Table of Contents

 

 

** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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**FORM 10-Q**

 

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**(Mark one)**

| x | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|---|---------------------------------------------------------------------------------------------------------|

 

**For thequarterly period ended September 30, 2008**

 

**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

 

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 |

 

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

 

Sharesof class A common stock outstanding at October 31, 2008 – 9,531,486;shares of class B common stock outstanding at October 31, 2008 –142,545; LP exchangeable units outstanding at October 31, 2008 –32,107,500.

 

 

 

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**EMERGENCYMEDICAL SERVICES CORPORATION**

 

**INDEXTO QUARTERLY REPORT**

 

**ONFORM 10-Q**

 

**FORTHE THREE AND NINE MONTHS ENDED**

 

**SEPTEMBER30, 2008**

 
| 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 Unaudited  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 6.                       |   | Exhibits |
|                               |   |   |
| Signatures                         |   |   |

 

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**EMERGENCYMEDICAL SERVICES CORPORATION**

**PART I. FINANCIAL INFORMATION**

**FORTHE THREE AND NINE MONTHS ENDED**

**SEPTEMBER30, 2008**

 

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

 

**EmergencyMedical Services Corporation**

**Consolidated Statements of Operationsand Comprehensive Income**

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

** **
| ** **                                                                      | ** ** | **Quarter ended**      | ** ** | **Nine months ended**  | ** ** |
|---------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                      | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                      | ** ** | **2008**               | ** ** | **2007**               | ** ** | **2008** | ** ** | **2007** | ** ** |
| Net revenue                                                                     |       | $                      | 679,328    |                   | $          | 529,752 |   | $ | 1,816,193 |   | $ | 1,569,783 |   |
| Compensation and  benefits                                                      |       | 426,755                |       | 366,835                |       | 1,221,607 |   | 1,079,076 |   |
| Operating  expenses                                                             |       | 135,087                |       | 82,473                 |       | 302,014 |   | 238,731 |   |
| Insurance  expense                                                              |       | 25,109                 |       | 13,465                 |       | 63,640 |   | 51,242 |   |
| Selling, general  and administrative expenses                                   |       | 20,509                 |       | 15,876                 |       | 50,621 |   | 44,082 |   |
| Depreciation and  amortization expense                                          |       | 16,993                 |       | 17,809                 |       | 52,156 |   | 52,165 |   |
| Restructuring  charges                                                          |       | —                 |       | —                 |       | — |   | 2,242 |   |
| Income from  operations                                                         |       | 54,875                 |       | 33,294                 |       | 126,155 |   | 102,245 |   |
| Interest income  from restricted assets                                         |       | 1,623                  |       | 1,919                  |       | 5,113 |   | 5,294 |   |
| Interest expense                                                                |       | (11,117                | )          | (12,652                | )          | (31,387 | ) | (35,281 | ) |
| Realized gain on  investments                                                   |       | 768                    |       | 9                      |       | 3,011 |   | 68 |   |
| Interest and  other income                                                      |       | 508                    |       | 602                    |       | 1,097 |   | 1,791 |   |
| Income before  income taxes and equity in earnings of unconsolidated subsidiary |       | 46,657                 |       | 23,172                 |       | 103,989 |   | 74,117 |   |
| Income tax  expense                                                             |       | (18,138                | )          | (8,672                 | )          | (40,170 | ) | (28,146 | ) |
| Income before  equity in earnings of unconsolidated subsidiary                  |       | 28,519                 |       | 14,500                 |       | 63,819 |   | 45,971 |   |
| Equity in  earnings of unconsolidated subsidiary                                |       | 98                     |       | 170                    |       | 152 |   | 425 |   |
| Net income                                                                      |       | 28,617                 |       | 14,670                 |       | 63,971 |   | 46,396 |   |
| Other  comprehensive income (loss), net of tax:                                 |       |                   |       |                   |       |   |   |   |   |
| Unrealized  holding (losses) gains during the period                            |       | (869                   | )          | 1,439                  |       | (2,629 | ) | 1,014 |   |
| Unrealized gains  (losses) on derivative financial instruments                  |       | 205                    |       | —                 |       | (555 | ) | — |   |
| Comprehensive  income                                                           |       | $                      | 27,953     |                   | $          | 16,109 |   | $ | 60,787 |   | $ | 47,410 |   |
|                                                                            |       |                   |       |                   |       |   |   |   |   |
| Basic earnings  per common share                                                |       | $                      | 0.69       |                   | $          | 0.35 |   | $ | 1.54 |   | $ | 1.12 |   |
| Diluted earnings  per common share                                              |       | $                      | 0.66       |                   | $          | 0.34 |   | $ | 1.49 |   | $ | 1.08 |   |
| Weighted average  common shares outstanding, basic                              |       | 41,637,765             |       | 41,567,657             |       | 41,594,270 |   | 41,544,741 |   |
| Weighted average  common shares outstanding, diluted                            |       | 43,062,364             |       | 43,190,779             |       | 43,058,904 |   | 43,143,997 |   |

 

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)**

** **
| ** **                                                                                                                                                  | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                  | ** ** | **2008**               | ** ** | **2007**              | ** ** |
| ** **                                                                                                                                                  | ** ** | **(Unaudited)**        | ** ** | ** **            | ** ** |
| **Assets**                                                                                                                                                  | ** ** | ** **             | ** ** | ** **            | ** ** |
| Current assets:                                                                                                                                             |       |                   |       |                  |       |
| Cash and cash  equivalents                                                                                                                                  |       | $                      | 135,682    |                  | $          | 28,914 |   |
| Insurance  collateral                                                                                                                                       |       | 50,693                 |       | 37,776                |       |
| Trade and other  accounts receivable, net                                                                                                                   |       | 552,795                |       | 495,348               |       |
| Parts and  supplies inventory                                                                                                                               |       | 20,177                 |       | 20,010                |       |
| Prepaids and  other current assets                                                                                                                          |       | 19,225                 |       | 11,715                |       |
| Current deferred  tax assets                                                                                                                                |       | 78,072                 |       | 76,997                |       |
| Total current  assets                                                                                                                                       |       | 856,644                |       | 670,760               |       |
| Non-current  assets:                                                                                                                                        |       |                   |       |                  |       |
| Property, plant  and equipment, net                                                                                                                         |       | 126,732                |       | 143,342               |       |
| Intangible  assets, net                                                                                                                                     |       | 75,274                 |       | 81,717                |       |
| Non-current  deferred tax assets                                                                                                                            |       | 59,165                 |       | 94,961                |       |
| Insurance  collateral                                                                                                                                       |       | 115,109                |       | 146,638               |       |
| Goodwill                                                                                                                                                    |       | 336,886                |       | 313,124               |       |
| Other long-term  assets                                                                                                                                     |       | 23,369                 |       | 29,021                |       |
| Total assets                                                                                                                                                |       | $                      | 1,593,179  |                  | $          | 1,479,563 |   |
| **Liabilities  and Equity**                                                                                                                                 | ** ** | ** **             | ** ** | ** **            | ** ** |
| Current  liabilities:                                                                                                                                       |       |                   |       |                  |       |
| Accounts payable                                                                                                                                            |       | $                      | 65,059     |                  | $          | 64,855 |   |
| Accrued  liabilities                                                                                                                                        |       | 290,147                |       | 237,319               |       |
| Current portion  of long-term debt                                                                                                                          |       | 4,844                  |       | 4,717                 |       |
| Total current  liabilities                                                                                                                                  |       | 360,050                |       | 306,891               |       |
| Long-term debt                                                                                                                                              |       | 474,885                |       | 478,166               |       |
| Insurance  reserves and other long-term liabilities                                                                                                         |       | 242,547                |       | 245,010               |       |
| Total  liabilities                                                                                                                                          |       | 1,077,482              |       | 1,030,067             |       |
| Equity:                                                                                                                                                     |       |                   |       |                  |       |
| Preferred stock  ($0.01 par value; 20,000,000 shares authorized, 0 issued and outstanding)                                                                  |       | —                 |       | —                |       |
| Class A  common stock ($0.01 par value; 100,000,000 shares authorized, 9,531,486 and  9,320,347 issued and outstanding in 2008 and 2007, respectively) |       | 95                     |       | 93                    |       |
| Class B  common stock ($0.01 par value; 40,000,000 shares authorized, 142,545 issued  and outstanding in 2008 and 2007)                                |       | 1                      |       | 1                     |       |
| Class B  special voting stock ($0.01 par value; 1 share authorized, issued and  outstanding in 2008 and 2007)                                          |       | —                 |       | —                |       |
| LP exchangeable  units (32,107,500 shares issued and outstanding in 2008 and 2007)                                                                          |       | 212,361                |       | 212,361               |       |
| Additional  paid-in capital                                                                                                                                 |       | 122,491                |       | 117,079               |       |
| Retained  earnings                                                                                                                                          |       | 182,927                |       | 118,956               |       |
| Accumulated  other comprehensive (loss) income                                                                                                              |       | (2,178                 | )          | 1,006                 |       |
| Total equity                                                                                                                                                |       | 515,697                |       | 449,496               |       |
| Total  liabilities and equity                                                                                                                               |       | $                      | 1,593,179  |                  | $          | 1,479,563 |   |

 

