the Company’s principal equity holder,represent the balance of the EMS LP equity. The LP exchangeable units areexchangeable at any time, at the option of the holder, for shares of theCompany’s class B common stock on a one-for-one basis. The holders of the LPexchangeable units have the right to vote, through the trustee holder of theCompany’s class B special voting stock, at all stockholder meetings at whichholders of the Company’s class B common stock or class B special voting stockare 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 receivedistributions only if the equivalent dividends are declared on the

 

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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.

 

***Fair Value Measurement***

 

The Company adoptedStatement of Financial Accounting Standards (“SFAS”) No. 157 *Fair Value Measurements* (“SFAS 157”) effective January 1,2008, which among other things, requires additional disclosures about financialinstruments that are reported at fair value. SFAS 157 establishes a hierarchal disclosure framework which ranks thelevel of market price observability used in measuring financial instruments atfair value. Market price observability is impacted by a number of factors,including the type of instrument and the characteristics specific to theinstrument.  Instruments with readilyavailable active quoted prices or for which fair value can be measured fromactively quoted prices generally will have a higher degree of market priceobservability and a lesser degree of judgment used in measuring fair value.

 

Financial instrumentsmeasured and reported at fair value are classified and disclosed in one of thefollowing categories:

 

Level 1 – Quoted pricesare available in active markets for identical assets or liabilities as of thereporting date.  As required by SFAS 157,the Company does not adjust the quoted price for these assets or liabilities.

 

Level 2 – Pricing inputsare other than quoted prices in active markets, which are either directly orindirectly observable as of the reporting date, and fair value is determinedthrough the use of models or other valuation methodologies.

 

Level 3 – Pricing inputsare unobservable as of the reporting date and reflect the Company’s ownassumptions about the fair value of the asset or liability.

 

The following tablesummarizes the valuation of EMSC’s financial instruments by the above SFAS 157fair value hierarchy levels as of June 30, 2009:

 
| **Description** | ** ** | **Total** | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
|-----------------|------------|-----------|------------|-------------|------------|-------------|------------|-------------|------------|
| Assets:         |       |      |       |        |       |        |       |        |       |
| Securities      |       | $         | 85,081     |        | $          | 64,299      |       | $           | 20,782     |   | $ | — |   |
| Liabilities:    |       |      |       |        |       |        |       |        |       |
| Derivatives     |       | $         | 3,709      |        | $          | —      |       | $           | 3,709      |   | $ | — |   |

 

Financial AccountingStandards Board (“FASB”) Staff Position No. 157-2 (“FSP 157-2”) delayedthe application of SFAS 157 to nonfinancial assets and liabilities until January 1,2009.  Adoption of FSP 157-2 did not havean impact on the Company’s financial statements during the three or six monthsended June 30, 2009.

 

***Recent Accounting Pronouncements***

 

In June 2009, theFASB issued SFAS No. 167 *Amendments to FASB InterpretationNo. 46(R) *(“SFAS 167”), which modifies the analysisrequired to identify controlling financial interest in variable interestentities.  SFAS 167 is effective for theCompany beginning on January 1, 2010. Management does not expect the adoption of SFAS 167 to have a materialeffect on the Company’s consolidated financial statements and relateddisclosures.

 

In June 2009, theFASB issued SFAS No. 166 *Accounting for Transfersof Financial Assets—an amendment of FASB Statement 140* (“SFAS 166”),which clarifies circumstances under which a transferor has surrendered controland, thus, should remove the asset together with any related liabilities fromits balance sheet.  SFAS 166 is effectivefor the Company beginning on January 1, 2010.  Management does not expect the adoption ofSFAS 166 to have a material effect on the Company’s consolidated financialstatements and related disclosures.

 

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In May 2009, theFASB issued SFAS No. 165 *Subsequent Events*(“SFAS 165”), which defines further disclosure requirements for events whichoccur after the balance sheet date but before financial statements areissued.  SFAS 165 is effective for theCompany beginning on April 1, 2009. In accordance with SFAS 165, the Company’s management has evaluatedevents subsequent to June 30, 2009 through August 4, 2009 which isthe issuance date of this report.  Therehas been no material event noted in this period which would either impact theresults reflected in this report or the Company’s results going forward.

 

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

 

The Company adopted SFAS No. 141(revised 2007) Business Combinations (“SFAS 141(R)”) effective January 1,2009.  The impact to the Company’sconsolidated financials statements and related disclosures will depend on thenature and terms of the business combinations entered into subsequent toadoption of SFAS 141(R).  The Companyexpensed $257 upon adoption of SFAS 141(R) and expensed a total of $191and $911 during the three and six months ended June 30, 2009,respectively.  These costs are includedin operating expenses on the accompanying statement of operations and previously would have beenrecorded as a component of goodwill.

 

In January 2009, theCompany entered into an agreement for the acquisition of the air ambulancebusiness of Skyservice Business Aviation Inc. (“Skyservice Air Ambulance”), afixed-wing air ambulance operator based in Montreal, Canada, with operations inQuebec, Ontario and British Columbia. Founded in 1989, Skyservice Air Ambulance provides worldwide airambulance service.  Completion of the transactionis subject to currently pending Canadian regulatory approval.

 

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

 

Accrued liabilities wereas follows at June 30, 2009 and December 31, 2008:

 
| ** **                                  | ** ** | **June 30,********2009** | ** ** | **December 31,******** 2008** | ** ** |
|---------------------------------------------|------------|-------------------------------|------------|-----------------------------------------|------------|
| Accrued  wages and benefits                 |       | $                             | 97,153     |                                    | $          | 95,029 |   |
| Accrued  paid time-off                      |       | 26,794                        |       | 25,505                                  |       |
| Current  portion of self-insurance reserves |       | 65,407                        |       | 61,099                                  |       |
| Accrued  restructuring                      |       | 190                           |       | 200                                     |       |
| Current  portion of compliance and legal    |       | 4,267                         |       | 2,616                                   |       |
| Accrued  billing and collection fees        |       | 4,062                         |       | 4,127                                   |       |
| Accrued  profit sharing                     |       | 19,230                        |       | 22,954                                  |       |
| Accrued  interest                           |       | 9,755                         |       | 9,964                                   |       |
| Other                                       |       | 37,608                        |       | 36,424                                  |       |
| Total  accrued liabilities                  |       | $                             | 264,466    |                                    | $          | 257,918 |   |

 

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

 

Long-term debt consistedof the following at June 30, 2009 and December 31, 2008:

 
| ** **                                                                       | ** ** | **June 30,********2009** | ** ** | **December 31,******** 2008** | ** ** |
|----------------------------------------------------------------------------------|------------|-------------------------------|------------|-----------------------------------------|------------|
| Senior  subordinated notes due 2015                                              |       | $                             | 250,000    |                                    | $          | 250,000 |   |
| Senior  secured term loan due 2012 (2.34% at June 30, 2009)                 |       | 200,813                       |       | 201,862                                 |       |
| Notes  due at various dates from 2009 to 2022 with interest rates from 6% to 10% |       | 1,221                         |       | 1,632                                   |       |
| Capital  lease obligations due at various dates from 2010 to 2018 (see note 7)   |       | 3,859                         |       | 5,011                                   |       |
|                                                                             |       | 455,893                       |       | 458,505                                 |       |
| Less  current portion                                                            |       | (4,025                        | )          | (4,905                                  | )          |
| Total  long-term debt                                                            |       | $                             | 451,868    |                                    | $          | 453,600 |   |

 

**6.****   ****Derivative Instrumentsand Hedging Activities**

 

The Company manages itsexposure to changes in market interest rates. The Company’s use of derivative instruments is limited to highlyeffective fixed interest rate swap agreements used to manage well-definedinterest rate risk exposures.  TheCompany monitors

 

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its positions and thecredit ratings of its counterparties and does not anticipate non-performance bythe counterparties.  The Company does notenter into interest rate swap agreements for trading purposes.

 

In March 2009, theCompany amended the interest rate swap agreement originally entered into in December 2007.  The amendment changed the hedged interestrate from the 3-month LIBOR to the 1-month LIBOR.  The swap agreement is with major financialinstitutions with a notional principal balance of $200 million.  The amended swap agreement effectivelyconverts $200 million of variable rate debt to fixed rate debt with aneffective rate of 6.1%.  The Company continues to make interest paymentsbased on the variable rate associated with the debt (based on LIBOR which had arate of less than 1% at June 30, 2009) and periodically settles with itscounterparties for the difference between the rate paid and the fixed rate. Theswap agreement will expire in December 2009.  The Company recorded, as a component of othercomprehensive income, a decrease to the liability associated with the fairvalue of the fixed interest rate swap agreement in the amount of $1.5 millionand $2.1 million for the three and six months ended June 30, 2009,respectively, and a decrease of $3.8 million and an increase of $0.1 millionduring the same periods in 2008, in each case before applicable tax impacts.  The net additional interest payments made orreceived under this swap agreement are recognized in interest expense.  Over the remaining term of the agreement, theCompany expects to reclassify $3.7 million of deferred loss before applicabletax impacts from accumulated other comprehensive loss to interest expense asrelated interest payments that are being hedged are recognized.

 

**7.****        ****Commitments andContingencies**

 

***Lease Commitments***

 

The Company leasesvarious facilities and equipment under operating lease agreements.

 

The Company also leasescertain vehicles and leasehold improvements under capital leases.  Assets under capital leases are capitalizedusing inherent interest rates at the inception of each lease. Capital leasesare collateralized by the underlying assets.

 

***Forward Purchase Commitment***

 

Beginning in March 2009,AMR entered into a series of forward purchase contracts which fix the price fora portion of its total monthly diesel fuel usage from April 1, 2009through June 30, 2010.  For the sixmonths ending December 31, 2009, the Company is under contract to purchase200,000 gallons of diesel fuel per month at prices ranging from $2.63 to $2.79per gallon.  For the twelve months endingJune 30, 2010, the Company is under contract to purchase 50,000 gallons ofdiesel fuel per month at prices ranging from $2.85 to $2.99 per gallon.  These forward purchase contracts representapproximately 40% of the Company’s total monthly diesel fuel usage.  Based on the terms of the contracts, theCompany has concluded they do not qualify as derivatives.  The impact related to these contracts duringthe three months ended June 30, 2009 was additional operating expense of$0.1 million.

 

***Services***

 

The Company is subject tothe Medicare and Medicaid fraud and abuse laws which prohibit, among otherthings, any false claims, or any bribe, kickback 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 proceedings described below, management believes thatthe outcome of any of these investigations would not have a material adverseeffect on the Company.

 

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***Other Legal Matters***

 

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

 

In December 2006,AMR received a subpoena from the Department of Justice.  The subpoena requested copies of documentsfor the period from January 2000 through the present.  The subpoena required AMR to produce a broadrange of documents relating to the operations of certain AMR affiliates in NewYork.  The Company continues to cooperatewith governmental requests for documents and information.

 

Three different lawsuitspurporting to be class actions have been filed against AMR and certain subsidiariesin California alleging violations of California wage and hour laws.  On April 16, 2008, Lori Bartonicommenced a suit in the Superior Court for the State of California, County ofAlameda, which has since been removed to the United States District Court,Northern District of California; on July 8, 2008, Vaughn Banta filed suitin the Superior Court of the State of California, County of Los Angeles; on January 22,2009, Laura Karapetian filed suit in the Superior Court of the State ofCalifornia, County of Los Angeles.  Atthe present time, courts have not certified classes in any of these cases.  Plaintiffs allege principally that the AMRentities failed to pay daily overtime charges pursuant to California law, andfailed to provide required meal breaks or pay premium compensation for missedmeal breaks.  Plaintiffs are seeking tocertify the classes and are seeking lost wages, punitive damages, attorneys’fees and other sanctions permitted under California law for violations of wagehour laws.  The Company is unable at thistime to estimate the amount of potential damages, if any.

 

The Company is involvedin other litigation arising in the ordinary course of business.  Management believes the outcome of theselegal proceedings will not have a material adverse impact on its financialcondition, results of operations or liquidity.

 

**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 transitionmethod.  The stock options are valued using the Black-Scholes valuation modelon the date of grant.

 

**EquityOption Plan**

 

Under the Company’sEquity Option Plan, key employees were granted options that permit theindividuals to purchase class A common shares and vest ratably generally over aperiod of four years. In addition, certain performance measures must be met for50% of the options to become exercisable; these performance measures were satisfiedduring the first quarter of 2009 with respect to the options granted in thefirst quarter of 2005.  Options withsimilar provisions were granted to non-employee directors. As the vestingperiod for these shares was complete during the first quarter of 2009, theCompany did not record a compensation charge for the three months ended June 30,2009.  A compensation charge of $431 wasrecorded for the three months ended June 30, 2008.  The compensation charge recorded for the sixmonths ended June 30, 2009 and 2008 was $97 and $862, respectively.

 

**Long-TermIncentive Plan**

 

The Company’s original2007 Long-Term Incentive Plan was approved by stockholders in May 2007 andan Amended and Restated 2007 Long-Term Incentive Plan (the “Plan”) was approvedby stockholders in May 2008.  ThePlan provides for the grant of long-term incentives, including variousequity-based incentives, to those persons with responsibility for the successand growth of the Company and its subsidiaries.

 

There were no options orrestricted stock granted during the three months ended June 30, 2009.  The Company recorded a compensation charge of$979 and $31 during the three months ended June 30, 2009 and 2008,respectively, and $1,407 and $62 during the six months ended June 30, 2009and 2008, respectively, in connection with the Plan.

 

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**Non-EmployeeDirector Compensation Plan**

 

The Non-Employee DirectorCompensation Plan, approved in May 2007, is available to non-employeedirectors of the Company, other than the Chair of the ComplianceCommittee.  Under this plan, eligibledirectors are granted Restricted Stock Units (“RSUs”) following each annualstockholder meeting with each RSU representing one share of the Company’s classA common stock.  Eligible directorsreceive a grant of RSUs having a fair market value of $100 on the date of grantbased on the closing price of the Company’s class A common stock on thebusiness day immediately preceding the grant date.  The Non-Employee Director Compensation Planallows directors to defer income from the grant of RSUs, which vest immediatelyprior to the election of directors at the next annual stockholder meeting.  In connection with this plan, the Companygranted 3,018 RSUs per director in 2009. The Company granted 4,145 RSUs per director following the 2008 annualstockholder meeting and granted an additional 2,374 RSUs to a director upon hiselection to the board of directors in October 2008.  The Company expensed $125 and $100 for eachof the three month periods ended June 30, 2009 and 2008, respectively, and$250 and $200 for the six month periods ended June 30, 2009 and 2008,respectively.