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)**

** **
| ** **                                                                         | ** ** | **Nine months ended September 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2008**                                                | ** ** | **2007** | ** ** |
| **Cash  Flows from Operating Activities**                                          | ** ** | ** **                                              | ** ** | ** ** | ** ** |
| Net income                                                                         |       | $                                                       | 63,971     |   | $ | 46,396 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                                    |       |   |   |
| Depreciation and  amortization                                                     |       | 53,734                                                  |       | 53,712 |   |
| Gain on disposal  of property, plant and equipment                                 |       | (144                                                    | )          | (166 | ) |
| Equity-based  compensation expense                                                 |       | 1,841                                                   |       | 1,293 |   |
| Equity in  earnings of unconsolidated subsidiary                                   |       | (152                                                    | )          | (425 | ) |
| Dividends  received                                                                |       | —                                                  |       | 416 |   |
| Deferred income  taxes                                                             |       | 36,449                                                  |       | 25,438 |   |
| Changes in  operating assets/liabilities, net of acquisitions:                     |       |                                                    |       |   |   |
| Trade and other  accounts receivable                                               |       | (54,499                                                 | )          | (71,007 | ) |
| Parts and  supplies inventory                                                      |       | (67                                                     | )          | (428 | ) |
| Prepaids and  other current assets                                                 |       | (7,401                                                  | )          | (3,623 | ) |
| Accounts payable  and accrued liabilities                                          |       | 42,027                                                  |       | 5,325 |   |
| Insurance  accruals                                                                |       | (5,333                                                  | )          | 15 |   |
| Net cash  provided by operating activities                                         |       | 130,426                                                 |       | 56,946 |   |
| **Cash  Flows from Investing Activities**                                          | ** ** | ** **                                              | ** ** | ** ** | ** ** |
| Purchases of  property, plant and equipment                                        |       | (21,754                                                 | )          | (31,570 | ) |
| Proceeds from  sale of property, plant and equipment                               |       | 347                                                     |       | 300 |   |
| Acquisition of  businesses, net of cash received                                   |       | (28,325                                                 | )          | (75,648 | ) |
| Net change in  insurance collateral                                                |       | 15,983                                                  |       | (7,300 | ) |
| Other investing  activities                                                        |       | 3,392                                                   |       | 3,076 |   |
| Net cash used in  investing activities                                             |       | (30,357                                                 | )          | (111,142 | ) |
| **Cash  Flows from Financing Activities**                                          | ** ** | ** **                                              | ** ** | ** ** | ** ** |
| EMSC issuance of  class A common stock                                             |       | 1,920                                                   |       | 382 |   |
| Borrowings under  revolving credit facility                                        |       | 14,000                                                  |       | 70,300 |   |
| Repayments of  capital lease obligations and other debt                            |       | (18,006                                                 | )          | (35,815 | ) |
| Increase in bank  overdrafts                                                       |       | 8,785                                                   |       | 2,387 |   |
| Net cash  provided by financing activities                                         |       | 6,699                                                   |       | 37,254 |   |
| Change in cash  and cash equivalents                                               |       | 106,768                                                 |       | (16,942 | ) |
| Cash and cash  equivalents, beginning of period                                    |       | 28,914                                                  |       | 39,336 |   |
| Cash and cash  equivalents, end of period                                          |       | $                                                       | 135,682    |   | $ | 22,394 |   |
|                                                                               |       |                                                    |       |   |   |
| **Non-cash  Activities**                                                           | ** ** | ** **                                              | ** ** | ** ** | ** ** |
| Capital lease  obligations incurred                                                |       | $                                                       | 682        |   | $ | 8,038 |   |

 

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. generally acceptedaccounting principles (“GAAP”) for interim reporting and accordingly, do notinclude all of the disclosures required for annual financial statements. In theopinion of management, all adjustments considered necessary for a fairpresentation have been included. All such adjustments are of a normal,recurring nature. Operating results for the three and nine month periods ended September 30,2008 are not necessarily indicative of the results that may be expected for thefull year ending December 31, 2008. 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, 2007.

 

The consolidatedfinancial statements of EMSC include those of its direct subsidiary, EmergencyMedical Services L.P. (“EMS LP”), a Delaware limited partnership. EMS LPacquired American Medical Response, Inc. and its subsidiaries (“AMR”) andEmCare Holdings Inc. and its subsidiaries (“EmCare”) from Laidlaw International, Inc.(“Laidlaw”) on February 10, 2005, with an effective transaction date afterthe close of business on January 31, 2005. On December 21, 2005, theCompany effected a reorganization and issued class A common stock in an initialpublic offering.

 

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 ninemonths ended September 30, 2008 and 2007, the Company expensed $250 and$750, respectively, in respect of this fee.

 

**2.****             ****Summary of Significant AccountingPolicies**

 

***Consolidation***

 

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

 

***Use of Estimates***

 

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

 

***Insurance***

 

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

 

The Company establishes reservesfor claims based upon an assessment of actual claims and claims incurred butnot reported.  The reserves areestablished based on quarterly consultation with third-party independentactuaries using actuarial principles and assumptions that consider a number offactors, including historical claim payment patterns (including legal costs)and changes in case reserves and the assumed rate of inflation in healthcarecosts and property damage repairs.

 

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The Company’s most recentactuarial valuation was completed in September 2008. As a result of thisactuarial valuation, in the three months ended September 30, 2008 theCompany recorded an increase in its provision for insurance liabilities ofapproximately $2.1 million related to its reserves for losses in prioryears.  In the nine months ended September 30, 2008 the Companyrecorded a reduction of approximately $4.0 million related to its reserves forlosses in prior years.  In the three andnine months ended September 30, 2007, the Company recorded a reduction inits provision for insurance liabilities of approximately $7.9 million and $21.7million, respectively, as a result of an actuarial valuation completed in September 2007.

 

The long-term portion ofinsurance reserves was $139.4 million and $144.7 million as of September 30,2008 and December 31, 2007, respectively.

 

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

 

The Company determinesits allowances based on payor reimbursement schedules, historical write-offexperience and other economic data. The allowances for contractual discountsand uncompensated care are reviewed monthly. Account balances are charged off againstthe uncompensated care allowance when it is probable the receivable will not berecovered. Write-offs to the contractual allowance occur when payment isreceived. The allowance for uncompensated care is related principally toreceivables recorded for self-pay patients. The Company’s accounts receivableallowances are as follows:

 

| ** **                           | ** ** | **September 30,  2008** | ** ** | **December 31,  2007** | ** ** |
|--------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Gross trade  accounts receivable     |       | $                            | 1,816,724  |                        | $          | 1,693,862 |   |
| Allowance for  contractual discounts |       | 939,954                      |       | 832,738                     |       |
| Allowance for  uncompensated care    |       | 460,084                      |       | 431,920                     |       |
| Net trade  accounts receivable       |       | 416,686                      |       | 429,204                     |       |
| Other  receivables, net              |       | 136,109                      |       | 66,144                      |       |
| Net accounts  receivable             |       | $                            | 552,795    |                        | $          | 495,348 |   |

 

Other receivablesrepresent EmCare hospital subsidies and fees and AMR fees for stand-by andspecial events and subsidies from community organizations.  Other receivables at September 30, 2008also included $62.5 million related to AMR’s hurricane deployment for Hurricane’sGustav and Ike pursuant to AMR’s national contract with the Federal EmergencyManagement Agency (“FEMA”).

 

AMR contractualallowances are primarily determined 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 retroactive 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 percentage of gross revenue and as apercentage of gross revenue less provision for contractual discounts are asfollows:

 

| ** **                                                                                     | ** ** | **Quarter ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
|------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                     | ** ** | **2008**                              | ** ** | **2007**                                  | ** ** | **2008** | ** ** | **2007** | ** ** |
| Gross revenue                                                                                  |       | 100.0                                 | %          | 100.0                                     | %          | 100.0 | % | 100.0 | % |
| Provision for  contractual discounts                                                           |       | 43.4                                  | %          | 43.8                                      | %          | 45.0 | % | 42.8 | % |
| Revenue net of  contractual discounts                                                          |       | 56.6                                  | %          | 56.2                                      | %          | 55.0 | % | 57.2 | % |
| Provision for  uncompensated care as a percentage of gross revenue                             |       | 19.7                                  | %          | 19.4                                      | %          | 19.2 | % | 19.6 | % |
| Provision for  uncompensated care as a percentage of gross revenue less contractual  discounts |       | 34.8                                  | %          | 34.5                                      | %          | 35.0 | % | 34.3 | % |

 

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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. As a result, there is a reasonablepossibility that recorded estimates will change materially in the short-term.Retroactive adjustments may change the amounts realized from third-party payorsand are considered in the recognition of revenue on an estimated basis in theperiod the related services are rendered. Such amounts, including adjustmentsbetween provisions for contractual discounts and uncompensated care, areadjusted in future periods, as adjustments become known.  Retroactiveadjustments in the three months ended September 30, 2008, which increasedrevenue, were 0.4% of consolidated net revenue compared to 1.3% of consolidatednet revenue for the three months ended September 30, 2007.  Retroactive adjustments recorded in the ninemonth period ended September 30, 2008, which increased revenue, were 0.4%of consolidated net revenue compared to 1.8% of consolidated net revenue forthe nine months ended September 30, 2007.

 

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.

 

The Company holds 23.2%of the equity interests in EMS LP. LP exchangeable units, held by personsaffiliated with the Company’s principal equity holder, represent the balance ofthe EMS LP equity. The LP exchangeable units are exchangeable at any time, atthe option of the holder, for shares of the Company’s class B common stock on aone-for-one basis. The holders of the LP exchangeable units have the right tovote, through the trustee holder of the Company’s class B special voting stock,at all stockholder meetings at which holders of the Company’s class B commonstock or class B special voting stock are entitled to vote.

 

In the EMS 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 one class, and entitle holders to receive distributionsonly if the equivalent dividends are declared on the Company’s class B commonstock. Accordingly, the Company accounts for the LP exchangeable units as ifthe LP exchangeable units were shares of its common stock, including reportingthe LP exchangeable units in the equity section of the Company’s balance sheetand including the number of outstanding LP exchangeable units in both its basicand diluted earnings per share calculations.

 

***Recent Accounting Pronouncements***

 

 The Company adoptedStatement of Financial Accounting Standards (“SFAS”) No. 157 Fair ValueMeasurement (“SFAS 157”) effective January 1, 2008, which among otherthings, requires additional disclosures about investments that are reported atfair value.  SFAS 157 establishes ahierarchal disclosure framework which ranks the level of market priceobservability used in measuring investments at fair value. Market priceobservability is impacted by a number of factors, including the type ofinvestment and the characteristics specific to the investment.  Investments with readily available activequoted prices or for which fair value can be measured from actively quotedprices generally will have a higher degree of market price observability and alesser degree of judgment used in measuring fair value.

 

8

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Investments measured andreported at fair value are classified and disclosed in one of the followingcategories:

 

Level 1 – Quoted pricesare available in active markets for identical investments as of the reportingdate. As required by SFAS 157, the Company does not adjust the quoted price forthese investments.

 

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.