 

**StockPurchase Plan/Employee Stock Purchase Plan**

 

During the second quarterof 2009, the Company commenced an offering of its class A common stock toeligible employees and independent contractors associated with the Company andits subsidiaries pursuant to a Stock Purchase Plan and the Company’s EmployeeStock Purchase Plan (together, the “SPPs”).  The purchases of stock underthe SPPs will occur in October 2009 at a 5% discount to the closing priceof the Company’s class A common stock on October 15, 2009.  No compensation charge has been recorded forthe SPPs in the six month period ended June 30, 2009.

 

**9.****   ****Segment Information**

 

The Company is organizedaround two separately managed business units: healthcare transportationservices and hospital-based physician 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 hospital-based physician services reportable segment providesoutsourced business services to hospitals primarily for emergency departmentsand urgent care centers, as well as for hospitalist/inpatient, radiology andanesthesiology services.  The ChiefExecutive Officer has been identified as the chief operating decision maker (“CODM”) forpurposes of SFAS No. 131*Disclosures about Segments of an Enterprise and Related Information*(“SFAS 131”), as he assesses the performance of the business units anddecides how to allocate resources to the business units.

 

Net income before equityin earnings of unconsolidated subsidiary, income tax expense, interest andother income, realized gain on investments, interest expense and depreciationand amortization (“Adjusted EBITDA”) is the measure of profit and loss that theCODM uses to assess performance, measure liquidity and make decisions. Theaccounting policies for reported segments are the same as for the Company as awhole.

 

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| ** **                                           | ** ** | **Quarter ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|------------------------------------------------------|------------|---------------------------------|------------|------------------------------------|------------|
| ** **                                           | ** ** | **2009**                        | ** ** | **2008**                           | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Healthcare Transportation Services**               |       |                            |       |                               |       |   |   |   |   |
| Revenue                                              |       | $                               | 335,504    |                               | $          | 323,672 |   | $ | 671,950 |   | $ | 649,988 |   |
| Segment Adjusted EBITDA                              |       | 32,425                          |       | 25,976                             |       | 66,313 |   | 54,374 |   |
| **Emergency Management Services**                    |       |                            |       |                               |       |   |   |   |   |
| Revenue                                              |       | 301,787                         |       | 247,407                            |       | 578,363 |   | 486,877 |   |
| Segment Adjusted EBITDA                              |       | 40,549                          |       | 29,545                             |       | 72,203 |   | 55,559 |   |
| **Total**                                            |       |                            |       |                               |       |   |   |   |   |
| Total revenue                                        |       | 637,291                         |       | 571,079                            |       | 1,250,313 |   | 1,136,865 |   |
| Total Adjusted EBITDA                                |       | 72,974                          |       | 55,521                             |       | 138,516 |   | 109,933 |   |
| **Reconciliation of Adjusted EBITDA  to Net Income** |       |                            |       |                               |       |   |   |   |   |
| Adjusted EBITDA                                      |       | $                               | 72,974     |                               | $          | 55,521 |   | $ | 138,516 |   | $ | 109,933 |   |
| Depreciation and amortization expense                |       | (16,157                         | )          | (17,446                            | )          | (32,925 | ) | (35,163 | ) |
| Interest expense                                     |       | (10,279                         | )          | (10,354                            | )          | (20,469 | ) | (20,270 | ) |
| Realized gain on investments                         |       | 847                             |       | 1,571                              |       | 1,486 |   | 2,243 |   |
| Interest and other income                            |       | 423                             |       | 287                                |       | 940 |   | 589 |   |
| Income tax expense                                   |       | (18,885                         | )          | (11,348                            | )          | (34,611 | ) | (22,032 | ) |
| Equity in earnings of unconsolidated subsidiary      |       | 96                              |       | 104                                |       | 153 |   | 54 |   |
| Net income                                           |       | $                               | 29,019     |                               | $          | 18,335 |   | $ | 53,090 |   | $ | 35,354 |   |

 

A reconciliationof Adjusted EBITDA to cash flows provided by operating activities is asfollows:

 
| ** **                                    | ** ** | **For  the quarter ended June 30,** | ** ** | **For  the six months ended June 30,** | ** ** |
|-----------------------------------------------|------------|------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                    | ** ** | **2009**                                 | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| Adjusted  EBITDA                              |       | $                                        | 72,974     |                                             | $          | 55,521 |   | $ | 138,516 |   | $ | 109,933 |   |
| Interest  paid                                |       | (9,774                                   | )          | (9,827                                           | )          | (19,651 | ) | (19,164 | ) |
| Change  in accounts receivable                |       | 3,499                                    |       | 12,556                                           |       | 874 |   | (13,752 | ) |
| Change  in other operating assets/liabilities |       | 31,439                                   |       | 659                                              |       | 18,956 |   | (22,081 | ) |
| Equity  based compensation                    |       | 1,104                                    |       | 562                                              |       | 1,754 |   | 1,124 |   |
| Other                                         |       | (245                                     | )          | (1,314                                           | )          | 490 |   | (681 | ) |
| Cash  flows provided by operating activities  |       | $                                        | 98,997     |                                             | $          | 58,157 |   | $ | 140,939 |   | $ | 55,379 |   |

 

**10.****                              ****Guarantors of Debt**

 

EMS LP financed theacquisition of AMR and EmCare in part by issuing $250.0 million principalamount of senior subordinated notes and borrowing $370.2 million under itssenior secured credit facility. Its wholly-owned subsidiaries, AMR HoldCo, Inc.(f/k/a EMSC Management, Inc.) and EmCare HoldCo, Inc., are theissuers of the senior subordinated notes and the borrowers under the seniorsecured credit facility. As part of the transaction, AMR and its subsidiariesbecame wholly-owned subsidiaries of AMR HoldCo, Inc. and EmCare and itssubsidiaries became wholly-owned subsidiaries of EmCare HoldCo, Inc. Thesenior subordinated notes and the senior secured credit facility include afull, unconditional and joint and several guarantee by EMSC, EMS LP and EMSC’sdomestic subsidiaries. The senior subordinated notes and senior secured creditfacility do not include a guarantee by the Company’s captive insurancesubsidiary. All of the operating income and cash flow of EMSC, EMS LP, AMRHoldCo, Inc. and EmCare HoldCo, Inc. is generated by AMR, EmCare andtheir 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, AMR HoldCo, Inc., EmCare HoldCo, Inc.and all of their subsidiaries are reflected in the Eliminations/Adjustmentscolumn. Separate complete financial statements of the issuers,

 

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EMS LP and subsidiaryguarantors would not provide additional material information that would beuseful in assessing the financial composition of the issuers, EMS LP or thesubsidiary guarantors. The condensed consolidating financial statements forEMSC, EMS LP, the issuers, the guarantors and the non-guarantor are as follows:

 

**ConsolidatingStatement of Operations**

**Forthe quarter ended June 30, 2009**

 
| ** **                                                       | ** ** | ** ** | ** ** | ** **  | ** ** | **Issuer**            | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                       | ** ** | ** ** | ** ** | ** **  | ** ** | **AMR**               | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | **EMSC**   | ** ** | **EMS  LP** | ** ** | **HoldCo, Inc.** | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| Net  revenue                                                     |       | $          | —     |        | $          | —                |       | $                     | —     |           | $          | —            |       | $                 | 637,291    |       | $          | 7,147 |   | $ | (7,147 | ) | $ | 637,291 |   |
| Compensation  and benefits                                       |       | —     |       | —      |       | —                |       | —                |       | 438,628        |       | —            |       | —            |       | 438,628    |       |
| Operating  expenses                                              |       | —     |       | —      |       | —                |       | —                |       | 82,173         |       | —            |       | —            |       | 82,173     |       |
| Insurance  expense                                               |       | —     |       | —      |       | —                |       | —                |       | 26,825         |       | 8,679             |       | (7,147            | )          | 28,357     |       |
| Selling,  general and administrative expenses                    |       | —     |       | —      |       | —                |       | —                |       | 16,279         |       | —            |       | —            |       | 16,279     |       |
| Depreciation  and amortization expense                           |       | —     |       | —      |       | —                |       | —                |       | 16,157         |       | —            |       | —            |       | 16,157     |       |
| Income  (loss) from operations                                   |       | —     |       | —      |       | —                |       | —                |       | 57,229         |       | (1,532            | )          | —            |       | 55,697     |       |
| Interest  income from restricted assets                          |       | —     |       | —      |       | —                |       | —                |       | 435            |       | 685               |       | —            |       | 1,120      |       |
| Interest  expense                                                |       | —     |       | —      |       | —                |       | —                |       | (10,279        | )          | —            |       | —            |       | (10,279    | )          |
| Realized  gain on investments                                    |       | —     |       | —      |       | —                |       | —                |       | —         |       | 847               |       | —            |       | 847        |       |
| Interest  and other income                                       |       | —     |       | —      |       | —                |       | —                |       | 423            |       | —            |       | —            |       | 423        |       |
| Income  before income taxes                                      |       | —     |       | —      |       | —                |       | —                |       | 47,808         |       | —            |       | —            |       | 47,808     |       |
| Income  tax expense                                              |       | —     |       | —      |       | —                |       | —                |       | (18,885        | )          | —            |       | —            |       | (18,885    | )          |
| Income  before equity in earnings of unconsolidated subsidiaries |       | —     |       | —      |       | —                |       | —                |       | 28,923         |       | —            |       | —            |       | 28,923     |       |
| Equity  in earnings of unconsolidated subsidiaries               |       | 29,019     |       | 29,019      |       | 8,591                 |       | 20,428                |       | 96             |       | —            |       | (87,057           | )          | 96         |       |
| Net  income                                                      |       | $          | 29,019     |        | $          | 29,019                |       | $                     | 8,591      |           | $          | 20,428            |       | $                 | 29,019     |       | $          | — |   | $ | (87,057 | ) | $ | 29,019 |   |

** **

**ConsolidatingStatement of Operations**

**Forthe quarter ended June 30, 2008**

 
| ** **                                                       | ** ** | ** ** | ** ** | ** **  | ** ** | **Issuer**            | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                       | ** ** | ** ** | ** ** | ** **  | ** ** | **AMR**               | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
|                                                             | ** ** | **EMSC**   | ** ** | **EMS  LP** | ** ** | **HoldCo, Inc.** | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| Net  revenue                                                     |       | $          | —     |        | $          | —                |       | $                     | —     |           | $          | —            |       | $                 | 571,079    |       | $          | 7,952 |   | $ | (7,952 | ) | $ | 571,079 |   |
| Compensation  and benefits                                       |       | —     |       | —      |       | —                |       | —                |       | 400,501        |       | —            |       | —            |       | 400,501    |       |
| Operating  expenses                                              |       | —     |       | —      |       | —                |       | —                |       | 83,704         |       | —            |       | —            |       | 83,704     |       |
| Insurance  expense                                               |       | —     |       | —      |       | —                |       | —                |       | 14,944         |       | 10,576            |       | (7,952            | )          | 17,568     |       |
| Selling,  general and administrative expenses                    |       | —     |       | —      |       | —                |       | —                |       | 15,520         |       | —            |       | —            |       | 15,520     |       |
| Depreciation  and amortization expense                           |       | —     |       | —      |       | —                |       | —                |       | 17,446         |       | —            |       | —            |       | 17,446     |       |
| Restructuring  charge                                            |       | —     |       | —      |       | —                |       | —                |       | —         |       | —            |       | —            |       | —     |       |
| Income  (loss) from operations                                   |       | —     |       | —      |       | —                |       | —                |       | 38,964         |       | (2,624            | )          | —            |       | 36,340     |       |
| Interest  income from restricted assets                          |       | —     |       | —      |       | —                |       | —                |       | 682            |       | 1,053             |       | —            |       | 1,735      |       |
| Interest  expense                                                |       | —     |       | —      |       | —                |       | —                |       | (10,354        | )          | —            |       | —            |       | (10,354    | )          |
| Realized  gain on investments                                    |       | —     |       | —      |       | —                |       | —                |       | —         |       | 1,571             |       | —            |       | 1,571      |       |
| Interest  and other income                                       |       | —     |       | —      |       | —                |       | —                |       | 287            |       | —            |       | —            |       | 287        |       |
| Income  before income taxes                                      |       | —     |       | —      |       | —                |       | —                |       | 29,579         |       | —            |       | —            |       | 29,579     |       |
| Income  tax expense                                              |       | —     |       | —      |       | —                |       | —                |       | (11,348        | )          | —            |       | —            |       | (11,348    | )          |
| Income  before equity in earnings of unconsolidated subsidiaries |       | —     |       | —      |       | —                |       | —                |       | 18,231         |       | —            |       | —            |       | 18,231     |       |
| Equity  in earnings of unconsolidated subsidiaries               |       | 18,335     |       | 18,335      |       | 3,637                 |       | 14,698                |       | 104            |       | —            |       | (55,005           | )          | 104        |       |
| Net  income                                                      |       | $          | 18,335     |        | $          | 18,335                |       | $                     | 3,637      |           | $          | 14,698            |       | $                 | 18,335     |       | $          | — |   | $ | (55,005 | ) | $ | 18,335 |   |

 

15

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Table of Contents

** **

**ConsolidatingStatement of Operations**

**Forthe six months ended June 30, 2009**

** **
| ** **                                                       | ** ** | ** ** | ** ** | ** **  | ** ** | **Issuer**            | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                       | ** ** | ** ** | ** ** | ** **  | ** ** | **AMR**               | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
|                                                             | ** ** | **EMSC**   | ** ** | **EMS  LP** | ** ** | **HoldCo, Inc.** | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| Net  revenue                                                     |       | $          | —     |        | $          | —                |       | $                     | —     |           | $          | —            |       | $                 | 1,250,313  |       | $          | 14,030 |   | $ | (14,030 | ) | $ | 1,250,313 |   |
| Compensation  and benefits                                       |       | —     |       | —      |       | —                |       | —                |       | 865,162        |       | —            |       | —            |       | 865,162    |       |
| Operating  expenses                                              |       | —     |       | —      |       | —                |       | —                |       | 166,845        |       | —            |       | —            |       | 166,845    |       |
| Insurance  expense                                               |       | —     |       | —      |       | —                |       | —                |       | 47,979         |       | 16,912            |       | (14,030           | )          | 50,861     |       |
| Selling,  general and administrative expenses                    |       | —     |       | —      |       | —                |       | —                |       | 31,315         |       | —            |       | —            |       | 31,315     |       |
| Depreciation  and amortization expense                           |       | —     |       | —      |       | —                |       | —                |       | 32,925         |       | —            |       | —            |       | 32,925     |       |
| Income  (loss) from operations                                   |       | —     |       | —      |       | —                |       | —                |       | 106,087        |       | (2,882            | )          | —            |       | 103,205    |       |
| Interest  income from restricted assets                          |       | —     |       | —      |       | —                |       | —                |       | 990            |       | 1,396             |       | —            |       | 2,386      |       |
| Interest  expense                                                |       | —     |       | —      |       | —                |       | —                |       | (20,469        | )          | —            |       | —            |       | (20,469    | )          |
| Realized  gain on investments                                    |       | —     |       | —      |       | —                |       | —                |       | —         |       | 1,486             |       | —            |       | 1,486      |       |
| Interest  and other income                                       |       | —     |       | —      |       | —                |       | —                |       | 940            |       | —            |       | —            |       | 940        |       |
| Income  before income taxes                                      |       | —     |       | —      |       | —                |       | —                |       | 87,548         |       | —            |       | —            |       | 87,548     |       |
| Income  tax expense                                              |       | —     |       | —      |       | —                |       | —                |       | (34,611        | )          | —            |       | —            |       | (34,611    | )          |
| Income  before equity in earnings of unconsolidated subsidiaries |       | —     |       | —      |       | —                |       | —                |       | 52,937         |       | —            |       | —            |       | 52,937     |       |
| Equity  in earnings of unconsolidated subsidiaries               |       | 53,090     |       | 53,090      |       | 17,935                |       | 35,155                |       | 153            |       | —            |       | (159,270          | )          | 153        |       |
| Net  income                                                      |       | $          | 53,090     |        | $          | 53,090                |       | $                     | 17,935     |           | $          | 35,155            |       | $                 | 53,090     |       | $          | — |   | $ | (159,270 | ) | $ | 53,090 |   |

** **

**ConsolidatingStatement of Operations**

**Forthe six months ended June 30, 2008**

 
| ** **                                                       | ** ** | ** ** | ** ** | ** **  | ** ** | **Issuer**            | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                       | ** ** | ** ** | ** ** | ** **  | ** ** | **AMR**               | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
|                                                             | ** ** | **EMSC**   | ** ** | **EMS  LP** | ** ** | **HoldCo, Inc.** | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| Net  revenue                                                     |       | $          | —     |        | $          | —                |       | $                     | —     |           | $          | —            |       | $                 | 1,136,865  |       | $          | 18,709 |   | $ | (18,709 | ) | $ | 1,136,865 |   |
| Compensation  and benefits                                       |       | —     |       | —      |       | —                |       | —                |       | 794,852        |       | —            |       | —            |       | 794,852    |       |
| Operating  expenses                                              |       | —     |       | —      |       | —                |       | —                |       | 166,927        |       | —            |       | —            |       | 166,927    |       |
| Insurance  expense                                               |       | —     |       | —      |       | —                |       | —                |       | 34,162         |       | 23,078            |       | (18,709           | )          | 38,531     |       |
| Selling,  general and administrative expenses                    |       | —     |       | —      |       | —                |       | —                |       | 30,112         |       | —            |       | —            |       | 30,112     |       |
| Depreciation  and amortization expense                           |       | —     |       | —      |       | —                |       | —                |       | 35,163         |       | —            |       | —            |       | 35,163     |       |
| Restructuring  charge                                            |       | —     |       | —      |       | —                |       | —                |       | —         |       | —            |       | —            |       | —     |       |
| Income  (loss) from operations                                   |       | —     |       | —      |       | —                |       | —                |       | 75,649         |       | (4,369            | )          | —            |       | 71,280     |       |
| Interest  income from restricted assets                          |       | —     |       | —      |       | —                |       | —                |       | 1,364          |       | 2,126             |       | —            |       | 3,490      |       |
| Interest  expense                                                |       | —     |       | —      |       | —                |       | —                |       | (20,270        | )          | —            |       | —            |       | (20,270    | )          |
| Realized  gain on investments                                    |       | —     |       | —      |       | —                |       | —                |       | —         |       | 2,243             |       | —            |       | 2,243      |       |
| Interest  and other income                                       |       | —     |       | —      |       | —                |       | —                |       | 589            |       | —            |       | —            |       | 589        |       |
| Income  before income taxes                                      |       | —     |       | —      |       | —                |       | —                |       | 57,332         |       | —            |       | —            |       | 57,332     |       |
| Income  tax expense                                              |       | —     |       | —      |       | —                |       | —                |       | (22,032        | )          | —            |       | —            |       | (22,032    | )          |
| Income  before equity in earnings of unconsolidated subsidiaries |       | —     |       | —      |       | —                |       | —                |       | 35,300         |       | —            |       | —            |       | 35,300     |       |
| Equity  in earnings of unconsolidated subsidiaries               |       | 35,354     |       | 35,354      |       | 8,698                 |       | 26,656                |       | 54             |       | —            |       | (106,062          | )          | 54         |       |
| Net  income                                                      |       | $          | 35,354     |        | $          | 35,354                |       | $                     | 8,698      |           | $          | 26,656            |       | $                 | 35,354     |       | $          | — |   | $ | (106,062 | ) | $ | 35,354 |   |

 

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Table of Contents

 

**ConsolidatingBalance Sheet**

**Asof June 30, 2009**

** **
| ** **                                | ** ** | ** ** | ** ** | ** **  | ** ** | **Issuer**            | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|------------|------------|-------------|------------|-----------------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                | ** ** | ** ** | ** ** | ** **  | ** ** | **AMR**               | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                                | ** ** | **EMSC**   | ** ** | **EMS  LP** | ** ** | **HoldCo, Inc.** | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| **Assets**                                |       |       |       |        |       |                  |       |                  |       |           |       |              |       |              |       |       |       |
| Current  assets:                          |       |       |       |        |       |                  |       |                  |       |           |       |              |       |              |       |       |       |
| Cash  and cash equivalents                |       | $          | —     |        | $          | —                |       | $                     | —     |           | $          | —            |       | $                 | 266,772    |       | $          | 367 |   | $ | — |   | $ | 267,139 |   |
| Insurance  collateral                     |       | —     |       | —      |       | —                |       | —                |       | 16,380         |       | 56,594            |       | (23,800           | )          | 49,174     |       |
| Trade  and other accounts receivable, net |       | —     |       | —      |       | —                |       | —                |       | 471,072        |       | 555               |       | —            |       | 471,627    |       |
| Parts  and supplies inventory             |       | —     |       | —      |       | —                |       | —                |       | 21,267         |       | —            |       | —            |       | 21,267     |       |
| Other  current assets                     |       | —     |       | —      |       | —                |       | —                |       | 32,588         |       | 1,799             |       | —            |       | 34,387     |       |
| Current  deferred tax assets              |       | —     |       | —      |       | —                |       | —                |       | 86,551         |       | 3,834             |       | —            |       | 90,385     |       |
| Current  assets                           |       | —     |       | —      |       | —                |       | —                |       | 894,630        |       | 63,149            |       | (23,800           | )          | 933,979    |       |
| Non-current  assets:                      |       |       |       |        |       |                  |       |                  |       |           |       |              |       |              |       |       |       |
| Property,  plant, and equipment, net      |       | —     |       | —      |       | —                |       | —                |       | 121,198        |       | —            |       | —            |       | 121,198    |       |
| Intercompany  receivable                  |       | 25,555     |       | 113,400     |       | 268,222               |       | 185,168               |       | —         |       | —            |       | (592,345          | )          | —     |       |
| Intangible  assets, net                   |       | —     |       | —      |       | —                |       | —                |       | 77,587         |       | —            |       | —            |       | 77,587     |       |
| Non-current  deferred tax assets          |       | —     |       | —      |       | —                |       | —                |       | 9,642          |       | (4,315            | )          | —            |       | 5,327      |       |
| Insurance  collateral                     |       | —     |       | —      |       | —                |       | —                |       | 42,422         |       | 79,944            |       | 2,555             |       | 124,921    |       |
| Goodwill                                  |       | —     |       | —      |       | —                |       | —                |       | 334,993        |       | 458               |       | —            |       | 335,451    |       |
| Other  long-term assets                   |       | —     |       | —      |       | 4,989                 |       | 2,203                 |       | 15,100         |       | —            |       | —            |       | 22,292     |       |
| Investment  and advances in subsidiaries  |       | 579,795    |       | 466,395     |       | 260,293               |       | 206,088               |       | 39,748         |       | —            |       | (1,552,319        | )          | —     |       |
| Assets                                    |       | $          | 605,350    |        | $          | 579,795               |       | $                     | 533,504    |           | $          | 393,459           |       | $                 | 1,535,320  |       | $          | 139,236 |   | $ | (2,165,909 | ) | $ | 1,620,755 |   |
| **Liabilities and Equity**                |       |       |       |        |       |                  |       |                  |       |           |       |              |       |              |       |       |       |
| Current  liabilities:                     |       |       |       |        |       |                  |       |                  |       |           |       |              |       |              |       |       |       |
| Accounts  payable                         |       | $          | —     |        | $          | —                |       | $                     | —     |           | $          | —            |       | $                 | 64,722     |       | $          | 55 |   | $ | — |   | $ | 64,777 |   |
| Accrued  liabilities                      |       | —     |       | —      |       | 5,104                 |       | 4,651                 |       | 219,314        |       | 36,023            |       | (626              | )          | 264,466    |       |
| Current  portion of long-term debt        |       | —     |       | —      |       | 1,447                 |       | 650                   |       | 1,928          |       | —            |       | —            |       | 4,025      |       |
| Current  liabilities                      |       | —     |       | —      |       | 6,551                 |       | 5,301                 |       | 285,964        |       | 36,078            |       | (626              | )          | 333,268    |       |
| Long-term  debt                           |       | —     |       | —      |       | 265,614               |       | 183,102               |       | 3,152          |       | —            |       | —            |       | 451,868    |       |
| Other  long-term liabilities              |       | —     |       | —      |       | —                |       | —                |       | 192,973        |       | 57,915            |       | (20,619           | )          | 230,269    |       |
| Intercompany                              |       | —     |       | —      |       | —                |       | —                |       | 586,850        |       | 5,495             |       | (592,345          | )          | —     |       |
| Liabilities                               |       | —     |       | —      |       | 272,165               |       | 188,403               |       | 1,068,939      |       | 99,488            |       | (613,590          | )          | 1,015,405  |       |
| Equity:                                   |       |       |       |        |       |                  |       |                  |       |           |       |              |       |              |       |       |       |
| Class A  common stock                |       | 105        |       | —      |       | —                |       | —                |       | —         |       | 30                |       | (30               | )          | 105        |       |
| Class B  common stock                |       | 1          |       | —      |       | —                |       | —                |       | —         |       | —            |       | —            |       | 1          |       |
| Partnership  equity                       |       | 212,361    |       | 325,761     |       | 189,394               |       | 22,967                |       | 212,361        |       | —            |       | (750,483          | )          | 212,361    |       |
| Additional  paid-in capital               |       | 138,849    |       | —      |       | —                |       | —                |       | —         |       | 4,316             |       | (4,316            | )          | 138,849    |       |
| Retained  earnings                        |       | 256,893    |       | 256,893     |       | 73,341                |       | 183,552               |       | 256,879        |       | 33,403            |       | (804,068          | )          | 256,893    |       |
| Comprehensive  income (loss)              |       | (2,859     | )          | (2,859      | )          | (1,396                | )          | (1,463                | )          | (2,859         | )          | 1,999             |       | 6,578             |       | (2,859     | )          |
| Equity                                    |       | 605,350    |       | 579,795     |       | 261,339               |       | 205,056               |       | 466,381        |       | 39,748            |       | (1,552,319        | )          | 605,350    |       |
| Liabilities  and Equity                   |       | $          | 605,350    |        | $          | 579,795               |       | $                     | 533,504    |           | $          | 393,459           |       | $                 | 1,535,320  |       | $          | 139,236 |   | $ | (2,165,909 | ) | $ | 1,620,755 |   |

 

17

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Table of Contents

 