 

The following tablesummarizes the valuation of EMSC’s investments by the above SFAS 157 fair valuehierarchy levels as of September 30, 2008:

 

| ** **      | ** ** | **Fair  value measurements at September 30, 2008 using:** | ** ** |
|-----------------|------------|----------------------------------------------------------------|------------|
| **Description** | ** ** | **Total**                                                      | ** ** | **Level 1** | ** ** | **Level 2** | ** ** |
| Assets:         |       |                                                           |       |   |   |   |   |
| Securities      |       | $                                                              | 92,306     |   | $ | 87,031 |   | $ | 5,275 |   |
| Liabilities:    |       |                                                           |       |   |   |   |   |
| Derivatives     |       | $                                                              | 3,014      |   | $ | — |   | $ | 3,014 |   |

 

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

 

In March 2008, theCompany completed its acquisition of River Medical, Inc. based in Lake Havasu,Arizona, which provides exclusive emergency ambulance transportation servicesto Lake Havasu City, and La Paz and Mohave Counties in western Arizona. TheCompany believes that this acquisition positions the Company for futureexpansion in the Arizona market. In April 2008, the Company completed itsacquisition of Aldan Emergency Physicians, P.A. which provides emergencydepartment staffing and management services at facilities located inBrooksville, Florida and Hudson, Florida. In August 2008, the Companycompleted its acquisition of the management services entity of ClinicalPartners, P.A., a provider of anesthesiology services, as well as an associatedbilling company based in Longview, Texas. The total cost of these acquisitionswas $28.3 million and the Company has recorded $21.1 million of goodwill, whichamount is subject to adjustment based upon completion of purchase priceallocations.

 

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

 

Accrued liabilities wereas follows at September 30, 2008 and December 31, 2007. Included inthe “Other” category at September 30, 2008 were accrued liabilities of$52.7 million for AMR’s hurricane deployment associated with AMR’s nationalcontract with FEMA.

 
| ** **                                  | ** ** | **September 30,  2008** | ** ** | **December 31,  2007** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Accrued wages  and benefits                 |       | $                            | 88,265     |                        | $          | 79,781 |   |
| Accrued paid  time-off                      |       | 26,815                       |       | 24,687                      |       |
| Current portion  of self-insurance reserves |       | 59,858                       |       | 59,821                      |       |
| Accrued  restructuring                      |       | 440                          |       | 600                         |       |
| Current portion  of compliance and legal    |       | 2,720                        |       | 2,245                       |       |
| Accrued billing  and collection fees        |       | 4,071                        |       | 5,046                       |       |
| Accrued profit  sharing                     |       | 22,351                       |       | 23,661                      |       |
| Accrued interest                            |       | 3,805                        |       | 10,407                      |       |
| Other                                       |       | 81,822                       |       | 31,071                      |       |
| Total accrued  liabilities                  |       | $                            | 290,147    |                        | $          | 237,319 |   |

 

9

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

 

Long-term debt consistedof the following at September 30, 2008 and December 31, 2007:

 
| ** **                                                                       | ** ** | **September 30,   2008** | ** ** | **December 31,  2007** | ** ** |
|----------------------------------------------------------------------------------|------------|-------------------------------|------------|----------------------------------|------------|
| Senior  subordinated notes due 2015                                              |       | $                             | 250,000    |                             | $          | 250,000 |   |
| Senior secured  term loan due 2012 (6.82% at September 30, 2008)            |       | 222,438                       |       | 224,167                          |       |
| Notes due at  various dates from 2008 to 2022 with interest rates from 6% to 10% |       | 1,709                         |       | 2,292                            |       |
| Capital lease  obligations due at various dates from 2008 to 2018 (see note 6)   |       | 5,582                         |       | 6,424                            |       |
|                                                                             |       | 479,729                       |       | 482,883                          |       |
| Less current  portion                                                            |       | (4,844                        | )          | (4,717                           | )          |
| Total long-term  debt                                                            |       | $                             | 474,885    |                             | $          | 478,166 |   |

 

**6.****             ****Commitments and Contingencies**

 

***Lease Commitments***

 

The Company leasesvarious facilities and equipment under operating lease agreements.

 

The Company also leasescertain vehicles and certain leasehold improvements under capital leases.During the first quarter of 2007 the Company extended the term on the vehicleslease for an additional three years. Assets under capital leases arecapitalized using inherent interest rates at the inception of each lease.Capital leases are collateralized by the underlying assets.

 

***Services***

 

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

 

On April 17, 2006,the Office of Inspector General for the United States Department of Health andHuman Services, or OIG, finalized its draft report requesting that the Company’sMassachusetts subsidiary reimburse the Medicare program for approximately $1.8million in alleged overpayments from Medicare for services performed between July 1,2002 and December 31, 2002. The OIG claims that these paymentswere made for services that did not meet Medicare medical necessity andreimbursement requirements.   On December 10, 2006, AMR paid the$1.8 million in alleged overpayments.  However, the Company disagreed withthe OIG’s finding, filed an administrative appeal and on May 15, 2008,received $1.2 million back from Medicare as a result of the successful appeal. Theoutcome of this appeal did not have an impact on the results of operations ofthe Company.

 

***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, butthe size and membership of the class has not been determined.  At thistime, AMR does not believe that any incorrect billings are material in amount.

 

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

 

10

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

 

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

 

The Company restructuredcertain billing functions of AMR and operations in the Los Angeles, Californiamarket during the first quarter of 2007 and recorded a restructuring charge of$2.2 million.  This restructuring charge included $0.2 million in leasetermination and exit costs and $2.0 million related to termination benefits.

 

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

 

The Company adopted theprovisions of SFAS No. 123 (revised 2004) Share-Based Payment (“SFAS 123R”)on January 1, 2006 using the prospective transition method.  Thestock options are valued using the Black-Scholes valuation method on the dateof 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. Options with similar provisions weregranted to non-employee directors. The Company recorded a compensation chargeof $431 and $300 for the three months ended September 30, 2008 and 2007,respectively, and $1,293 and $900 for the nine months ended September 30,2008 and 2007, respectively.

 

**Non-EmployeeDirector Compensation Plan**

 

The Non-Employee DirectorCompensation Plan, approved in May 2007, is available to non-employee directorsof the Company, other than the Chair of the Compliance Committee. Under thisplan, eligible directors are granted Restricted Stock Units (“RSUs”) followingeach annual stockholder meeting with each RSU representing one share of theCompany’s class A common stock. Eligible directors receive a grant of RSUshaving a fair market value of $100 on the date of grant based on the closingprice of the Company’s class A common stock on the business day immediatelypreceding the grant date. The Non-Employee Director Compensation Plan allowsdirectors to defer income from the grant of RSUs, which vest immediately priorto the election of directors at the next following annual stockholder meeting. Inconnection with this plan, the Company granted 4,145 and 2,705 RSUs perdirector in 2008 and 2007, respectively, and expensed $100 for each of thethree month periods ended September 30, 2008 and 2007 and $300 for each ofthe nine month periods ended September 30, 2008 and 2007.

 

**Long-TermIncentive Plan**

 

The Company’s originalLong-Term Incentive Plan was approved by stockholders in May 2007 and anAmended and Restated Long-Term Incentive Plan (the “Plan”) was approved bystockholders in May 2008. The Plan provides for the grant of long-termincentives, including various equity-based incentives, to those persons withresponsibility for the success and growth of the Company and its subsidiaries.

 

The Company grantedoptions to key employees during the nine months ended September 30, 2008under the Plan. The options permit employees to purchase a total of 214,750shares of class A common stock at a weighted average exercise price of$30.28 per share, vest and become exercisable ratably over a period offour years from the date of grant and have a maximum term of ten years.

 

The Company recorded acompensation charge of $186 and $93 during the three months ended September 30,2008 and 2007, respectively, and $248 and $93 for the nine months ended September 30,2008 and 2007, respectively, in connection with the Plan.

 

11

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**StockPurchase Plan/Employee Stock Purchase Plan**

 

During the first quarterof 2008, 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 occured in September 2008 at a 5% discount to the closing priceof the Company’s class A common stock on September 15, 2008, and as suchno compensation charge is required to be recorded for the SPPs during the ninemonths ended September 30, 2008. Employee contributions to the SPPstotaling $644 were used to purchase a total of 20,627 shares of class A commonstock.

 

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

 

The Company is organizedaround two separately managed business units: healthcare transportationservices and emergency management services, which have been identified asoperating segments. The healthcare transportation services reportable segmentfocuses on providing a full range of medical transportation services from basicpatient transit to the most advanced emergency care and pre-hospitalassistance. The emergency management services reportable segment providesoutsourced business services to hospitals primarily for emergency departments,urgent care centers and for certain inpatient departments. The Chief ExecutiveOfficer has been identified as the chief operating decision maker (“CODM”) forpurposes of SFAS No. 131*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.

 
| ** **                                           | ** ** | **Quarter ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------------|------------|
| ** **                                           | ** ** | **2008**                             | ** ** | **2007**                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
| **Healthcare  Transportation Services**              | ** ** | ** **                           | ** ** | ** **                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                              |       | $                                    | 425,335    |                                     | $          | 310,929 |   | $ | 1,075,323 |   | $ | 914,341 |   |
| Segment Adjusted  EBITDA                             |       | 47,184                               |       | 26,007                                   |       | 101,558 |   | 74,316 |   |
| **Emergency  Management Services**                   | ** ** | ** **                           | ** ** | ** **                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                              |       | 253,993                              |       | 218,823                                  |       | 740,870 |   | 655,442 |   |
| Segment Adjusted  EBITDA                             |       | 26,307                               |       | 27,015                                   |       | 81,866 |   | 85,388 |   |
| **Total**                                            | ** ** | ** **                           | ** ** | ** **                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total revenue                                        |       | 679,328                              |       | 529,752                                  |       | 1,816,193 |   | 1,569,783 |   |
| Total Adjusted  EBITDA                               |       | 73,491                               |       | 53,022                                   |       | 183,424 |   | 159,704 |   |
| **Reconciliation  of Adjusted EBITDA to Net Income** | ** ** | ** **                           | ** ** | ** **                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Adjusted EBITDA                                      |       | $                                    | 73,491     |                                     | $          | 53,022 |   | $ | 183,424 |   | $ | 159,704 |   |
| Depreciation and  amortization expense               |       | (16,993                              | )          | (17,809                                  | )          | (52,156 | ) | (52,165 | ) |
| Interest expense                                     |       | (11,117                              | )          | (12,652                                  | )          | (31,387 | ) | (35,281 | ) |
| Realized gain on  investments                        |       | 768                                  |       | 9                                        |       | 3,011 |   | 68 |   |
| Interest and  other income                           |       | 508                                  |       | 602                                      |       | 1,097 |   | 1,791 |   |
| Income tax  expense                                  |       | (18,138                              | )          | (8,672                                   | )          | (40,170 | ) | (28,146 | ) |
| Equity in  earnings of unconsolidated subsidiary     |       | 98                                   |       | 170                                      |       | 152 |   | 425 |   |
| Net income                                           |       | $                                    | 28,617     |                                     | $          | 14,670 |   | $ | 63,971 |   | $ | 46,396 |   |