**ConsolidatingBalance Sheet**

**Asof December 31, 2008**

** **
| ** **                                | ** ** | ** ** | ** ** | ** **  | ** ** | **Issuer**            | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|------------|------------|-------------|------------|-----------------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                | ** ** | ** ** | ** ** | ** **  | ** ** | **AMR**               | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                                | ** ** | **EMSC**   | ** ** | **EMS  LP** | ** ** | **HoldCo, Inc.** | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| **Assets**                                |       |       |       |        |       |                  |       |                  |       |           |       |              |       |              |       |       |       |
| Current  assets:                          |       |       |       |        |       |                  |       |                  |       |           |       |              |       |              |       |       |       |
| Cash  and cash equivalents                |       | $          | —     |        | $          | —                |       | $                     | —     |           | $          | —            |       | $                 | 140,452    |       | $          | 5,721 |   | $ | — |   | $ | 146,173 |   |
| Insurance  collateral                     |       | —     |       | —      |       | —                |       | —                |       | 18,618         |       | 40,751            |       | (4,317            | )          | 55,052     |       |
| Trade  and other accounts receivable, net |       | —     |       | —      |       | —                |       | —                |       | 471,546        |       | 955               |       | —            |       | 472,501    |       |
| Parts  and supplies inventory             |       | —     |       | —      |       | —                |       | —                |       | 21,160         |       | —            |       | —            |       | 21,160     |       |
| Other  current assets                     |       | —     |       | —      |       | —                |       | —                |       | 28,339         |       | 39                |       | —            |       | 28,378     |       |
| Current  deferred tax assets              |       | —     |       | —      |       | —                |       | —                |       | 88,076         |       | 3,834             |       | —            |       | 91,910     |       |
| Current  assets                           |       | —     |       | —      |       | —                |       | —                |       | 768,191        |       | 51,300            |       | (4,317            | )          | 815,174    |       |
| Non-current  assets:                      |       |       |       |        |       |                  |       |                  |       |           |       |              |       |              |       |       |       |
| Property,  plant, and equipment, net      |       | —     |       | —      |       | —                |       | —                |       | 124,869        |       | —            |       | —            |       | 124,869    |       |
| Intercompany  receivable                  |       | 11,067     |       | 113,400     |       | 268,581               |       | 185,250               |       | —         |       | —            |       | (578,298          | )          | —     |       |
| Intangible  assets, net                   |       | —     |       | —      |       | —                |       | —                |       | 76,141         |       | —            |       | —            |       | 76,141     |       |
| Non-current  deferred tax assets          |       | —     |       | —      |       | —                |       | —                |       | 40,666         |       | (4,315            | )          | —            |       | 36,351     |       |
| Insurance  collateral                     |       | —     |       | —      |       | —                |       | —                |       | 39,923         |       | 81,062            |       | (1,341            | )          | 119,644    |       |
| Goodwill                                  |       | —     |       | —      |       | —                |       | —                |       | 345,555        |       | 458               |       | —            |       | 346,013    |       |
| Other  long-term assets                   |       | —     |       | —      |       | 5,496                 |       | 2,513                 |       | 15,018         |       | —            |       | —            |       | 23,027     |       |
| Investment  and advances in subsidiaries  |       | 527,972    |       | 414,572     |       | 241,438               |       | 173,120               |       | 33,216         |       | —            |       | (1,390,318        | )          | —     |       |
| Assets                                    |       | $          | 539,039    |        | $          | 527,972               |       | $                     | 515,515    |           | $          | 360,883           |       | $                 | 1,443,579  |       | $          | 128,505 |   | $ | (1,974,274 | ) | $ | 1,541,219 |   |
| **Liabilities and Equity**                |       |       |       |        |       |                  |       |                  |       |           |       |              |       |              |       |       |       |
| Current  liabilities:                     |       |       |       |        |       |                  |       |                  |       |           |       |              |       |              |       |       |       |
| Accounts  payable                         |       | $          | —     |        | $          | —                |       | $                     | —     |           | $          | —            |       | $                 | 57,260     |       | $          | 58 |   | $ | — |   | $ | 57,318 |   |
| Accrued  liabilities                      |       | —     |       | —      |       | 5,247                 |       | 4,717                 |       | 216,692        |       | 31,263            |       | (1                | )          | 257,918    |       |
| Current  portion of long-term debt        |       | —     |       | —      |       | 1,590                 |       | 715                   |       | 2,600          |       | —            |       | —            |       | 4,905      |       |
| Current  liabilities                      |       | —     |       | —      |       | 6,837                 |       | 5,432                 |       | 276,552        |       | 31,321            |       | (1                | )          | 320,141    |       |
| Long-term  debt                           |       | —     |       | —      |       | 266,194               |       | 183,363               |       | 4,043          |       | —            |       | —            |       | 453,600    |       |
| Other  long-term liabilities              |       | —     |       | —      |       | —                |       | —                |       | 175,623        |       | 58,473            |       | (5,657            | )          | 228,439    |       |
| Intercompany                              |       | —     |       | —      |       | —                |       | —                |       | 572,803        |       | 5,495             |       | (578,298          | )          | —     |       |
| Liabilities                               |       | —     |       | —      |       | 273,031               |       | 188,795               |       | 1,029,021      |       | 95,289            |       | (583,956          | )          | 1,002,180  |       |
| Equity:                                   |       |       |       |        |       |                  |       |                  |       |           |       |              |       |              |       |       |       |
| Class A  common stock                |       | 96         |       | —      |       | —                |       | —                |       | —         |       | 30                |       | (30               | )          | 96         |       |
| Class B  common stock                |       | 1          |       | —      |       | —                |       | —                |       | —         |       | —            |       | —            |       | 1          |       |
| Partnership  equity                       |       | 212,361    |       | 325,761     |       | 189,394               |       | 22,967                |       | 212,361        |       | —            |       | (750,483          | )          | 212,361    |       |
| Additional  paid-in capital               |       | 124,370    |       | —      |       | —                |       | —                |       | —         |       | 4,316             |       | (4,316            | )          | 124,370    |       |
| Retained  earnings                        |       | 203,803    |       | 203,803     |       | 55,406                |       | 148,397               |       | 203,789        |       | 24,337            |       | (635,732          | )          | 203,803    |       |
| Comprehensive  income (loss)              |       | (1,592     | )          | (1,592      | )          | (2,316                | )          | 724                   |       | (1,592         | )          | 4,533             |       | 243               |       | (1,592     | )          |
| Equity                                    |       | 539,039    |       | 527,972     |       | 242,484               |       | 172,088               |       | 414,558        |       | 33,216            |       | (1,390,318        | )          | 539,039    |       |
| Liabilities  and Equity                   |       | $          | 539,039    |        | $          | 527,972               |       | $                     | 515,515    |           | $          | 360,883           |       | $                 | 1,443,579  |       | $          | 128,505 |   | $ | (1,974,274 | ) | $ | 1,541,219 |   |

 

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**CondensedConsolidating Statement of Cash Flows**

**Forthe quarter ended June 30, 2009**

** **
| ** **                                              | ** ** | ** ** | ** ** | ** **  | ** ** | **Issuer**       | ** ** | **Issuer**       | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
|---------------------------------------------------------|------------|------------|------------|-------------|------------|------------------|------------|------------------|------------|----------------|------------|--------------------|------------|------------|------------|
| ** **                                              | ** ** | ** ** | ** ** | ** **  | ** ** | **AMR**          | ** ** | **EmCare**       | ** ** | **Subsidiary** | ** ** | **Subsidiary**     | ** ** | ** ** | ** ** |
| ** **                                              | ** ** | **EMSC**   | ** ** | **EMS  LP** | ** ** | **HoldCo  Inc.** | ** ** | **HoldCo  Inc.** | ** ** | **Guarantors** | ** ** | **Non-guarantors** | ** ** | **Total**  | ** ** |
| **Cash Flows from Operating Activities**                |       |       |       |        |       |             |       |             |       |           |       |               |       |       |       |
| Net  cash provided by (used in) operating activities    |       | $          | —     |        | $          | —           |       | $                | —     |           | $          | —             |       | $          | 101,646    |   | $ | (2,649 | ) | $ | 98,997 |   |
| **Cash Flows from Investing Activities**                |       |       |       |        |       |             |       |             |       |           |       |               |       |       |       |
| Purchase  of property, plant and equipment              |       | —     |       | —      |       | —           |       | —           |       | (12,878        | )          | —             |       | (12,878    | )          |
| Proceeds  from sale of property, plant and equipment    |       | —     |       | —      |       | —           |       | —           |       | 39             |       | —             |       | 39         |       |
| Acquisition  of businesses, net of cash received        |       | —     |       | —      |       | —           |       | —           |       | (133           | )          | —             |       | (133       | )          |
| Net  change in insurance collateral                     |       | —     |       | —      |       | —           |       | —           |       | (1,627         | )          | (13,616            | )          | (15,243    | )          |
| Net  change in deposits and other assets                |       | —     |       | —      |       | —           |       | —           |       | 27             |       | —             |       | 27         |       |
| Net  cash used in investing activities                  |       | —     |       | —      |       | —           |       | —           |       | (14,572        | )          | (13,616            | )          | (28,188    | )          |
| **Cash Flows from Financing Activities**                |       |       |       |        |       |             |       |             |       |           |       |               |       |       |       |
| EMSC  issuance of class A common stock                  |       | 3,825      |       | —      |       | —           |       | —           |       | —         |       | —             |       | 3,825      |       |
| Repayments  of capital lease obligations and other debt |       | —     |       | —      |       | —           |       | —           |       | (1,453         | )          | —             |       | (1,453     | )          |
| Decrease  in bank overdrafts                            |       | —     |       | —      |       | —           |       | —           |       | (190           | )          | —             |       | (190       | )          |
| Net  intercompany borrowings (payments)                 |       | (3,825     | )          | —      |       | —           |       | —           |       | 3,825          |       | —             |       | —     |       |
| Net  cash provided by financing activities              |       | —     |       | —      |       | —           |       | —           |       | 2,182          |       | —             |       | 2,182      |       |
| Change  in cash and cash equivalents                    |       | —     |       | —      |       | —           |       | —           |       | 89,256         |       | (16,265            | )          | 72,991     |       |
| Cash  and cash equivalents, beginning of period         |       | —     |       | —      |       | —           |       | —           |       | 177,516        |       | 16,632             |       | 194,148    |       |
| Cash  and cash equivalents, end of period               |       | $          | —     |        | $          | —           |       | $                | —     |           | $          | —             |       | $          | 266,772    |   | $ | 367 |   | $ | 267,139 |   |

 

**CondensedConsolidating Statement of Cash Flows**

**Forthe quarter ended June 30, 2008**

** **
| ** **                                              | ** ** | ** ** | ** ** | ** **  | ** ** | **Issuer**       | ** ** | **Issuer**       | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
|---------------------------------------------------------|------------|------------|------------|-------------|------------|------------------|------------|------------------|------------|----------------|------------|--------------------|------------|------------|------------|
| ** **                                              | ** ** | ** ** | ** ** | ** **  | ** ** | **AMR**          | ** ** | **EmCare**       | ** ** | **Subsidiary** | ** ** | **Subsidiary**     | ** ** | ** ** | ** ** |
| ** **                                              | ** ** | **EMSC**   | ** ** | **EMS  LP** | ** ** | **HoldCo  Inc.** | ** ** | **HoldCo  Inc.** | ** ** | **Guarantors** | ** ** | **Non-guarantors** | ** ** | **Total**  | ** ** |
| **Cash Flows from Operating Activities**                |       |       |       |        |       |             |       |             |       |           |       |               |       |       |       |
| Net  cash provided by operating activities              |       | $          | —     |        | $          | —           |       | $                | —     |           | $          | —             |       | $          | 55,547     |   | $ | 2,610 |   | $ | 58,157 |   |
| **Cash Flows from Investing Activities**                |       |       |       |        |       |             |       |             |       |           |       |               |       |       |       |
| Purchase  of property, plant and equipment              |       | —     |       | —      |       | —           |       | —           |       | (7,653         | )          | —             |       | (7,653     | )          |
| Proceeds  from sale of property, plant and equipment    |       | —     |       | —      |       | —           |       | —           |       | 157            |       | —             |       | 157        |       |
| Acquisition  of businesses, net of cash received        |       | —     |       | —      |       | —           |       | —           |       | (6,679         | )          | —             |       | (6,679     | )          |
| Net  change in insurance collateral                     |       | —     |       | —      |       | —           |       | —           |       | 5,130          |       | 7,601              |       | 12,731     |       |
| Net  change in deposits and other assets                |       | —     |       | —      |       | —           |       | —           |       | 1,975          |       | —             |       | 1,975      |       |
| Net  cash provided by (used in) investing activities    |       | —     |       | —      |       | —           |       | —           |       | (7,070         | )          | 7,601              |       | 531        |       |
| **Cash Flows from Financing Activities**                |       |       |       |        |       |             |       |             |       |           |       |               |       |       |       |
| EMSC  issuance of class A common stock                  |       | 33         |       | —      |       | —           |       | —           |       | —         |       | —             |       | 33         |       |
| Repayments  of capital lease obligations and other debt |       | —     |       | —      |       | —           |       | —           |       | (1,570         | )          | —             |       | (1,570     | )          |
| Decrease  in bank overdrafts                            |       | —     |       | —      |       | —           |       | —           |       | (287           | )          | —             |       | (287       | )          |
| Net  intercompany borrowings (payments)                 |       | (33        | )          | —      |       | —           |       | —           |       | 33             |       | —             |       | —     |       |
| Net  cash used in financing activities                  |       | —     |       | —      |       | —           |       | —           |       | (1,824         | )          | —             |       | (1,824     | )          |
| Change  in cash and cash equivalents                    |       | —     |       | —      |       | —           |       | —           |       | 46,653         |       | 10,211             |       | 56,864     |       |
| Cash  and cash equivalents, beginning of period         |       | —     |       | —      |       | —           |       | —           |       | 15,328         |       | 827                |       | 16,155     |       |
| Cash  and cash equivalents, end of period               |       | $          | —     |        | $          | —           |       | $                | —     |           | $          | —             |       | $          | 61,981     |   | $ | 11,038 |   | $ | 73,019 |   |

 

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**CondensedConsolidating Statement of Cash Flows**

**Forthe six months ended June 30, 2009**

** **
| ** **                                              | ** ** | ** ** | ** ** | ** **  | ** ** | **Issuer**       | ** ** | **Issuer**       | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
|---------------------------------------------------------|------------|------------|------------|-------------|------------|------------------|------------|------------------|------------|----------------|------------|--------------------|------------|------------|------------|
| ** **                                              | ** ** | ** ** | ** ** | ** **  | ** ** | **AMR**          | ** ** | **EmCare**       | ** ** | **Subsidiary** | ** ** | **Subsidiary**     | ** ** | ** ** | ** ** |
| ** **                                              | ** ** | **EMSC**   | ** ** | **EMS  LP** | ** ** | **HoldCo  Inc.** | ** ** | **HoldCo  Inc.** | ** ** | **Guarantors** | ** ** | **Non-guarantors** | ** ** | **Total**  | ** ** |
| **Cash Flows from Operating Activities**                |       |       |       |        |       |             |       |             |       |           |       |               |       |       |       |
| Net  cash provided by (used in) operating activities    |       | $          | —     |        | $          | —           |       | $                | —     |           | $          | —             |       | $          | 144,622    |   | $ | (3,683 | ) | $ | 140,939 |   |
| **Cash Flows from Investing Activities**                |       |       |       |        |       |             |       |             |       |           |       |               |       |       |       |
| Purchase  of property, plant and equipment              |       | —     |       | —      |       | —           |       | —           |       | (20,085        | )          | —             |       | (20,085    | )          |
| Proceeds  from sale of property, plant and equipment    |       | —     |       | —      |       | —           |       | —           |       | 60             |       | —             |       | 60         |       |
| Net  change in insurance collateral                     |       | —     |       | —      |       | —           |       | —           |       | (262           | )          | (1,671             | )          | (1,933     | )          |
| Net  change in deposits and other assets                |       | —     |       | —      |       | —           |       | —           |       | (776           | )          | —             |       | (776       | )          |
| Net  cash used in investing activities                  |       | —     |       | —      |       | —           |       | —           |       | (21,063        | )          | (1,671             | )          | (22,734    | )          |
| **Cash Flows from Financing Activities**                |       |       |       |        |       |             |       |             |       |           |       |               |       |       |       |
| EMSC  issuance of class A common stock                  |       | 4,723      |       | —      |       | —           |       | —           |       | —         |       | —             |       | 4,723      |       |
| Repayments  of capital lease obligations and other debt |       | —     |       | —      |       | —           |       | —           |       | (2,612         | )          | —             |       | (2,612     | )          |
| Increase  in bank overdrafts                            |       | —     |       | —      |       | —           |       | —           |       | 650            |       | —             |       | 650        |       |
| Net  intercompany borrowings (payments)                 |       | (4,723     | )          | —      |       | —           |       | —           |       | 4,723          |       | —             |       | —     |       |
| Net  cash provided by financing activities              |       | —     |       | —      |       | —           |       | —           |       | 2,761          |       | —             |       | 2,761      |       |
| Change  in cash and cash equivalents                    |       | —     |       | —      |       | —           |       | —           |       | 126,320        |       | (5,354             | )          | 120,966    |       |
| Cash  and cash equivalents, beginning of period         |       | —     |       | —      |       | —           |       | —           |       | 140,452        |       | 5,721              |       | 146,173    |       |
| Cash  and cash equivalents, end of period               |       | $          | —     |        | $          | —           |       | $                | —     |           | $          | —             |       | $          | 266,772    |   | $ | 367 |   | $ | 267,139 |   |

 

**CondensedConsolidating Statement of Cash Flows**

**Forthe six months ended June 30, 2008**

** **
| ** **                                              | ** ** | ** ** | ** ** | ** **  | ** ** | **Issuer**       | ** ** | **Issuer**       | ** ** | ** **     | ** ** | ** **         | ** ** | ** ** | ** ** |
|---------------------------------------------------------|------------|------------|------------|-------------|------------|------------------|------------|------------------|------------|----------------|------------|--------------------|------------|------------|------------|
| ** **                                              | ** ** | ** ** | ** ** | ** **  | ** ** | **AMR**          | ** ** | **EmCare**       | ** ** | **Subsidiary** | ** ** | **Subsidiary**     | ** ** | ** ** | ** ** |
| ** **                                              | ** ** | **EMSC**   | ** ** | **EMS  LP** | ** ** | **HoldCo  Inc.** | ** ** | **HoldCo  Inc.** | ** ** | **Guarantors** | ** ** | **Non-guarantors** | ** ** | **Total**  | ** ** |
| **Cash Flows from Operating Activities**                |       |       |       |        |       |             |       |             |       |           |       |               |       |       |       |
| Net  cash provided by operating activities              |       | $          | —     |        | $          | —           |       | $                | —     |           | $          | —             |       | $          | 54,494     |   | $ | 885 |   | $ | 55,379 |   |
| **Cash Flows from Investing Activities**                |       |       |       |        |       |             |       |             |       |           |       |               |       |       |       |
| Purchase  of property, plant and equipment              |       | —     |       | —      |       | —           |       | —           |       | (10,180        | )          | —             |       | (10,180    | )          |
| Proceeds  from sale of property, plant and equipment    |       | —     |       | —      |       | —           |       | —           |       | 220            |       | —             |       | 220        |       |
| Acquisition  of businesses, net of cash received        |       | —     |       | —      |       | —           |       | —           |       | (19,957        | )          | —             |       | (19,957    | )          |
| Net  change in insurance collateral                     |       | —     |       | —      |       | —           |       | —           |       | 8,630          |       | 6,226              |       | 14,856     |       |
| Net  change in deposits and other assets                |       | —     |       | —      |       | —           |       | —           |       | 2,628          |       | —             |       | 2,628      |       |
| Net  cash provided by (used in) investing activities    |       | —     |       | —      |       | —           |       | —           |       | (18,659        | )          | 6,226              |       | (12,433    | )          |
| **Cash Flows from Financing Activities**                |       |       |       |        |       |             |       |             |       |           |       |               |       |       |       |
| EMSC  issuance of class A common stock                  |       | 45         |       | —      |       | —           |       | —           |       | —         |       | —             |       | 45         |       |
| Repayments  of capital lease obligations and other debt |       | —     |       | —      |       | —           |       | —           |       | (16,721        | )          | —             |       | (16,721    | )          |
| Increase  in bank overdrafts                            |       | —     |       | —      |       | —           |       | —           |       | 3,835          |       | —             |       | 3,835      |       |
| Borrowings  under revolving credit facility             |       | —     |       | —      |       | —           |       | —           |       | 14,000         |       | —             |       | 14,000     |       |
| Net  intercompany borrowings (payments)                 |       | (45        | )          | —      |       | —           |       | —           |       | 45             |       | —             |       | —     |       |
| Net  cash provided by financing activities              |       | —     |       | —      |       | —           |       | —           |       | 1,159          |       | —             |       | 1,159      |       |
| Change  in cash and cash equivalents                    |       | —     |       | —      |       | —           |       | —           |       | 36,994         |       | 7,111              |       | 44,105     |       |
| Cash  and cash equivalents, beginning of period         |       | —     |       | —      |       | —           |       | —           |       | 24,987         |       | 3,927              |       | 28,914     |       |
| Cash  and cash equivalents, end of period               |       | $          | —     |        | $          | —           |       | $                | —     |           | $          | —             |       | $          | 61,981     |   | $ | 11,038 |   | $ | 73,019 |   |

 

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

 

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

 

Certain 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 Reportson Form 10-Q. Among the factors that could cause future results to differmaterially from those provided in this Quarterly Report on Form 10-Q are:the impact on our revenue of changes in transport volume, mix of insured anduninsured patients, and third party reimbursement rates and methods; theadequacy of our insurance coverage and insurance reserves; potential penaltiesor changes to our operations if we fail to comply with extensive and complexgovernment regulation of our industry, both as it exists now and as it maychange in the future; our ability to recruit and retain qualified physiciansand other healthcare professionals, and enforce our non-compete agreements withour physicians; the loss of one or more members of our senior management team;the outcome of government investigations of certain of our business practices;our ability to generate cash flow to service our debt obligations and fund thecost of capital expenditures to maintain and upgrade our vehicle fleet andmedical equipment; and the loss of existing contracts and the accuracy of ourassessment of costs under new contracts.

 

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

 

This Report should beread in conjunction with the Company’s consolidated financial statements andnotes thereto included in our Annual Report on Form 10-K filed with theSEC on February 23, 2009.

 

***Company Overview***

 

We are a leading providerof emergency medical services in the United States. We operate our business andmarket our services under the AMR and EmCare brands. We believe that AMR, overits more than 50 years of operating history, has become the leading provider ofambulance transport services in the United States. We believe that EmCare, overits more than 35 years of operating history, has become the leading provider ofoutsourced emergency department staffing and management services in the UnitedStates and also provides hospital-based services for hospitalist/inpatient,radiology, and anesthesiology departments.

 

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

 

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

 

We evaluate our revenuenet of provisions for contractual payor discounts and provisions foruncompensated care. Medicaid, Medicare and certain other payors receivediscounts from our standard charges, which we refer to as contractualdiscounts. In addition, individuals we treat and transport may be personallyresponsible for a deductible or co-pay under their third party payor coverage,and most of our contracts require us to treat and transport patients who haveno insurance or other third party payor coverage. Due to the uncertaintyregarding collectability of charges associated with services we provide to thesepatients, which we refer to as uncompensated care, our net revenue recognitionis based on expected cash collections. Our net revenue is gross billings afterprovisions for contractual discounts and estimated uncompensated care.Provisions for contractual discounts and uncompensated care

 

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have increasedhistorically primarily as a result of increases in gross billing rates.

 

The table belowsummarizes our approximate payor mix as a percentage of both net revenue andtotal transports and patient encounters for the three and six months ended June 30,2009 and 2008. In determining the net revenue payor mix, we use cashcollections in the period as an approximation of net revenue recorded.

 
| ** **                             | ** ** | **Percentage  of Net Revenue**          | ** ** | **Percentage  of Total Volume**      | ** ** |
|----------------------------------------|------------|-----------------------------------------|------------|--------------------------------------|------------|
| ** **                             | ** ** | **Quarter  ended********June 30,** | ** ** | **Six  months ended  June 30,** | ** ** | **Quarter  ended********June 30,** | ** ** | **Six  months ended   June 30,** | ** ** |
| ** **                             | ** ** | **2009**                                | ** ** | **2008**                             | ** ** | **2009** | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
| Medicare                               |       | 23.4                                    | %          | 24.5                                 | %          | 23.6 | % | 24.7 | % | 24.3 | % | 25.7 | % | 25.1 | % | 26.2 | % |
| Medicaid                               |       | 4.6                                     | %          | 4.6                                  | %          | 4.5 | % | 4.6 | % | 11.2 | % | 10.9 | % | 11.0 | % | 10.7 | % |
| Commercial insurance and  managed care |       | 51.5                                    | %          | 49.7                                 | %          | 50.7 | % | 49.6 | % | 42.9 | % | 42.1 | % | 42.5 | % | 42.0 | % |
| Self-pay                               |       | 3.9                                     | %          | 4.4                                  | %          | 4.0 | % | 4.5 | % | 21.6 | % | 21.3 | % | 21.4 | % | 21.1 | % |
| Subsidies & fees              |       | 16.6                                    | %          | 16.8                                 | %          | 17.2 | % | 16.6 | % | — |   | — |   | — |   | — |   |
| Total                                  |       | 100.0                                   | %          | 100.0                                | %          | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |

 

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

 

**AMR**

 

Approximately 88% of AMR’snet revenue for the six months ended June 30, 2009 was transport revenuederived from the treatment and transportation of patients, including fixed wingmedical transportation services, based on billings to third party payors,healthcare facilities and patients. The balance of AMR’s net revenue is derivedfrom direct billings to communities and government agencies for the provisionof training, dispatch center and other services.  AMR’s measures for net revenue includetransports (segregated into ambulance and wheelchair transports, and weightedin certain of our analyses) and net revenue per transport.

 

The change from period toperiod in the number of transports is influenced by changes 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 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.

 

**EmCare**

 

Of EmCare’s net revenuefor the six months ended June 30, 2009, approximately 86% was derived fromour hospital contracts for emergency department staffing and approximately 14%was derived from hospitalist, anesthesiology, radiology and other hospitalmanagement services.  Approximately 80%of EmCare’s net revenue was generated from billings to third party payors andpatients for patient encounters and approximately 20% was generated frombillings to hospitals and affiliated physician groups for professionalservices. EmCare’s key net revenue measures are patient encounters (segregatedinto emergency department visits, radiology reads, and anesthesiology andhospitalist encounters, and weighted in certain of our analyses), net revenueper patient encounter, and

 

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number of contracts.  Due to our expansion in the radiology andanesthesiology markets which typically generate lower net revenue per encounterthan emergency room visits, patient encounters are now being weighted to makenet revenue per encounter comparable across all of EmCare’s markets.

 

The change from period toperiod in the number of patient encounters under our “same store” contracts isinfluenced by general community conditions as well as hospital-specificelements, many of which are beyond our direct control.

 

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 encounter and professional liability costs.

 

We have developedextensive professional liability risk mitigation processes, including riskassessments on medical professionals and hospitals, extensive incidentreporting and tracking processes, clinical fail-safe programs, training andeducation and other risk mitigation programs which we believe have resulted ina continued reduction in the frequency, severity and development of claims.

 

***Recent Developments***

 

The Company adopted SFAS No. 141(revised 2007)*Business Combinations*(“SFAS 141(R)”) effective January 1, 2009.  The new standard replacesFASB Statement No. 141 and establishes requirements for how an acquirer ina business combination recognizes and measures the assets acquired, liabilitiesassumed and any noncontrolling interests.  The impact to the Company’sconsolidated financial statements and related disclosures will depend on thenature and terms of the business combinations entered into subsequent toadoption of SFAS 141(R).

 

***Factors Affecting Operating Results***

 

**Changesin Net 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 contract expirations.We regularly bid for new contracts, frequently in a formal competitive biddingprocess that often requires written responses to a Request for Proposal, orRFP, and, in any fiscal period, certain of our contracts will expire. We mayelect not to seek extension or renewal of a contract, or may reduce certainservices, if we determine that we cannot continue to provide such services onfavorable terms. With respect to expiring contracts we would like to renew, wemay be required to seek renewal through an RFP, and we may not be successful inretaining any such contracts, or retaining them on terms that are as favorableas present terms.

 

**Inflation**

 

Certain of our expenses,such as wages and benefits, insurance, fuel and equipment repair and maintenancecosts, are subject to normal inflationary pressures. Fuel expense represented9.0% and 16.1% of AMR’s operating expenses for the three months ended June 30,2009 and 2008, respectively, and 8.5% and 14.6% for the six months ended June 30,2009 and 2008, respectively.  Although wehave generally been able to offset inflationary and other cost increasesthrough increased operating efficiencies and successful negotiation of fees andsubsidies, we can provide no assurance that we will be able to offset any futurefuel and inflationary cost increases through similar efficiencies and feechanges.

 

***Critical Accounting Policies***

 

**RevenueRecognition**

 

Management regularlyanalyzes the ultimate collectability of accounts receivable after certainstages of the collection cycle using a look-back analysis to determine theamount of receivables subsequently collected. Adjustments related to thisanalysis were less than 1% of net revenue for the three and six month periodsended June 30, 2009 and 2008.