 

12

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A reconciliation of AdjustedEBITDA to cash flows provided by operating activities is as follows:

 

| ** **                                    | ** ** | **For the nine months ended September 30,** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                    | ** ** | **2008**                                              | ** ** | **2007** | ** ** |
| Adjusted EBITDA                               |       | $                                                     | 183,424    |   | $ | 159,704 |   |
| Interest paid                                 |       | (29,808                                               | )          | (33,734 | ) |
| Change in  accounts receivable                |       | (54,499                                               | )          | (71,007 | ) |
| Change in other  operating assets/liabilities |       | 29,226                                                |       | 1,289 |   |
| Equity based  compensation                    |       | 1,841                                                 |       | 1,293 |   |
| Other                                         |       | 242                                                   |       | (599 | ) |
| Cash flows  provided by operating activities  |       | $                                                     | 130,426    |   | $ | 56,946 |   |

 

**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, EMS LP andsubsidiary guarantors would not provide additional material information thatwould be useful in assessing the financial composition of the issuers, EMS LPor the subsidiary guarantors. The condensed consolidating financial statementsfor EMSC, EMS LP, the issuers, the guarantors and the non-guarantor are asfollows:

 

13

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**ConsolidatingStatement of Operations**

**Forthe quarter ended September 30, 2008**

 
| ** **                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | **Issuer**            | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|------------|------------|-----------------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | **AMR**               | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **HoldCo, Inc.** | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| Net revenue                                                      |       | $          | —     |       | $          | —                |       | $                     | —     |           | $          | —            |       | $                 | 679,328    |       | $          | 8,845 |   | $ | (8,845 | ) | $ | 679,328 |   |
| Compensation and benefits                                        |       | —     |       | —     |       | —                |       | —                |       | 426,755        |       | —            |       | —            |       | 426,755    |       |
| Operating expenses                                               |       | —     |       | —     |       | —                |       | —                |       | 135,087        |       | —            |       | —            |       | 135,087    |       |
| Insurance expense                                                |       | —     |       | —     |       | —                |       | —                |       | 23,423         |       | 10,531            |       | (8,845            | )          | 25,109     |       |
| Selling, general and administrative  expenses                    |       | —     |       | —     |       | —                |       | —                |       | 20,509         |       | —            |       | —            |       | 20,509     |       |
| Depreciation and amortization expense                            |       | —     |       | —     |       | —                |       | —                |       | 16,993         |       | —            |       | —            |       | 16,993     |       |
| Income (loss) from operations                                    |       | —     |       | —     |       | —                |       | —                |       | 56,561         |       | (1,686            | )          | —            |       | 54,875     |       |
| Interest income from restricted assets                           |       | —     |       | —     |       | —                |       | —                |       | 705            |       | 918               |       | —            |       | 1,623      |       |
| Interest expense                                                 |       | —     |       | —     |       | —                |       | —                |       | (11,117        | )          | —            |       | —            |       | (11,117    | )          |
| Realized gain on investments                                     |       | —     |       | —     |       | —                |       | —                |       | —         |       | 768               |       | —            |       | 768        |       |
| Interest and other income                                        |       | —     |       | —     |       | —                |       | —                |       | 508            |       | —            |       | —            |       | 508        |       |
| Income before income taxes                                       |       | —     |       | —     |       | —                |       | —                |       | 46,657         |       | —            |       | —            |       | 46,657     |       |
| Income tax expense                                               |       | —     |       | —     |       | —                |       | —                |       | (18,138        | )          | —            |       | —            |       | (18,138    | )          |
| Income before equity in earnings of  unconsolidated subsidiaries |       | —     |       | —     |       | —                |       | —                |       | 28,519         |       | —            |       | —            |       | 28,519     |       |
| Equity in earnings of unconsolidated  subsidiaries               |       | 28,617     |       | 28,617     |       | 16,768                |       | 11,849                |       | 98             |       | —            |       | (85,851           | )          | 98         |       |
| Net income                                                       |       | $          | 28,617     |       | $          | 28,617                |       | $                     | 16,768     |           | $          | 11,849            |       | $                 | 28,617     |       | $          | — |   | $ | (85,851 | ) | $ | 28,617 |   |

 

 

**ConsolidatingStatement of Operations**

**Forthe quarter ended September 30, 2007**

 
| ** **                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Issuer**            | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------|------------|------------|------------|------------|------------|-----------------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **AMR**               | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                                                      | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **HoldCo, Inc.** | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| Net revenue                                                     |       | $          | —     |       | $          | —                |       | $                     | —     |           | $          | —            |       | $                 | 529,752    |       | $          | 7,856 |   | $ | (7,856 | ) | $ | 529,752 |   |
| Compensationand benefits                                        |       | —     |       | —     |       | —                |       | —                |       | 366,835        |       | —            |       | —            |       | 366,835    |       |
| Operating expenses                                              |       | —     |       | —     |       | —                |       | —                |       | 82,473         |       | —            |       | —            |       | 82,473     |       |
| Insurance expense                                               |       | —     |       | —     |       | —                |       | —                |       | 12,257         |       | 9,064             |       | (7,856            | )          | 13,465     |       |
| Selling, general and administrative  expenses                   |       | —     |       | —     |       | —                |       | —                |       | 15,876         |       | —            |       | —            |       | 15,876     |       |
| Depreciation and amortization expense                           |       | —     |       | —     |       | —                |       | —                |       | 17,809         |       | —            |       | —            |       | 17,809     |       |
| Income (loss) from operations                                   |       | —     |       | —     |       | —                |       | —                |       | 34,502         |       | (1,208            | )          | —            |       | 33,294     |       |
| Interest income from restricted assets                          |       | —     |       | —     |       | —                |       | —                |       | 720            |       | 1,199             |       | —            |       | 1,919      |       |
| Interest expense                                                |       | —     |       | —     |       | —                |       | —                |       | (12,652        | )          | —            |       | —            |       | (12,652    | )          |
| Realized gain on investments                                    |       | —     |       | —     |       | —                |       | —                |       | —         |       | 9                 |       | —            |       | 9          |       |
| Interest and other income                                       |       | —     |       | —     |       | —                |       | —                |       | 602            |       | —            |       | —            |       | 602        |       |
| Income before income taxes                                      |       | —     |       | —     |       | —                |       | —                |       | 23,172         |       | —            |       | —            |       | 23,172     |       |
| Income tax expense                                              |       | —     |       | —     |       | —                |       | —                |       | (8,672         | )          | —            |       | —            |       | (8,672     | )          |
| Income before equityin earnings of  unconsolidated subsidiaries |       | —     |       | —     |       | —                |       | —                |       | 14,500         |       | —            |       | —            |       | 14,500     |       |
| Equity in earnings of unconsolidated  subsidiaries              |       | 14,670     |       | 14,670     |       | 2,901                 |       | 11,769                |       | 170            |       | —            |       | (44,010           | )          | 170        |       |
| Net income                                                      |       | $          | 14,670     |       | $          | 14,670                |       | $                     | 2,901      |           | $          | 11,769            |       | $                 | 14,670     |       | $          | — |   | $ | (44,010 | ) | $ | 14,670 |   |

 

14

----

 

**ConsolidatingStatement of Operations**

**Forthe nine months ended September 30, 2008**

 
| ** **                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | **Issuer**            | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|------------|------------|-----------------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | **AMR**               | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **HoldCo, Inc.** | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| Net revenue                                                      |       | $          | —     |       | $          | —                |       | $                     | —     |           | $          | —            |       | $                 | 1,816,193  |       | $          | 27,554 |   | $ | (27,554 | ) | $ | 1,816,193 |   |
| Compensation and benefits                                        |       | —     |       | —     |       | —                |       | —                |       | 1,221,607      |       | —            |       | —            |       | 1,221,607  |       |
| Operating expenses                                               |       | —     |       | —     |       | —                |       | —                |       | 302,014        |       | —            |       | —            |       | 302,014    |       |
| Insurance expense                                                |       | —     |       | —     |       | —                |       | —                |       | 57,585         |       | 33,609            |       | (27,554           | )          | 63,640     |       |
| Selling, general and administrative  expenses                    |       | —     |       | —     |       | —                |       | —                |       | 50,621         |       | —            |       | —            |       | 50,621     |       |
| Depreciation and amortization expense                            |       | —     |       | —     |       | —                |       | —                |       | 52,156         |       | —            |       | —            |       | 52,156     |       |
| Income (loss) from operations                                    |       | —     |       | —     |       | —                |       | —                |       | 132,210        |       | (6,055            | )          | —            |       | 126,155    |       |
| Interest income from restricted assets                           |       | —     |       | —     |       | —                |       | —                |       | 2,069          |       | 3,044             |       | —            |       | 5,113      |       |
| Interest expense                                                 |       | —     |       | —     |       | —                |       | —                |       | (31,387        | )          | —            |       | —            |       | (31,387    | )          |
| Realized gain on investments                                     |       | —     |       | —     |       | —                |       | —                |       | —         |       | 3,011             |       | —            |       | 3,011      |       |
| Interest and other income                                        |       | —     |       | —     |       | —                |       | —                |       | 1,097          |       | —            |       | —            |       | 1,097      |       |
| Income before income taxes                                       |       | —     |       | —     |       | —                |       | —                |       | 103,989        |       | —            |       | —            |       | 103,989    |       |
| Income tax expense                                               |       | —     |       | —     |       | —                |       | —                |       | (40,170        | )          | —            |       | —            |       | (40,170    | )          |
| Income before equity in earnings of  unconsolidated subsidiaries |       | —     |       | —     |       | —                |       | —                |       | 63,819         |       | —            |       | —            |       | 63,819     |       |
| Equity in earnings of unconsolidated  subsidiaries               |       | 63,971     |       | 63,971     |       | 25,466                |       | 38,505                |       | 152            |       | —            |       | (191,913          | )          | 152        |       |
| Net income                                                       |       | $          | 63,971     |       | $          | 63,971                |       | $                     | 25,466     |           | $          | 38,505            |       | $                 | 63,971     |       | $          | — |   | $ | (191,913 | ) | $ | 63,971 |   |