 

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**Resultsof Operations**

 

**Quarterand Six Months Ended June 30, 2009 Compared to the Quarter and Six MonthsEnded June 30, 2008**

 

The following tablespresent a comparison of financial data from our unaudited consolidatedstatements of operations for the three and six months ended June 30, 2009and 2008 for EMSC and our two operating segments.

 

**Non-GAAPMeasures**

 

*AdjustedEBITDA. *AdjustedEBITDA is defined as net income before equity in earnings of unconsolidatedsubsidiary, income tax expense, interest and other income, realized gain oninvestments, interest expense and depreciation and amortization.  AdjustedEBITDA is commonly used by management and investors as a performance measureand liquidity indicator. Adjusted EBITDA is not considered a measure offinancial performance under U.S. generally accepted accounting principles, orGAAP, and the items excluded from Adjusted EBITDA are significant components inunderstanding and assessing our financial performance. Adjusted EBITDA shouldnot be considered in isolation or as an alternative to such GAAP measures asnet income, cash flows provided by or used in operating, investing or financingactivities or other financial statement data presented in our financialstatements as an indicator of financial performance or liquidity. SinceAdjusted EBITDA is not a measure determined in accordance with GAAP and issusceptible to varying calculations, Adjusted EBITDA, as presented, may not becomparable to other similarly titled measures of other companies. The tablesset forth a reconciliation of Adjusted EBITDA to net income and cash flowsprovided by operating activities.

 

**UnauditedConsolidated Results of Operations and as a Percentage of Net Revenue**

**(dollarsin thousands)**

**EMSC**

** **
| ** **                                       | ** ** | **Quarter ended******** June 30, 2009** | ** ** | **Quarter ended******** June 30, 2008** | ** ** | **Six months ended******** June 30, 2009** | ** ** | **Six months ended******** June 30, 2008** | ** ** |
|--------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| ** **                                       | ** ** | ** **                                                  | ** ** | **% of net******** revenue**                 | ** ** | ** **                                                          | ** ** | **% of net******** revenue**                         | ** ** | ** ** | ** ** | **% of net******** revenue** | ** ** | ** ** | ** ** | **% of net******** revenue** | ** ** |
| Net  revenue                                     |       | $                                                           | 637,291    |                                                        | 100.0      | %                                                                   | $          | 571,079                                                             |       | 100.0 | % | $ | 1,250,313 |   | 100.0 | % | $ | 1,136,865 |   | 100.0 | % |
| Compensation  and benefits                       |       | 438,628                                                     |       | 68.8                                                        |       | 400,501                                                             |       | 70.1                                                                |       | 865,162 |   | 69.2 |   | 794,852 |   | 69.9 |   |
| Operating  expenses                              |       | 82,173                                                      |       | 12.9                                                        |       | 83,704                                                              |       | 14.7                                                                |       | 166,845 |   | 13.3 |   | 166,927 |   | 14.7 |   |
| Insurance  expense                               |       | 28,357                                                      |       | 4.4                                                         |       | 17,568                                                              |       | 3.1                                                                 |       | 50,861 |   | 4.1 |   | 38,531 |   | 3.4 |   |
| Selling,  general and administrative expenses    |       | 16,279                                                      |       | 2.6                                                         |       | 15,520                                                              |       | 2.7                                                                 |       | 31,315 |   | 2.5 |   | 30,112 |   | 2.6 |   |
| Interest  income from restricted assets          |       | (1,120                                                      | )          | (0.2                                                        | )          | (1,735                                                              | )          | (0.3                                                                | )          | (2,386 | ) | (0.2 | ) | (3,490 | ) | (0.3 | ) |
| Adjusted  EBITDA                                 |       | $                                                           | 72,974     |                                                        | 11.5       | %                                                                   | $          | 55,521                                                              |       | 9.7 | % | $ | 138,516 |   | 11.1 | % | $ | 109,933 |   | 9.7 | % |
| Depreciation  and amortization expenses          |       | (16,157                                                     | )          | (2.5                                                        | )          | (17,446                                                             | )          | (3.1                                                                | )          | (32,925 | ) | (2.6 | ) | (35,163 | ) | (3.1 | ) |
| Interest  expense                                |       | (10,279                                                     | )          | (1.6                                                        | )          | (10,354                                                             | )          | (1.8                                                                | )          | (20,469 | ) | (1.6 | ) | (20,270 | ) | (1.8 | ) |
| Realized  gain on investments                    |       | 847                                                         |       | 0.1                                                         |       | 1,571                                                               |       | 0.3                                                                 |       | 1,486 |   | 0.1 |   | 2,243 |   | 0.2 |   |
| Interest  and other income                       |       | 423                                                         |       | 0.1                                                         |       | 287                                                                 |       | 0.1                                                                 |       | 940 |   | 0.1 |   | 589 |   | 0.1 |   |
| Income  tax expense                              |       | (18,885                                                     | )          | (3.0                                                        | )          | (11,348                                                             | )          | (2.0                                                                | )          | (34,611 | ) | (2.8 | ) | (22,032 | ) | (1.9 | ) |
| Equity  in earnings of unconsolidated subsidiary |       | 96                                                          |       | 0.0                                                         |       | 104                                                                 |       | 0.0                                                                 |       | 153 |   | 0.0 |   | 54 |   | 0.0 |   |
| Net  income                                      |       | $                                                           | 29,019     |                                                        | 4.6        | %                                                                   | $          | 18,335                                                              |       | 3.2 | % | $ | 53,090 |   | 4.2 | % | $ | 35,354 |   | 3.1 | % |

 

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**UnauditedReconciliation of Adjusted EBITDA to Cash Flows Provided by OperatingActivities**

**(dollarsin thousands)**

** **
| ** **                                    | ** ** | **For  the quarter ended June 30,** | ** ** | **For  the six months ended June 30,** | ** ** |
|-----------------------------------------------|------------|------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                    | ** ** | **2009**                                 | ** ** | **2008**                                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| Adjusted  EBITDA                              |       | $                                        | 72,974     |                                             | $          | 55,521 |   | $ | 138,516 |   | $ | 109,933 |   |
| Interest  paid                                |       | (9,774                                   | )          | (9,827                                           | )          | (19,651 | ) | (19,164 | ) |
| Change  in accounts receivable                |       | 3,499                                    |       | 12,556                                           |       | 874 |   | (13,752 | ) |
| Change  in other operating assets/liabilities |       | 31,439                                   |       | 659                                              |       | 18,956 |   | (22,081 | ) |
| Equity  based compensation                    |       | 1,104                                    |       | 562                                              |       | 1,754 |   | 1,124 |   |
| Other                                         |       | (245                                     | )          | (1,314                                           | )          | 490 |   | (681 | ) |
| Cash  flows provided by operating activities  |       | $                                        | 98,997     |                                             | $          | 58,157 |   | $ | 140,939 |   | $ | 55,379 |   |

 

**UnauditedSegment Results of Operations and as a Percentage of Net Revenue**

**(dollarsin thousands)**

 

**AMR**

** **
| ** **                                                   | ** ** | **Quarter ended******** June 30, 2009** | ** ** | **Quarter ended******** June 30, 2008** | ** ** | **Six months ended******** June 30, 2009** | ** ** | **Six months ended******** June 30, 2008** | ** ** |
|--------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| ** **                                                   | ** ** | ** **                                                  | ** ** | **% of net******** revenue**                 | ** ** | ** **                                                          | ** ** | **% of net******** revenue**                         | ** ** | ** ** | ** ** | **% of net******** revenue** | ** ** | ** ** | ** ** | **% of net******** revenue** | ** ** |
| Net  revenue                                                 |       | $                                                           | 335,504    |                                                        | 100.0      | %                                                                   | $          | 323,672                                                             |       | 100.0 | % | $ | 671,950 |   | 100.0 | % | $ | 649,988 |   | 100.0 | % |
| Compensation  and benefits                                   |       | 207,820                                                     |       | 61.9                                                        |       | 204,110                                                             |       | 63.1                                                                |       | 416,094 |   | 61.9 |   | 408,089 |   | 62.8 |   |
| Operating  expenses                                          |       | 72,084                                                      |       | 21.5                                                        |       | 75,691                                                              |       | 23.4                                                                |       | 146,619 |   | 21.8 |   | 149,782 |   | 23.0 |   |
| Insurance  expense                                           |       | 13,928                                                      |       | 4.2                                                         |       | 8,912                                                               |       | 2.8                                                                 |       | 25,016 |   | 3.7 |   | 20,100 |   | 3.1 |   |
| Selling,  general and administrative expenses                |       | 9,682                                                       |       | 2.9                                                         |       | 9,665                                                               |       | 3.0                                                                 |       | 18,898 |   | 2.8 |   | 19,007 |   | 2.9 |   |
| Interest  income from restricted assets                      |       | (435                                                        | )          | (0.1                                                        | )          | (682                                                                | )          | (0.2                                                                | )          | (990 | ) | (0.1 | ) | (1,364 | ) | (0.2 | ) |
| Adjusted  EBITDA                                             |       | $                                                           | 32,425     |                                                        | 9.7        | %                                                                   | $          | 25,976                                                              |       | 8.0 | % | $ | 66,313 |   | 9.9 | % | $ | 54,374 |   | 8.4 | % |
| Reconciliation  of Adjusted EBITDA to income from operations |       |                                                        |       |                                                        |       |                                                                |       |                                                                |       |   |   |   |   |   |   |   |   |
| Adjusted  EBITDA                                             |       | 32,425                                                      |       | 9.7                                                         |       | 25,976                                                              |       | 8.0                                                                 |       | 66,313 |   | 9.9 |   | 54,374 |   | 8.4 |   |
| Depreciation  and amortization expense                       |       | (12,242                                                     | )          | (3.6                                                        | )          | (14,118                                                             | )          | (4.4                                                                | )          | (24,948 | ) | (3.7 | ) | (28,504 | ) | (4.4 | ) |
| Interest  income from restricted assets                      |       | (435                                                        | )          | (0.1                                                        | )          | (682                                                                | )          | (0.2                                                                | )          | (990 | ) | (0.1 | ) | (1,364 | ) | (0.2 | ) |
| Income  from operations                                      |       | $                                                           | 19,748     |                                                        | 5.9        | %                                                                   | $          | 11,176                                                              |       | 3.5 | % | $ | 40,375 |   | 6.0 | % | $ | 24,506 |   | 3.8 | % |

 

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**EmCare**

 
| ** **                                                   | ** ** | **Quarter ended******** June 30, 2009** | ** ** | **Quarter ended******** June 30, 2008** | ** ** | **Six months ended******** June 30, 2009** | ** ** | **Six months ended******** June 30, 2008** | ** ** |
|--------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| ** **                                                   | ** ** | ** **                                                  | ** ** | **% of net******** revenue**                 | ** ** | ** **                                                          | ** ** | **% of net******** revenue**                         | ** ** | ** ** | ** ** | **% of net******** revenue** | ** ** | ** ** | ** ** | **% of net******** revenue** | ** ** |
| Net  revenue                                                 |       | $                                                           | 301,787    |                                                        | 100.0      | %                                                                   | $          | 247,407                                                             |       | 100.0 | % | $ | 578,363 |   | 100.0 | % | $ | 486,877 |   | 100.0 | % |
| Compensation  and benefits                                   |       | 230,808                                                     |       | 76.5                                                        |       | 196,391                                                             |       | 79.4                                                                |       | 449,068 |   | 77.6 |   | 386,763 |   | 79.4 |   |
| Operating  expenses                                          |       | 10,089                                                      |       | 3.3                                                         |       | 8,013                                                               |       | 3.2                                                                 |       | 20,226 |   | 3.5 |   | 17,145 |   | 3.5 |   |
| Insurance  expense                                           |       | 14,429                                                      |       | 4.8                                                         |       | 8,656                                                               |       | 3.5                                                                 |       | 25,845 |   | 4.5 |   | 18,431 |   | 3.8 |   |
| Selling,  general and administrative expenses                |       | 6,597                                                       |       | 2.2                                                         |       | 5,855                                                               |       | 2.4                                                                 |       | 12,417 |   | 2.1 |   | 11,105 |   | 2.3 |   |
| Interest  income from restricted assets                      |       | (685                                                        | )          | (0.2                                                        | )          | (1,053                                                              | )          | (0.4                                                                | )          | (1,396 | ) | (0.2 | ) | (2,126 | ) | (0.4 | ) |
| Adjusted  EBITDA                                             |       | $                                                           | 40,549     |                                                        | 13.4       | %                                                                   | $          | 29,545                                                              |       | 11.9 | % | $ | 72,203 |   | 12.5 | % | $ | 55,559 |   | 11.4 | % |
| Reconciliation  of Adjusted EBITDA to income from operations |       |                                                        |       |                                                        |       |                                                                |       |                                                                |       |   |   |   |   |   |   |   |   |
| Adjusted  EBITDA                                             |       | 40,549                                                      |       | 13.4                                                        |       | 29,545                                                              |       | 11.9                                                                |       | 72,203 |   | 12.5 |   | 55,559 |   | 11.4 |   |
| Depreciation  and amortization expenses                      |       | (3,915                                                      | )          | (1.3                                                        | )          | (3,328                                                              | )          | (1.3                                                                | )          | (7,977 | ) | (1.4 | ) | (6,659 | ) | (1.4 | ) |
| Interest  income from restricted assets                      |       | (685                                                        | )          | (0.2                                                        | )          | (1,053                                                              | )          | (0.4                                                                | )          | (1,396 | ) | (0.2 | ) | (2,126 | ) | (0.4 | ) |
| Income  from operations                                      |       | $                                                           | 35,949     |                                                        | 11.9       | %                                                                   | $          | 25,164                                                              |       | 10.2 | % | $ | 62,830 |   | 10.9 | % | $ | 46,774 |   | 9.6 | % |

 

***Quarter ended June 30, 2009 compared to the quarterended June 30, 2008***

 

***Consolidated***

 

Our results for the threemonths ended June 30, 2009 reflect an increase in net revenue of $66.2million and an increase in net income of $10.7 million compared to the threemonths ended June 30, 2008.  The increase in net income isattributable primarily to growth in income from operations, offset in part byincreased income tax expense.  Basic and diluted earnings per share were$0.69 and $0.67, respectively, for the three months ended June 30,2009.  Basic and diluted earnings per share were $0.44 and $0.43,respectively, for the same period in 2008.