 

**ConsolidatingStatement of Operations**

**Forthe nine months ended September 30, 2007**

 
| ** **                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | **Issuer**            | ** ** | **Issuer**            | ** ** | ** **     | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|------------|------------|-----------------------|------------|-----------------------|------------|----------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | **AMR**               | ** ** | **EmCare**            | ** ** | **Subsidiary** | ** ** | **Subsidiary**    | ** ** | **Eliminations/** | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | **EMSC**   | ** ** | **EMS LP** | ** ** | **HoldCo, Inc.** | ** ** | **HoldCo, Inc.** | ** ** | **Guarantors** | ** ** | **Non-Guarantor** | ** ** | **Adjustments**   | ** ** | **Total**  | ** ** |
| Net revenue                                                      |       | $          | —     |       | $          | —                |       | $                     | —     |           | $          | —            |       | $                 | 1,569,783  |       | $          | 23,363 |   | $ | (23,363 | ) | $ | 1,569,783 |   |
| Compensation and benefits                                        |       | —     |       | —     |       | —                |       | —                |       | 1,079,076      |       | —            |       | —            |       | 1,079,076  |       |
| Operating expenses                                               |       | —     |       | —     |       | —                |       | —                |       | 238,731        |       | —            |       | —            |       | 238,731    |       |
| Insurance expense                                                |       | —     |       | —     |       | —                |       | —                |       | 48,040         |       | 26,565            |       | (23,363           | )          | 51,242     |       |
| Selling, general and administrative  expenses                    |       | —     |       | —     |       | —                |       | —                |       | 44,082         |       | —            |       | —            |       | 44,082     |       |
| Depreciation and amortization expense                            |       | —     |       | —     |       | —                |       | —                |       | 52,165         |       | —            |       | —            |       | 52,165     |       |
| Restructuring charge                                             |       | —     |       | —     |       | —                |       | —                |       | 2,242          |       | —            |       | —            |       | 2,242      |       |
| Income (loss) from operations                                    |       | —     |       | —     |       | —                |       | —                |       | 105,447        |       | (3,202            | )          | —            |       | 102,245    |       |
| Interest income from restricted assets                           |       | —     |       | —     |       | —                |       | —                |       | 2,160          |       | 3,134             |       | —            |       | 5,294      |       |
| Interest expense                                                 |       | —     |       | —     |       | —                |       | —                |       | (35,281        | )          | —            |       | —            |       | (35,281    | )          |
| Realized gain on investments                                     |       | —     |       | —     |       | —                |       | —                |       | —         |       | 68                |       | —            |       | 68         |       |
| Interest and other income                                        |       | —     |       | —     |       | —                |       | —                |       | 1,791          |       | —            |       | —            |       | 1,791      |       |
| Income before income taxes                                       |       | —     |       | —     |       | —                |       | —                |       | 74,117         |       | —            |       | —            |       | 74,117     |       |
| Income tax expense                                               |       | —     |       | —     |       | —                |       | —                |       | (28,146        | )          | —            |       | —            |       | (28,146    | )          |
| Income before equity in earnings of  unconsolidated subsidiaries |       | —     |       | —     |       | —                |       | —                |       | 45,971         |       | —            |       | —            |       | 45,971     |       |
| Equity in earnings of unconsolidated  subsidiaries               |       | 46,396     |       | 46,396     |       | 7,777                 |       | 38,619                |       | 425            |       | —            |       | (139,188          | )          | 425        |       |
| Net income                                                       |       | $          | 46,396     |       | $          | 46,396                |       | $                     | 7,777      |           | $          | 38,619            |       | $                 | 46,396     |       | $          | — |   | $ | (139,188 | ) | $ | 46,396 |   |

 

15

----

 

**ConsolidatingBalance Sheet**

**Asof September 30, 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                |       | $          | —     |       | $          | —            |       | $                 | —     |           | $          | —            |       | $                 | 125,380    |       | $          | 10,302 |   | $ | — |   | $ | 135,682 |   |
| Insurance  collateral                     |       | —     |       | —     |       | —            |       | —            |       | 19,957         |       | 45,097            |       | (14,361           | )          | 50,693     |       |
| Trade and other  accounts receivable, net |       | —     |       | —     |       | —            |       | —            |       | 551,779        |       | 1,016             |       | —            |       | 552,795    |       |
| Parts and  supplies inventory             |       | —     |       | —     |       | —            |       | —            |       | 20,177         |       | —            |       | —            |       | 20,177     |       |
| Other current  assets                     |       | —     |       | —     |       | —            |       | —            |       | 18,325         |       | 900               |       | —            |       | 19,225     |       |
| Current deferred  tax assets              |       | —     |       | —     |       | —            |       | —            |       | 74,238         |       | 3,834             |       | —            |       | 78,072     |       |
| Current assets                            |       | —     |       | —     |       | —            |       | —            |       | 809,856        |       | 61,149            |       | (14,361           | )          | 856,644    |       |
| Non-current  assets:                      |       |       |       |       |       |              |       |              |       |           |       |              |       |              |       |       |       |
| Property, plant,  and equipment, net      |       | —     |       | —     |       | —            |       | —            |       | 126,732        |       | —            |       | —            |       | 126,732    |       |
| Intercompany  receivable                  |       | 9,187      |       | 114,010    |       | 278,048           |       | 188,823           |       | —         |       | —            |       | (590,068          | )          | —     |       |
| Intangible  assets, net                   |       | —     |       | —     |       | —            |       | —            |       | 75,274         |       | —            |       | —            |       | 75,274     |       |
| Non-current  deferred tax assets          |       | —     |       | —     |       | —            |       | —            |       | 63,480         |       | (4,315            | )          | —            |       | 59,165     |       |
| Insurance  collateral                     |       | —     |       | —     |       | —            |       | —            |       | 43,713         |       | 73,683            |       | (2,287            | )          | 115,109    |       |
| Goodwill                                  |       | —     |       | —     |       | —            |       | —            |       | 336,428        |       | 458               |       | —            |       | 336,886    |       |
| Other long-term  assets                   |       | —     |       | —     |       | 6,028             |       | 2,748             |       | 14,593         |       | —            |       | —            |       | 23,369     |       |
| Investment and  advances in subsidiaries  |       | 506,510    |       | 392,500    |       | 234,073           |       | 159,023           |       | 28,867         |       | —            |       | (1,320,973        | )          | —     |       |
| Assets                                    |       | $          | 515,697    |       | $          | 506,510           |       | $                 | 518,149    |           | $          | 350,594           |       | $                 | 1,498,943  |       | $          | 130,975 |   | $ | (1,927,689 | ) | $ | 1,593,179 |   |
| **Liabilities  and Equity**               |       |       |       |       |       |              |       |              |       |           |       |              |       |              |       |       |       |
| Current  liabilities:                     |       |       |       |       |       |              |       |              |       |           |       |              |       |              |       |       |       |
| Accounts payable                          |       | $          | —     |       | $          | —            |       | $                 | —     |           | $          | —            |       | $                 | 64,984     |       | $          | 75 |   | $ | — |   | $ | 65,059 |   |
| Accrued  liabilities                      |       | —     |       | —     |       | 2,094             |       | 1,711             |       | 255,453        |       | 31,515            |       | (626              | )          | 290,147    |       |
| Current portion  of long-term debt        |       | —     |       | —     |       | 1,590             |       | 715               |       | 2,539          |       | —            |       | —            |       | 4,844      |       |
| Current  liabilities                      |       | —     |       | —     |       | 3,684             |       | 2,426             |       | 322,976        |       | 31,590            |       | (626              | )          | 360,050    |       |
| Long-term debt                            |       | —     |       | —     |       | 280,392           |       | 189,741           |       | 4,752          |       | —            |       | —            |       | 474,885    |       |
| Other long-term  liabilities              |       | —     |       | —     |       | —            |       | —            |       | 193,546        |       | 65,023            |       | (16,022           | )          | 242,547    |       |
| Intercompany                              |       | —     |       | —     |       | —            |       | —            |       | 584,573        |       | 5,495             |       | (590,068          | )          | —     |       |
| Liabilities                               |       | —     |       | —     |       | 284,076           |       | 192,167           |       | 1,105,847      |       | 102,108           |       | (606,716          | )          | 1,077,482  |       |
| Equity:                                   |       |       |       |       |       |              |       |              |       |           |       |              |       |              |       |       |       |
| Class A common  stock                     |       | 95         |       | —     |       | —            |       | —            |       | —         |       | 30                |       | (30               | )          | 95         |       |
| 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               |       | 122,491    |       | —     |       | —            |       | —            |       | —         |       | 4,316             |       | (4,316            | )          | 122,491    |       |
| Retained earnings                         |       | 182,927    |       | 182,927    |       | 45,613            |       | 136,704           |       | 182,913        |       | 24,337            |       | (572,494          | )          | 182,927    |       |
| Comprehensive  income (loss)              |       | (2,178     | )          | (2,178     | )          | (934              | )          | (1,244            | )          | (2,178         | )          | 184               |       | 6,350             |       | (2,178     | )          |
| Equity                                    |       | 515,697    |       | 506,510    |       | 234,073           |       | 158,427           |       | 393,096        |       | 28,867            |       | (1,320,973        | )          | 515,697    |       |
| Liabilities and  Equity                   |       | $          | 515,697    |       | $          | 506,510           |       | $                 | 518,149    |           | $          | 350,594           |       | $                 | 1,498,943  |       | $          | 130,975 |   | $ | (1,927,689 | ) | $ | 1,593,179 |   |

 

16

----

 

**ConsolidatingBalance Sheet**

**Asof December 31, 2007**

 
| ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** | **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                |       | $          | —     |       | $          | —            |       | $                 | —     |           | $          | —            |       | $                 | 24,987     |       | $          | 3,927 |   | $ | — |   | $ | 28,914 |   |
| Insurance  collateral                     |       | —     |       | —     |       | —            |       | —            |       | 24,498         |       | 13,278            |       | —            |       | 37,776     |       |
| Trade and other  accounts receivable, net |       | —     |       | —     |       | —            |       | —            |       | 494,376        |       | 972               |       | —            |       | 495,348    |       |
| Parts and  supplies inventory             |       | —     |       | —     |       | —            |       | —            |       | 20,010         |       | —            |       | —            |       | 20,010     |       |
| Other current  assets                     |       | —     |       | —     |       | —            |       | —            |       | 11,709         |       | 6                 |       | —            |       | 11,715     |       |
| Current deferred  tax assets              |       | —     |       | —     |       | —            |       | —            |       | 73,834         |       | 3,163             |       | —            |       | 76,997     |       |
| Current assets                            |       | —     |       | —     |       | —            |       | —            |       | 649,414        |       | 21,346            |       | —            |       | 670,760    |       |
| Non-current  assets:                      |       |       |       |       |       |              |       |              |       |           |       |              |       |              |       |       |       |
| Property, plant,  and equipment, net      |       | —     |       | —     |       | —            |       | —            |       | 143,342        |       | —            |       | —            |       | 143,342    |       |
| Intercompany  receivable                  |       | 3,773      |       | 113,400    |       | 281,598           |       | 192,635           |       | —         |       | —            |       | (591,406          | )          | —     |       |
| Intangible  assets, net                   |       | —     |       | —     |       | —            |       | —            |       | 81,717         |       | —            |       | —            |       | 81,717     |       |
| Non-current  deferred tax assets          |       | —     |       | —     |       | —            |       | —            |       | 94,092         |       | 869               |       | —            |       | 94,961     |       |
| Insurance  collateral                     |       | —     |       | —     |       | —            |       | —            |       | 49,200         |       | 102,280           |       | (4,842            | )          | 146,638    |       |
| Goodwill                                  |       | —     |       | —     |       | —            |       | —            |       | 312,666        |       | 458               |       | —            |       | 313,124    |       |
| Other long-term  assets                   |       | —     |       | —     |       | 7,124             |       | 3,231             |       | 18,666         |       | —            |       | —            |       | 29,021     |       |
| Investment and  advances in subsidiaries  |       | 445,723    |       | 332,323    |       | 212,555           |       | 119,754           |       | 3,458          |       | —            |       | (1,113,813        | )          | —     |       |
| Assets                                    |       | $          | 449,496    |       | $          | 445,723           |       | $                 | 501,277    |           | $          | 315,620           |       | $                 | 1,352,555  |       | $          | 124,953 |   | $ | (1,710,061 | ) | $ | 1,479,563 |   |
| **Liabilities  and Equity**               |       |       |       |       |       |              |       |              |       |           |       |              |       |              |       |       |       |
| Current  liabilities:                     |       |       |       |       |       |              |       |              |       |           |       |              |       |              |       |       |       |
| Accounts payable                          |       | $          | —     |       | $          | —            |       | $                 | —     |           | $          | —            |       | $                 | 64,746     |       | $          | 109 |   | $ | — |   | $ | 64,855 |   |
| Accrued  liabilities                      |       | —     |       | —     |       | 5,547             |       | 4,860             |       | 196,565        |       | 30,347            |       | —            |       | 237,319    |       |
| Current portion  of long-term debt        |       | —     |       | —     |       | 1,656             |       | 744               |       | 2,317          |       | —            |       | —            |       | 4,717      |       |
| Current  liabilities                      |       | —     |       | —     |       | 7,203             |       | 5,604             |       | 263,628        |       | 30,456            |       | —            |       | 306,891    |       |
| Long-term debt                            |       | —     |       | —     |       | 281,519           |       | 190,248           |       | 6,399          |       | —            |       | —            |       | 478,166    |       |
| Other long-term  liabilities              |       | —     |       | —     |       | —            |       | —            |       | 158,813        |       | 91,039            |       | (4,842            | )          | 245,010    |       |
| Intercompany                              |       | —     |       | —     |       | —            |       | —            |       | 591,406        |       | —            |       | (591,406          | )          | —     |       |
| Liabilities                               |       | —     |       | —     |       | 288,722           |       | 195,852           |       | 1,020,246      |       | 121,495           |       | (596,248          | )          | 1,030,067  |       |
| Equity:                                   |       |       |       |       |       |              |       |              |       |           |       |              |       |              |       |       |       |
| Class A common  stock                     |       | 93         |       | —     |       | —            |       | —            |       | —         |       | 30                |       | (30               | )          | 93         |       |
| Class B common  stock                     |       | 1          |       | —     |       | —            |       | —            |       | —         |       | —            |       | —            |       | 1          |       |
| Partnership  equity                       |       | 212,361    |       | 325,761    |       | 189,394           |       | 22,967            |       | 212,361        |       | —            |       | (750,483          | )          | 212,361    |       |
| Additional paid-in  capital               |       | 117,079    |       | —     |       | —            |       | —            |       | —         |       | 6,690             |       | (6,690            | )          | 117,079    |       |
| Retained earnings                         |       | 118,956    |       | 118,956    |       | 23,783            |       | 95,173            |       | 118,942        |       | (5,500            | )          | (351,354          | )          | 118,956    |       |
| Comprehensive  income (loss)              |       | 1,006      |       | 1,006      |       | (622              | )          | 1,628             |       | 1,006          |       | 2,238             |       | (5,256            | )          | 1,006      |       |
| Equity                                    |       | 449,496    |       | 445,723    |       | 212,555           |       | 119,768           |       | 332,309        |       | 3,458             |       | (1,113,813        | )          | 449,496    |       |
| Liabilities and  Equity                   |       | $          | 449,496    |       | $          | 445,723           |       | $                 | 501,277    |           | $          | 315,620           |       | $                 | 1,352,555  |       | $          | 124,953 |   | $ | (1,710,061 | ) | $ | 1,479,563 |   |

 

17

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**CondensedConsolidating Statement of Cash Flows**

**Forthe nine months ended September 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              |       | $          | —     |       | $          | —           |       | $                | —     |           | $          | —             |       | $          | 127,295    |   | $ | 3,131 |   | $ | 130,426 |   |
| **Cash  Flows from Investing Activities**               |       |       |       |       |       |             |       |             |       |           |       |               |       |       |       |
| Purchase of property,  plant and equipment              |       | —     |       | —     |       | —           |       | —           |       | (21,754        | )          | —             |       | (21,754    | )          |
| Proceeds from  sale of property, plant and equipment    |       | —     |       | —     |       | —           |       | —           |       | 347            |       | —             |       | 347        |       |
| Acquisition of  businesses, net of cash received        |       | —     |       | —     |       | —           |       | —           |       | (28,325        | )          | —             |       | (28,325    | )          |
| Net change in  insurance collateral                     |       | —     |       | —     |       | —           |       | —           |       | 12,739         |       | 3,244              |       | 15,983     |       |
| Net change in  deposits and other assets                |       | —     |       | —     |       | —           |       | —           |       | 3,392          |       | —             |       | 3,392      |       |
| Net cash provided  by (used in) investing activities    |       | —     |       | —     |       | —           |       | —           |       | (33,601        | )          | 3,244              |       | (30,357    | )          |
| **Cash  Flows from Financing Activities**               |       |       |       |       |       |             |       |             |       |           |       |               |       |       |       |
| EMSC issuance of  class A common stock                  |       | 1,920      |       | —     |       | —           |       | —           |       | —         |       | —             |       | 1,920      |       |
| Repayments of  capital lease obligations and other debt |       | —     |       | —     |       | —           |       | —           |       | (18,006        | )          | —             |       | (18,006    | )          |
| Increase in bank  overdrafts                            |       | —     |       | —     |       | —           |       | —           |       | 8,785          |       | —             |       | 8,785      |       |
| Borrowings under  revolving credit facility             |       | —     |       | —     |       | —           |       | —           |       | 14,000         |       | —             |       | 14,000     |       |
| Net intercompany  borrowings (payments)                 |       | (1,920     | )          | —     |       | —           |       | —           |       | 1,920          |       | —             |       | —     |       |
| Net cash provided  by financing activities              |       | —     |       | —     |       | —           |       | —           |       | 6,699          |       | —             |       | 6,699      |       |
| Change in cash  and cash equivalents                    |       | —     |       | —     |       | —           |       | —           |       | 100,393        |       | 6,375              |       | 106,768    |       |
| Cash and cash  equivalents, beginning of period         |       | —     |       | —     |       | —           |       | —           |       | 24,987         |       | 3,927              |       | 28,914     |       |
| Cash and cash  equivalents, end of period               |       | $          | —     |       | $          | —           |       | $                | —     |           | $          | —             |       | $          | 125,380    |   | $ | 10,302 |   | $ | 135,682 |   |

 