 

*Netrevenue. *Forthe three months ended June 30, 2009, we generated net revenue of $637.3million compared to $571.1million for the three months ended June 30,2008, representing an increase of 11.6%.  The increase is attributableprimarily to increases in rates and volumes on existing contracts and increasedvolume from net new contracts and acquisitions.

 

*AdjustedEBITDA.* AdjustedEBITDA was $73.0 million, or 11.5% of net revenue, for the three months ended June 30,2009 compared to $55.5 million, or 9.7% of net revenue for the three monthsended June 30, 2008.

 

*Interestexpense.* Interestexpense for the three months ended June 30, 2009 was $10.3 millioncompared to $10.4 million for the three months ended June 30, 2008.

 

*Incometax expense. *Incometax expense for the three months ended June 30, 2009 was $18.9 millioncompared to $11.3 million for the same period in 2008.  Our effective taxrate for the three months ended June 30, 2009 was 39.5%, compared to38.4% for the same period in 2008.

 

***AMR***

 

*Netrevenue. *Netrevenue for the three months ended June 30, 2009 was $335.5 million, anincrease of $11.8 million, or 3.7%, from $323.7 million for the same period in2008.  The increase in net revenue wasdue primarily to an increase in net revenue per weighted transport of 5.0%, or$15.9 million, partially offset by a decrease of 1.3%, or $4.1 million, inweighted transport volume.  Of the increase in net revenue per weightedtransport, 3.2% is attributable primarily to various rate increases, includinga Medicare fee increase effective January 1, 2009, and the remainder isdue primarily to growth in our managed transportation business.  Weighted transports decreased 9,400 from thesame quarter last year.  The change was due to a decrease in weightedtransports of 12,200 from

 

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the exit of markets and adecrease in weighted transport volume in existing markets of 3,000, or 0.4%,which were offset partially by 5,800 weighted transports from entrance into newmarkets.

 

*Compensationand benefits. *Compensationand benefit costs for the three months ended June 30, 2009 were $207.8million, or 61.9% of net revenue, compared to $204.1 million, or 63.1% of netrevenue, for the same period last year. Ambulance crew wages per ambulance unithour increased by approximately 3.8%, or $4.3 million, attributable primarilyto annual wage rate increases.   Ambulance unit hours decreasedperiod over period by 1.3%, or $1.5 million, due primarily to the reduction involume in existing markets and improvements in our deployment. Compensation and benefits decreased as a percentage of net revenue due in partto the growth in our managed transportation business.  Our managed transportation costs arereflected primarily in operating expenses.

 

*Operatingexpenses. *Operatingexpenses for the three months ended June 30, 2009 were $72.1 million, or21.5% of net revenue, compared to $75.7 million, or 23.4% of net revenue, forthe three months ended June 30, 2008. Operating expenses per weighted transport decreased 3.5% in the threemonths ended June 30, 2009 compared to the same period in 2008.  Thechange is due primarily to decreased fuel costs of $5.7 million, includingapproximately $5.0 million related to lower fuel rates and decreased aircraftexpenses of $1.5 million from decreased transports in our fixed wing medicaltransportation services business, partially offset by an increase of $3.9million in operating expenses associated with growth in our managed transportationbusiness.

 

*Insuranceexpense. *Insuranceexpense for the three months ended June 30, 2009 was $13.9 million, or4.2% of net revenue, compared to $8.9 million, or 2.8% of net revenue, for thesame period in 2008.  We recorded an increase of prior year insuranceprovisions of $1.3 million during the three months ended June 30, 2009compared to a decrease of $1.7 million during the three months ended June 30,2008.

 

*Selling,general and administrative. *Selling, general and administrative expense for thethree months ended June 30, 2009 was $9.7 million, or 2.9% of net revenue,compared to $9.7 million, or 3.0% of net revenue, for the three months ended June 30,2008.

 

*Depreciationand amortization. *Depreciation and amortization expense for the three months ended June 30,2009 was $12.2 million, or 3.6% of net revenue, compared to $14.1 million, or4.4% of net revenue, for the same period in 2008. The decrease is relatedprimarily to reduced annual capital expenditures in 2008.

 

***EmCare***

 

*Netrevenue. *Netrevenue for the three months ended June 30, 2009 was $301.8 million, anincrease of $54.4 million, or 22.0%, from $247.4 million for the three monthsended June 30, 2008. The increase was due primarily to an increase inpatient encounters from net new hospital contracts and net revenue increases inexisting contracts. Following March 31, 2008, we added 98 net newcontracts which accounted for a net revenue increase of $29.6 million for thethree months ended June 30, 2009.  Of the 98 net new contracts addedsince March 31, 2008, 73 were added in 2008 resulting in an incrementalincrease in 2009 net revenue of $18.9 million.  Of the 73 contracts addedin 2008, 45 were from our acquisition of Clinical Partners in August 2008with related management fee revenue totaling $2.0 million during the threemonths ended June 30, 2009.  EmCarehas added 53 new contracts and terminated 28 contracts to date in 2009,resulting in an increase in net revenue of $10.6 million for the three monthsended June 30, 2009.  Net revenue under our “same store” contracts(contracts in existence for the entirety of both periods) increased $23.3million, or 10.9%, for the three months ended June 30, 2009.  Thechange is due to a 3.7% increase in revenue per weighted patient encounter and anincrease in same store weighted patient encounters of 7.2% over the priorperiod.

 

*Compensationand benefits. *Compensationand benefits costs for the three months ended June 30, 2009 were $230.8million, or 76.5% of net revenue, compared to $196.4 million, or 79.4% of netrevenue, for the same period in 2008. Provider compensation costs increased$19.8 million from net new contract additions. Same store provider compensationcosts were $9.1 million over the prior period due primarily to a 7.2% increasein same store weighted patient encounters. Non-provider compensation andbenefits costs increased $6.1 million due primarily to our recent acquisitions,organic growth, and additional incentive related accruals.  Compensation and benefits costs decreased asa percentage of net revenue due primarily to the increase in weighted patientencounters during the three months ended June 30, 2009 compared to the sameperiod in 2008.

 

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*Operatingexpenses. *Operatingexpenses for the three months ended June 30, 2009 were $10.1 million, or3.3% of net revenue, compared to $8.0 million, or 3.2% of net revenue, for thesame period in 2008.  Operating expenses increased due primarily toincreased collection agency fees and an increase in off-hours radiologycoverage for new contracts.

 

*Insuranceexpense. *Professionalliability insurance expense for the three months ended June 30, 2009 was$14.4 million, or 4.8% of net revenue, compared to $8.7 million, or 3.5% of netrevenue, for the three months ended June 30, 2008.  We recorded anincrease of prior year insurance provisions of $3.1 million during the threemonths ended June 30, 2009 compared to a decrease of $1.7 million duringthe three months ended June 30, 2008.

 

*Selling,general and administrative. *Selling, general and administrative expense for thethree months ended June 30, 2009 was $6.6 million, or 2.2% of net revenue,compared to $5.9 million, or 2.4% of net revenue, for the three months ended June 30,2008.  The increase is due primarily toan increase in regional travel and other administrative expenses associatedwith the increase in contracts during the period.

 

*Depreciationand amortization. *Depreciation and amortization expense for the three months ended June 30,2009 was $3.9 million, or 1.3% of net revenue, compared to $3.3 million, or1.3% of net revenue, for the three months ended June 30, 2008.

 

***Six months ended June 30, 2009 compared to the sixmonths ended June 30, 2008***

 

***Consolidated***

 

Our results for the sixmonths ended June 30, 2009 reflect an increase in net revenue of $113.4million and an increase in net income of $17.7 million compared to the sixmonths ended June 30, 2008. The increase in net income is attributableprimarily to growth in income from operations, offset in part by increasedincome tax expense.  Basic and dilutedearnings per share were $1.26 and $1.23, respectively, for the six months endedJune 30, 2009. Basic and diluted earnings per share were $0.85 and $0.82,respectively, for the same period in 2008.

 

*Netrevenue. *Forthe six months ended June 30, 2009, net revenue was $1,250.3 millioncompared to $1,136.9 million for the six months ended June 30, 2008,representing an increase of 10.0%. The increase is attributable primarily toincreases in rates and volumes on existing contracts and increased volume fromnet new contracts and acquisitions.

 

*AdjustedEBITDA. *AdjustedEBITDA was $138.5 million, or 11.1% of net revenue, for the six months ended June 30,2009 compared to $109.9 million, or 9.7% of net revenue, for the six monthsended June 30, 2008.

 

*Interestexpense. *Interestexpense for the six months ended June 30, 2009 was $20.5 million comparedto $20.3 million for the six months ended June 30, 2008.

 

*Incometax expense. *Incometax expense increased $12.6 million for the six months ended June 30,2009, compared to the same period in 2008, resulting primarily from increasedoperating income.  Our effective tax rate for the six months ended June 30,2009 was 39.5% compared with 38.4% for the same period in 2008.

 

***AMR***

 

*Netrevenue. *Netrevenue for the six months ended June 30, 2009 was $672.0 million, anincrease of $22.0 million, or 3.4%, from $650.0 million for the same period in2008. The increase in net revenue was due primarily to an increase in our netrevenue per weighted transport of 5.9%, or $38.5 million, partially offsetby a decrease of 2.5%, or $16.5 million, in weighted transport volume.  Of the increase in net revenue per weightedtransport, 3.9% is attributable primarily to various rate increases, includinga Medicare fee increase effective January 1, 2009, and the remainder isdue primarily to growth in our managed transportation business.  Weighted transports decreased 38,300 from thesame quarter last year.  The change was due to a decrease in weightedtransports of 21,400 from the exit of markets and a decrease in weightedtransport volume in existing markets of 30,400, or 2.0%, partially offset by13,500 weighted transports from entrance into new markets.

 

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*Compensationand benefits. *Compensationand benefit costs for the six months ended June 30, 2009 were $416.1million, or 61.9% of net revenue, compared to $408.1 million, or 62.8% of netrevenue, for the six months ended June 30, 2008. Ambulance crew wages perambulance unit hour increased by approximately 4.0%, or $8.8 million,attributable primarily to annual wage rate increases.  Ambulance unithours decreased period over period by 1.2%, or $2.7 million, due primarily tothe reduction in volume in existing markets and improvements in ourdeployment.  Compensation and benefits decreased as a percentage of netrevenue due in part to the growth in our managed transportation business.  Our managed transportation costs arereflected primarily in operating expenses.

 

*Operatingexpenses. *Operatingexpenses for the six months ended June 30, 2009 were $146.6 million, or21.8% of net revenue, compared to $149.8 million, or 23.0% of net revenue, forthe six months ended June 30, 2008. Operating expenses per weightedtransport increased 0.4% in the six months ended June 30, 2009 compared tothe same period in 2008. The change is due primarily to decreased fuel costs of$9.4 million, including approximately $8.0 million related to lower fuel ratesand decreased aircraft expenses of $3.5 million from decreased transports inour fixed wing medical transportation services business, partially offset by anincrease of $8.0 million in operating expenses associated with growth in ourmanaged transportation business.

 

*Insuranceexpense. *Insuranceexpense for the six months ended June 30, 2009 was $25.0 million, or 3.7%of net revenue, compared to $20.1 million, or 3.1% of net revenue, for the sameperiod in 2008. We recorded an increase of prior year insurance provisions of$2.0 million during the six months ended June 30, 2009 compared to adecrease of $3.6 million during the six months ended June 30, 2008.

 

*Selling,general and administrative. *Selling, general and administrative expense for thesix months ended June 30, 2009 was $18.9 million, or 2.8% of net revenue,compared to $19.0 million, or 2.9% of net revenue, for the six months ended June 30,2008.

 

*Depreciationand amortization. *Depreciation and amortization expense for the six months ended June 30,2009 was $24.9 million, or 3.7% of net revenue, compared to $28.5 million, or4.4% of net revenue, for the same period in 2008. The decrease is relatedprimarily to reduced annual capital expenditures in 2008.

 

***EmCare***

 

*Netrevenue.* Net revenue for the six months ended June 30,2009 was $578.4 million, an increase of $91.5 million, or 18.8%, from $486.9million for the six months ended June 30, 2008. The increase was dueprimarily to an increase in patient encounters from net new hospital contractsand net revenue increases in existing contracts. Following December 31,2007, we added 104 net new contracts which accounted for a net revenue increaseof $61.0 million.  Of the 104 net new contracts added since December 31,2007, 79 were added in 2008 resulting in an increase in 2009 net revenue of$48.1 million.  Ofthe 79 contracts added in 2008, 45 were from our acquisition of ClinicalPartners in August 2008 with related management fee revenue totaling $4.0million during the six months ended June 30, 2009. EmCare has added 53 newcontracts and terminated 28 contracts to date in 2009, resulting in an increasein net revenue of $12.9 million for the six months ended June 30, 2009.  Net revenue under our same storecontracts increased $26.7 million, or 6.5%, for the six months ended June 30,2009 due to a 3.6% increase in revenue per weighted encounter and an increasein same store weighted patient encounters of 2.9% over the prior period.

 

*Compensationand benefits.* Compensation and benefits costs for the sixmonths ended June 30, 2009 were $449.1 million, or 77.6% of net revenue,compared to $386.8 million, or 79.4% of net revenue for the same period in2008. Provider compensation costs increased $41.1 million from net new contractadditions. Same store provider compensation costs were $11.2 million over the priorperiod due to a 1.2% increase in provider compensation per weighted patientencounter and a 2.9% increase in same store weighted patient encounters.  Non-provider compensation and benefits costsincreased by $10.6 million due primarily to our recent acquisitions, organicgrowth, and additional incentive related accruals.  Compensation and benefits costs decreased asa percentage of net revenue due primarily to the increase in weighted patientencounters during the six months ended June 30, 2009 compared to the sameperiod in 2008.