**CondensedConsolidating Statement of Cash Flows**

**Forthe nine months ended September 30, 2007**

** **
| ** **                                              | ** ** | ** ** | ** ** | ** ** | ** ** | **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              |       | $          | —     |       | $          | —           |       | $                | —     |           | $          | —             |       | $          | 45,609     |   | $ | 11,337 |   | $ | 56,946 |   |
| **Cash  Flows from Investing Activities**               |       |       |       |       |       |             |       |             |       |           |       |               |       |       |       |
| Purchase of  property, plant and equipment              |       | —     |       | —     |       | —           |       | —           |       | (31,570        | )          | —             |       | (31,570    | )          |
| Proceeds from  sale of property, plant and equipment    |       | —     |       | —     |       | —           |       | —           |       | 300            |       | —             |       | 300        |       |
| Acquisition of  businesses, net of cash received        |       | —     |       | —     |       | —           |       | —           |       | (75,648        | )          | (75,648            | )          |       |       |
| Net change in  insurance collateral                     |       | —     |       | —     |       | —           |       | —           |       | 3,928          |       | (11,228            | )          | (7,300     | )          |
| Net change in  deposits and other assets                |       | —     |       | —     |       | —           |       | —           |       | 3,076          |       | —             |       | 3,076      |       |
| Net cash used in  investing activities                  |       | —     |       | —     |       | —           |       | —           |       | (99,914        | )          | (11,228            | )          | (111,142   | )          |
| **Cash  Flows from Financing Activities**               |       |       |       |       |       |             |       |             |       |           |       |               |       |       |       |
| EMSC issuance of  class A common stock                  |       | 382        |       | —     |       | —           |       | —           |       | —         |       | —             |       | 382        |       |
| Borrowings under  revolving credit facility             |       | —     |       | —     |       | —           |       | —           |       | 70,300         |       | —             |       | 70,300     |       |
| Repayments of  capital lease obligations and other debt |       | —     |       | —     |       | —           |       | —           |       | (35,815        | )          | —             |       | (35,815    | )          |
| Net intercompany  borrowings (payments)                 |       | (382       | )          | —     |       | —           |       | —           |       | 382            |       | —             |       | —     |       |
| Increase in bank  overdrafts                            |       | —     |       | —     |       | —           |       | —           |       | 2,387          |       | —             |       | 2,387      |       |
| Net cash provided  by financing activities              |       | —     |       | —     |       | —           |       | —           |       | 37,254         |       | —             |       | 37,254     |       |
| Change in cash  and cash equivalents                    |       | —     |       | —     |       | —           |       | —           |       | (17,051        | )          | 109                |       | (16,942    | )          |
| Cash and cash  equivalents, beginning of period         |       | —     |       | —     |       | —           |       | —           |       | 39,329         |       | 7                  |       | 39,336     |       |
| Cash and cash  equivalents, end of period               |       | $          | —     |       | $          | —           |       | $                | —     |           | $          | —             |       | $          | 22,278     |   | $ | 116 |   | $ | 22,394 |   |

 

**11.****      ****Subsequent Events**

 

TheCompany completed the acquisition of Templeton Readings, LLC in October 2008for $27.5 million.  Based in Baltimore,Maryland, Templeton Readings, LLC is a provider of final reads andteleradiology services with contracts in 31 states as of October 20, 2008. TheCompany is in the process of performing its allocation of the purchase price.

 

On October 24,2008, the Company filed a shelf registration statement with the Securities andExchange Commission. The Company has not commenced any offering. Uponeffectiveness, the shelf registration will allow EMSC’s existing stockholders tosell a portion of their holdings of class A common stock, and it will alsoallow EMSC to issue and sell new shares of class A common stock. In theaggregate, up to 10,000,000 shares of class A common stock will be eligible tobe sold by the Company’s stockholders and by the Company pursuant to the shelfregistration statement.

 

18

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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 complex governmentregulation of our industry, both as it exists now and as it may change in thefuture; our ability to recruit and retain qualified physicians and otherhealthcare professionals, and enforce our non-compete agreements with ourphysicians; the loss of one or more members of our senior management team; theoutcome of government investigations of certain of our business practices; ourability to generate cash flow to service our debt obligations and fund the costof capital expenditures to maintain and upgrade our vehicle fleet and medicalequipment; and the loss of existing contracts and the accuracy of ourassessment of costs under new contracts.

 

All references to “we”, “our”,“us” or “EMSC” refer to Emergency Medical Services Corporation and its subsidiaries,including Emergency Medical Services L.P., or EMS LP. The Company’s business isconducted primarily through two operating subsidiaries, American MedicalResponse, Inc., or AMR, and EmCare Holdings Inc., or EmCare.

 

This Report should 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 27, 2008.

 

***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 30 years of operating history, has become the leading provider ofoutsourced emergency department staffing and management services in the UnitedStates.

 

***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 collectibility of charges associated with services we provide tothese patients, which we refer to as uncompensated care, our net revenuerecognition is based on expected cash collections. Our net revenue is grossbillings after provisions for contractual discounts and estimated uncompensatedcare. Provisions for contractual discounts and uncompensated care haveincreased historically primarily as a result of increases in gross billingrates.

 

The table belowsummarizes our approximate payor mix as a percentage of both net revenue andtotal transports and patient visits for the three and nine months ended September 30,2008 and 2007. In determining the net revenue payor mix, we use cashcollections in the period as an approximation of net revenue recorded.

 

19

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| ** **                             | ** ** | **Percentage of Net Revenue**         | ** ** | **Percentage of Total Volume**           | ** ** |
|----------------------------------------|------------|---------------------------------------|------------|------------------------------------------|------------|
| ** **                             | ** ** | **Quarter ended  September 30,** | ** ** | **Nine months ended September 30,** | ** ** | **Quarter ended  September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
| ** **                             | ** ** | **2008**                              | ** ** | **2007**                                 | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** |
| Medicare                               |       | 20.4                                  | %          | 25.0                                     | %          | 23.1 | % | 24.7 | % | 25.2 | % | 26.0 | % | 25.9 | % | 26.2 | % |
| Medicaid                               |       | 3.7                                   | %          | 4.7                                      | %          | 4.3 | % | 4.7 | % | 10.8 | % | 10.4 | % | 10.8 | % | 10.5 | % |
| Commercial  insurance and managed care |       | 42.6                                  | %          | 46.7                                     | %          | 47.0 | % | 48.6 | % | 41.9 | % | 40.7 | % | 41.9 | % | 41.1 | % |
| Self-pay                               |       | 4.0                                   | %          | 4.9                                      | %          | 4.3 | % | 4.7 | % | 22.2 | % | 22.9 | % | 21.4 | % | 22.2 | % |
| Subsidies &  fees             |       | 29.3                                  | %          | 18.7                                     | %          | 21.3 | % | 17.3 | % | — |   | — |   | — |   | — |   |
| 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 52%, 57%excluding deployment revenue from AMR’s agreement with the Federal EmergencyManagement Agency, or FEMA, of AMR’s net revenue for the nine months ended September 30,2008 was generated from emergency 9-1-1 ambulance transport services. The FEMAcontract is described further in “Item 2 — Management’s Discussion and Analysisof Financial Condition and Results of Operations - *FactorsAffecting Operating Results*.*”*Non-emergencyambulance transport services, including critical care transfers, wheelchairtransports and other interfacility transports, or IFTs, accounted for 27%, 30%excluding FEMA deployment revenue, of AMR’s net revenue for the same period,with the balance generated from fixed wing medical transportation services,Medicaid managed transportation services, and the provision of training,dispatch and other services to communities and public safety agencies. AMR’s measures for net revenue include transports, segregated into ambulanceand wheelchair transports and in certain analyses weighted, and net revenue pertransport.

 

The change from period toperiod in the number of transports is influenced by increases in transports inexisting markets from both new and existing facilities we serve fornon-emergency transports, the effects of general community conditions foremergency transports and the impact of newly acquired businesses.

 

The costs we incur in ourAMR business segment consist primarily of compensation and benefits for medicalcrews and support personnel, direct and indirect operating costs to providetransportation services, and costs related to accident and insurance claims.AMR’s key cost measures include unit hours and cost per unit hour, to measurecompensation-related costs and the efficiency of our ambulance deployment,operating costs per transport, and accident and insurance claims.

 

We have focused our riskmitigation efforts on employee training for proper patient handling techniques,development of clinical and medical equipment protocols, driving safety,implementation of technology to reduce auto incidents and other risk mitigationprocesses which we believe have resulted in a reduction in the frequency,severity and development of claims. We continue to see positive trends in ourclaims costs but cannot provide assurance that these trends will continue.

 

**EmCare**

 

Of EmCare’s net revenuefor the nine months ended September 30, 2008, approximately 99% wasderived from our hospital contracts for emergency department staffing,hospitalist and radiology services and other management services. Of thisrevenue, approximately 78% was generated from billings to third party payorsand patients for patient visits and approximately 22% was generated frombillings to hospitals and affiliated physician groups for professionalservices. EmCare’s key net revenue measures are patient visits, net revenue perpatient visit, and number of contracts.

 

The change from period toperiod in the number of patient visits 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 for physiciansand other professional providers, professional liability costs, and contractand other support costs. EmCare’s key cost measures include providercompensation per patient visit and professional liability costs.

 

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

 

20

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***Recent Developments***

 

The Company adopted SFAS157 Fair Value Measurement effective January 1, 2008, which among otherthings, requires additional disclosures about investments that are reported atfair value.  SFAS 157 establishes a hierarchal disclosure framework whichranks the level of market price observability used in measuring investments atfair value. Market price observability is impacted by a number of factors,including the type of investment and the characteristics specific to theinvestment.  Investments with readily available active quoted prices orfor which fair value can be measured from actively quoted prices generally willhave a higher degree of market price observability and a lesser degree ofjudgment used in measuring fair value.

 

***Factors Affecting Operating Results***

 

**Federal Emergency Management AgencyContract**

 

In 2007, FEMA awarded AMRwith a national contract to provide ambulance, para-transit, and rotary andfixed-wing air ambulance transportation services to supplement federal andmilitary responses to disasters, acts of terrorism and other public healthemergencies. The contract covers the 21 states along the Gulf and Atlanticcoasts and can be expanded by FEMA to the 48 contiguous states if necessary. Thenational contract took effect on August 1, 2007 and was renewed by FEMA for asecond year.  FEMA has the option torenew the contract for three more years on an annual basis. In August 2008,AMR was deployed under this contract to provide patient evacuations anddisaster relief efforts in three Gulf Coast states for hurricanes Gustav andIke and recorded $101 million, which included approximately $11 million ofexpense pass-throughs, in net revenue during each of the three and nine monthsended September 30, 2008. For the three and nine months ended September 30,2007, net revenue for the FEMA contract was $11 million associated with thedeployment for hurricane Dean.

 

**Changes in 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 contractexpirations. We regularly bid for new contracts, frequently in a formalcompetitive bidding process that often requires written responses to a Requestfor Proposal, or RFP, and, in any fiscal period, certain of our contracts willexpire. We may elect not to seek extension or renewal of a contract, or mayreduce certain services, if we determine that we cannot continue to providesuch services on favorable terms. With respect to expiring contracts we wouldlike to renew, we may be required to seek renewal through an RFP, and we maynot be successful in retaining any such contracts, or retaining them on termsthat are as favorable as present terms.