 

*Operatingexpenses.* Operating expenses for the six months ended June 30,2009 were $20.2 million, or 3.5% of net revenue, compared to $17.1 million, or3.5% of net revenue, for the same period in 2008.  Operating expenses increased dueprimarily to increased collection agency fees and an increase in off-hoursradiology coverage for new contracts.

 

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*Insuranceexpense.* Professional liability insurance expense forthe six months ended June 30, 2009 was $25.8 million, or 4.5% of netrevenue, compared to $18.4 million, or 3.8% of net revenue, for the six monthsended June 30, 2008.  We recorded an increase of prior yearinsurance provisions of $3.2 million during the six months ended June 30,2009 compared to a decrease of $2.6 million during the six months ended June 30,2008.

 

*Selling,general and administrative.* Selling, general andadministrative expense for the six months ended June 30, 2009 was $12.4million, or 2.1% of net revenue, compared to $11.1 million, or 2.3% of netrevenue, for the six months ended June 30, 2008.  The increase is due primarily to an increase inregional travel and other administrative expenses associated with the increasein contracts during the period.

 

*Depreciationand amortization.* Depreciation and amortization expense for thesix months ended June 30, 2009 was $8.0 million, or 1.4% of net revenue,compared to $6.7 million, or 1.4% of net revenue, for the six months ended June 30,2008.

 

**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 — CriticalAccounting Policies” contained in our annual report on Form 10-K for theyear ended December 31, 2008 and incorporated by reference herein. As of June 30,2009, there were no significant changes in our critical accounting policies orestimation procedures.

 

**Liquidityand Capital Resources**

 

Our primary source ofliquidity is cash flows provided by our operating activities. We can also useour revolving senior secured credit facility, described below, to supplementcash flows provided by our operating activities if we decide to do so forstrategic or operating reasons. Our liquidity needs are primarily to servicelong-term debt and to fund working capital requirements, capital expendituresrelated to the acquisition of vehicles and medical equipment, technology-relatedassets and insurance-related deposits.

 

We believe our cash andcash equivalents, net cash from our operating activities, and amounts availableunder our senior secured credit facility will meet the liquidity requirementsof our business through at least the next 12 months. We have available to us,upon compliance with customary conditions, $100.0 million under the revolvingcredit facility, less outstanding letters of credit of $43.6 million at June 30,2009. Further, we have a conditional right under our senior secured creditfacility to request new or existing lenders to provide up to an additional$100.0 million of term debt (in $20.0 million increments).

 

**CashFlow**

 

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

 
| ** **                       | ** ** | **Six months ended********June 30,** | ** ** |
|----------------------------------|------------|-------------------------------------------|------------|
| ** **                       | ** ** | **2009**                                  | ** ** | **2008** | ** ** |
| Net  cash provided by (used in): |       |                                      |       |   |   |
| Operating  activities            |       | $                                         | 140,939    |   | $ | 55,379 |   |
| Investing  activities            |       | (22,734                                   | )          | (12,433 | ) |
| Financing  activities            |       | 2,761                                     |       | 1,159 |   |
|                                  |            |                                           |            |  |  |  |  |

 

*Operatingactivities*. Netcash provided by operating activities was $140.9 million for the six monthsended June 30, 2009 compared to $55.4 million for the same period in2008.  The increase in operating cash flows relates

 

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primarily to an increasein net income, further reductions in days sales outstanding, or DSO, andchanges in accounts payable and accrued liabilities, including insuranceaccruals.  Changes in accounts payableand accrued liabilities increased net cash provided by operating activitiesduring the six months ended June 30, 2009 compared to the same period in2008 due primarily to the timing of payroll related disbursements.

 

We regularly analyze DSOwhich is calculated by taking our net revenue for the quarter divided by thenumber of days in the quarter.  The result is divided into net accountsreceivable at the end of the period.  DSO provides us with a gauge tomeasure receivables, revenue and collection activities.  The reductionssince December 31, 2008 shown below are due to additional collections onaccounts receivable as a result of continued billing and collection processenhancements at both AMR and EmCare.  The following table outlines our DSOby segment and in total excluding the impact of AMR’s 2008 deployments underits contract with the Federal Emergency Management Agency:

 
| ** ** | ** ** | **Q2 2009** | ** ** | **Q1 2009** | ** ** | **Q4 2008** | ** ** | **Q3 2008** | ** ** | **Q2 2008** | ** ** | **Q1 2008** | ** ** |
|------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| AMR        |       | 73               |       | 74               |       | 79               |       | 83               |       | 86               |       | 87               |       |
| EmCare     |       | 61               |       | 65               |       | 68               |       | 72               |       | 76               |       | 79               |       |
| EMSC       |       | 67               |       | 70               |       | 74               |       | 78               |       | 82               |       | 84               |       |

 

*Investingactivities*. Net cash used in investing activities was $22.7 million for the six monthsended June 30, 2009 compared to $12.4 million for the same period in 2008.  The increase in cash flows used in investing activities relates toadditional insurance collateral requirements of $1.9 million during 2009compared to a reduction in cash required for insurance collateral of $14.9 millionduring the 2008 period.  Net capitalexpenditure spending was $20.0 million during the six months ended June 30,2009 compared to $10.0 million during the same period in 2008 due primarily tothe timing of capital purchases.  Thesedifferences were partially offset by $20.0 million used in the acquisition ofbusinesses during the six months ended June 30, 2008.  Cash used in the acquisition of businesseswas $0.1 million during the six months ended June 30, 2009.

 

*Financingactivities.* Forthe six months ended June 30, 2009, net cash provided by financingactivities was $2.8 million compared to $1.2 million for the six months ended June 30,2008.  At June 30, 2009 there were no amounts outstanding under ourrevolving credit facility.

 

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

 

Our primary exposure tomarket risk consists of changes in interest rates on certain of ourborrowings.  While we have entered intotransactions to mitigate our exposure to both changes in interest rates andfuel prices, we do not use these instruments for speculative or tradingpurposes.

 

We monitor the risk fromchanging interest rates and evaluate ways to mitigate possible exposures, asappropriate, using derivative and hedging instruments.  Our use ofderivative instruments is limited to highly effective fixed interest rate swapagreements used to manage well-defined interest rate risk exposures.  In March 2009,we amended the interest rate swap agreement originally entered into in December 2007. The amendment changed the hedged interest rate from the 3-month LIBOR to the1-month LIBOR.  The amended swap agreement is with major financialinstitutions and amounts to $200 million of our variable rate debt.  Thisswap agreement effectively converts $200 million of variable rate debt to fixedrate debt with an effective rate of 6.1%.  The Company continues to makeinterest payments based on the variable rate associated with the debt (based onLIBOR which had a rate of less than 1% at June 30, 2009) and periodicallysettles with its counterparties for the difference between the rate paid andthe fixed rate.  The swap agreement expires in December 2009.

 

As of June 30, 2009,we had $452.0 million of debt excluding capital leases, of which $0.8 millionwas variable rate debt under our senior secured credit facility and the balancewas fixed rate debt, including $250.0 million aggregate principal amount of oursenior subordinated notes. An increase or decrease in interest rates of 0.2%will impact our interest costs by less than $0.1 million.

 

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**ITEM 4.CONTROLS AND PROCEDURES**

 

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

 

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

 

Based on their evaluationof our disclosure controls and procedures conducted within 90 days of the dateof filing this Report on Form 10-Q, our principal executive officer andour principal financial officer have concluded that, as of the date of theirevaluation, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d -15(e) promulgated under the Exchange Act) areeffective.

 

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

 

There were no changes inour internal control over financial reporting that occurred during our fiscalquarter ended June 30, 2009 that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

 

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**EMERGENCYMEDICAL SERVICES CORPORATION**

 

**PART II. OTHER INFORMATION**

 

**FORTHE THREE AND SIX MONTHS ENDED**

 

**JUNE30, 2009**

 

**ITEM 1.LEGAL PROCEEDINGS**

 

For additionalinformation regarding legal proceedings, please refer to note 7, under thecaption “Commitments and Contingencies” of the notes accompanying theconsolidated financial statements included herein, to our Annual Report on Form 10-Kfiled with the SEC on February 23, 2009 and to our Quarterly Report on Form 10-Qfiled with the SEC on May 6, 2009. 

 

**ITEM1A. RISK FACTORS**

 

There have been nomaterial changes from the risk factors disclosed in the “Risk Factors” sectionof the Company’s Annual Report on Form 10-K for the year ended December 31,2008.

 

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

 

Our 2009 annual meetingof stockholders was held on May 19, 2009 in Englewood, Colorado.  The matters submitted for a vote at the meetingand the related election results were as follows:

 

1.                                       Election of two Class I directors,Robert M. Le Blanc and William A. Sanger, to our Board of Directors:

 

Robert M. Le Blanc

For: 325,742,030;Withheld: 4,057,200

 

William A. Sanger

For: 325,188,115; Withheld:4,611,115

 

2.                                       Ratification of the appointment of Ernst &Young LLP as the Company’s independent registered public accounting firm forthe fiscal year ending December 31, 2009:

 

For: 329,786,319;Against: 6,565; Abstain: 6,347; Broker Non-Vote: 0

 

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**ITEM 6.EXHIBITS**

 
| 4.3.2  |   | Amendment No. 2 to  Investor Equityholders Agreement, dated as of March 12, 2009, by and  among Emergency Medical Services L.P., Onex Partners LP and the equityholders  listed on the signature pages thereto.*                                                                              |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                    |
| 4.21   |   | Supplemental Indenture No. 14,  effective as of November 13, 2008, among Templeton Readings, LLC, the Issuers  named therein, the other Guarantors named therein and U.S. Bank Trust  National Association, as trustee.*                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 4.22   |   | Supplemental Indenture No. 15,  effective as of May 21, 2009, among EMS Offshore Medical Services, LLC,  the Issuers named therein, the other Guarantors named therein and U.S. Bank  Trust National Association, as trustee.*                                                                |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 10.19  |   | Amended and Restated Employment  Agreement by and between American Medical Response, Inc. and Mark  Bruning, dated as of May 4, 2009.*                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 31.1   |   | Certification of the  Chief Executive Officer of Emergency Medical Services Corporation pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 31.2   |   | Certification of the  Chief Executive Officer of Emergency Medical Services Corporation, as general  partner of Emergency Medical Services L.P., pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002.*                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 31.3   |   | Certification of the  Chief Financial Officer of Emergency Medical Services Corporation pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 31.4   |   | Certification of the  Chief Financial Officer of Emergency Medical Services Corporation, as general  partner of Emergency Medical Services L.P., pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002.*                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 32.1   |   | Certification of the  Chief Executive Officer and the Chief Financial Officer of Emergency Medical  Services Corporation pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                          |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 32.2   |   | Certification of the  Chief Executive Officer and the Chief Financial Officer of Emergency Medical  Services Corporation, as general partner of Emergency Medical Services L.P.  pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.* |

 

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*  Filed withthis report

 

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**SIGNATURES**

 

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrants have dulycaused this report to be signed on their behalf by the undersigned, thereuntoduly authorized.

 
|           |       | **EMERGENCY  MEDICAL SERVICES CORPORATION** |
|----------------|------------|---------------------------------------------|
|           |       | (registrant)                                |
|           |       |                                        |
| August 4, 2009 |       | By:                                         | /s/ William A. Sanger |   |
| Date           |       |                                        | William A. Sanger |
|           |       |                                        | Chairman and Chief  Executive Officer |
|           |       |                                        |   |
|           |       | By:                                         | /s/ Randel G. Owen |   |
|           |       |                                        | Randel G. Owen |
|           |       |                                        | Chief Financial Officer  and Executive Vice President |
|           |       |                                        |   |
|           |       |                                        |
| ** **     | ** ** | **EMERGENCY  MEDICAL SERVICES L.P.**        |
|           |       | (registrant)                                |
|           |       |                                        |
|           |       | By:                                         | Emergency Medical  Services Corporation, its General  Partner |
|           |       |                                        |
| August 4, 2009 |       | By:                                         | /s/ William A. Sanger |   |
| Date           |       |                                        | William A. Sanger |
|           |       |                                        | Chairman and Chief  Executive Officer |
|           |       |                                        |   |
|           |       | By:                                         | /s/ Randel G. Owen |   |
|           |       |                                        | Randel G. Owen |
|           |       |                                        | Chief Financial Officer  and Executive Vice President |
|                |            |                                             |  |  |  |

 

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**EXHIBITINDEX**

 
| 4.3.2  |   | Amendment No. 2 to  Investor Equityholders Agreement, dated as of March 12, 2009, by and  among Emergency Medical Services L.P., Onex Partners LP and the equityholders  listed on the signature pages thereto.*                                                                              |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                    |
| 4.21   |   | Supplemental Indenture No. 14,  effective as of November 13, 2008, among Templeton Readings, LLC, the Issuers  named therein, the other Guarantors named therein and U.S. Bank Trust National  Association, as trustee.*                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 4.22   |   | Supplemental Indenture No. 15,  effective as of May 21, 2009, among EMS Offshore Medical Services, LLC,  the Issuers named therein, the other Guarantors named therein and U.S. Bank  Trust National Association, as trustee.*                                                                |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 10.19  |   | Amended and Restated Employment  Agreement by and between American Medical Response, Inc. and Mark  Bruning, dated as of May 4, 2009.*                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 31.1   |   | Certification of the  Chief Executive Officer of Emergency Medical Services Corporation pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 31.2   |   | Certification of the  Chief Executive Officer of Emergency Medical Services Corporation, as general  partner of Emergency Medical Services L.P., pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002.*                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 31.3   |   | Certification of the  Chief Financial Officer of Emergency Medical Services Corporation pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 31.4   |   | Certification of the  Chief Financial Officer of Emergency Medical Services Corporation, as general  partner of Emergency Medical Services L.P., pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002.*                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 32.1   |   | Certification of the  Chief Executive Officer and the Chief Financial Officer of Emergency Medical  Services Corporation pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                          |
|   |   |                                                                                                                                                                                                                                                                                                    |
| 32.2   |   | Certification of the  Chief Executive Officer and the Chief Financial Officer of Emergency Medical  Services Corporation, as general partner of Emergency Medical Services L.P.  pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.* |

 

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*  Filed withthis report

 

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