 

**Inflation**

 

Certain of our expenses,such as wages and benefits, insurance, fuel and equipment repair andmaintenance costs, are subject to normal inflationary pressures. Excluding theimpact of the FEMA contract, fuel expense represented 16.2% and 12.7% of AMR’soperating expenses for the three months ended September 30, 2008 and 2007,respectively, and 15.2% and 11.8% for the nine months ended September 30,2008 and 2007, 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 anyfuture fuel and inflationary cost increases through similar efficiencies andfee changes.

 

***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. Retroactive adjustments recorded in the first nine months of the year,which increased revenue, were 0.4% of consolidated net revenue compared to 1.8%of consolidated net revenue for the nine months ended September 30, 2007.

 

**Resultsof Operations**

 

**Threeand Nine Months Ended September 30, 2008 Compared to Three and Nine MonthsEnded September 30, 2007**

 

The following tablespresent a comparison of financial data from our unaudited consolidatedstatements of operations for the three and nine months ended September 30,2008 and for the three and nine months ended September 30, 2007 for EMSCand our two operating segments.

 

21

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**Non-GAAPMeasures**

 

*AdjustedEBITDA. *Adjusted EBITDA is defined as 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 iscommonly used by management and investors as a performance measure andliquidity indicator. Adjusted EBITDA is not considered a measure of financialperformance under U.S. generally accepted accounting principles, or GAAP, andthe 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.

 

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

**(dollarsin thousands)**

 

**EMSC**

 
| ** **                                       | ** **         | **Quarter ended  September 30, 2008**                                                    | ** **         | **Quarter ended  September 30, 2007**                                              | ** **               | **Nine months ended  September 30, 2008**                                           | ** **         | **Nine months ended  September 30, 2007**                                     | ** **               |
|--------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------------------|--------------------------|--------------------------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------------------|--------------------------|
| ** **                                       | ** **         | ** **                                                                                                   | ** **         | **% of net  revenue**                                                                   | ** **               | ** **                                                                                                   | ** **         | **% of net  revenue**                                                                   | ** **               | ** ** | ** ** | **% of net  revenue** | ** ** | ** ** | ** ** | **% of net  revenue** | ** ** |
| Net revenue                                      |               | $                                                                                                            | 679,328            |                                                                                                   | 100.0                    | %                                                                                                            | $                  | 529,752                                                                                                |                     | 100.0 | % | $ | 1,816,193 |   | 100.0 | % | $ | 1,569,783 |   | 100.0 | % |
| Compensation and  benefits                       |               | 426,755                                                                                                      |               | 62.8                                                                                                   |                     | 366,835                                                                                                      |               | 69.2                                                                                                   |                     | 1,221,607 |   | 67.3 |   | 1,079,076 |   | 68.7 |   |
| Operating  expenses                              |               | 135,087                                                                                                      |               | 19.9                                                                                                   |                     | 82,473                                                                                                       |               | 15.6                                                                                                   |                     | 302,014 |   | 16.6 |   | 238,731 |   | 15.2 |   |
| Insurance  expense                               |               | 25,109                                                                                                       |               | 3.7                                                                                                    |                     | 13,465                                                                                                       |               | 2.5                                                                                                    |                     | 63,640 |   | 3.5 |   | 51,242 |   | 3.3 |   |
| Selling, general  and administrative expenses    |               | 20,509                                                                                                       |               | 3.0                                                                                                    |                     | 15,876                                                                                                       |               | 3.0                                                                                                    |                     | 50,621 |   | 2.8 |   | 44,082 |   | 2.8 |   |
| Restructuring  charges                           |               | —                                                                                                       |               | —                                                                                                 |                     | —                                                                                                       |               | —                                                                                                 |                     | — |   | — |   | 2,242 |   | 0.1 |   |
| Interest income  from restricted assets          |               | (1,623                                                                                                       | )                  | (0.2                                                                                                   | )                        | (1,919                                                                                                       | )                  | (0.4                                                                                                   | )                        | (5,113 | ) | (0.3 | ) | (5,294 | ) | (0.3 | ) |
| Adjusted EBITDA                                  |               | 73,491                                                                                                       |               | 10.8                                                                                                   |                     | 53,022                                                                                                       |               | 10.0                                                                                                   |                     | 183,424 |   | 10.1 |   | 159,704 |   | 10.2 |   |
| Depreciation and  amortization expenses          |               | (16,993                                                                                                      | )                  | (2.5                                                                                                   | )                        | (17,809                                                                                                      | )                  | (3.4                                                                                                   | )                        | (52,156 | ) | (2.9 | ) | (52,165 | ) | (3.3 | ) |
| Interest expense                                 |               | (11,117                                                                                                      | )                  | (1.6                                                                                                   | )                        | (12,652                                                                                                      | )                  | (2.4                                                                                                   | )                        | (31,387 | ) | (1.7 | ) | (35,281 | ) | (2.2 | ) |
| Realized gain on  investments                    |               | 768                                                                                                          |               | 0.1                                                                                                    |                     | 9                                                                                                            |               | 0.0                                                                                                    |                     | 3,011 |   | 0.2 |   | 68 |   | 0.0 |   |
| Interest and  other income                       |               | 508                                                                                                          |               | 0.1                                                                                                    |                     | 602                                                                                                          |               | 0.1                                                                                                    |                     | 1,097 |   | 0.1 |   | 1,791 |   | 0.1 |   |
| Income tax  expense                              |               | (18,138                                                                                                      | )                  | (2.7                                                                                                   | )                        | (8,672                                                                                                       | )                  | (1.6                                                                                                   | )                        | (40,170 | ) | (2.2 | ) | (28,146 | ) | (1.8 | ) |
| Equity in  earnings of unconsolidated subsidiary |               | 98                                                                                                           |               | 0.0                                                                                                    |                     | 170                                                                                                          |               | 0.0                                                                                                    |                     | 152 |   | 0.0 |   | 425 |   | 0.0 |   |
| Net income                                       |               | $                                                                                                            | 28,617             |                                                                                                   | 4.2                      | %                                                                                                            | $                  | 14,670                                                                                                 |                     | 2.8 | % | $ | 63,971 |   | 3.5 | % | $ | 46,396 |   | 3.0 | % |
|                                             |     |                    |     |                   |      |                    |     |                   |      |                    |     |                   |      |                    |     |                   |   |

**Unaudited Reconciliation of AdjustedEBITDA to Cash Flows Provided by Operating Activities**

**(dollarsin thousands)**

** **

| ** **                                    | ** ** | **For the nine months ended** | ** ** |
|-----------------------------------------------|------------|-------------------------------|------------|
| ** **                                    | ** ** | **September 30,**        | ** ** |
| ** **                                    | ** ** | **2008**                      | ** ** | **2007** | ** ** |
| Adjusted EBITDA                               |       | $                             | 183,424    |   | $ | 159,704 |   |
| Interest paid                                 |       | (29,808                       | )          | (33,734 | ) |
| Change in  accounts receivable                |       | (54,499                       | )          | (71,007 | ) |
| Change in other  operating assets/liabilities |       | 29,226                        |       | 1,289 |   |
| Equity based  compensation                    |       | 1,841                         |       | 1,293 |   |
| Other                                         |       | 242                           |       | (599 | ) |
| Cash flows  provided by operating activities  |       | $                             | 130,426    |   | $ | 56,946 |   |

 

22

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

**(dollarsin thousands)**

 

**AMR**

 
| ** **                                                   | ** **         | **Quarter ended  September 30, 2008**                                                    | ** **         | **Quarter ended  September 30, 2007**                                              | ** **               | **Nine months ended  September 30, 2008**                                           | ** **         | **Nine months ended  September 30, 2007**                                     | ** **               |
|--------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------------------|--------------------------|--------------------------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------------------|--------------------------|
| ** **                                                   | ** **         | ** **                                                                                                   | ** **         | **% of net  revenue**                                                                   | ** **               | ** **                                                                                                   | ** **         | **% of net  revenue**                                                                   | ** **               | ** ** | ** ** | **% of net  revenue** | ** ** | ** ** | ** ** | **% of net  revenue** | ** ** |
| Net revenue                                                  |               | $                                                                                                            | 425,335            |                                                                                                   | 100.0                    | %                                                                                                            | $                  | 310,929                                                                                                |                     | 100.0 | % | $ | 1,075,323 |   | 100.0 | % | $ | 914,341 |   | 100.0 | % |
| Compensation and  benefits                                   |               | 226,942                                                                                                      |               | 53.4                                                                                                   |                     | 196,292                                                                                                      |               | 63.1                                                                                                   |                     | 635,031 |   | 59.1 |   | 576,301 |   | 63.0 |   |
| Operating  expenses                                          |               | 126,154                                                                                                      |               | 29.7                                                                                                   |                     | 71,682                                                                                                       |               | 23.1                                                                                                   |                     | 275,936 |   | 25.7 |   | 207,289 |   | 22.7 |   |
| Insurance  expense                                           |               | 10,694                                                                                                       |               | 2.5                                                                                                    |                     | 6,752                                                                                                        |               | 2.2                                                                                                    |                     | 30,794 |   | 2.9 |   | 26,045 |   | 2.8 |   |
| Selling, general  and administrative expenses                |               | 15,066                                                                                                       |               | 3.5                                                                                                    |                     | 10,916                                                                                                       |               | 3.5                                                                                                    |                     | 34,073 |   | 3.2 |   | 30,308 |   | 3.3 |   |
| Restructuring  charges                                       |               | —                                                                                                       |               | —                                                                                                 |                     | —                                                                                                       |               | —                                                                                                 |                     | — |   | — |   | 2,242 |   | 0.2 |   |
| Interest income  from restricted assets                      |               | (705                                                                                                         | )                  | (0.2                                                                                                   | )                        | (720                                                                                                         | )                  | (0.2                                                                                                   | )                        | (2,069 | ) | (0.2 | ) | (2,160 | ) | (0.2 | ) |
| Adjusted EBITDA                                              |               | 47,184                                                                                                       |               | 11.1                                                                                                   |                     | 26,007                                                                                                       |               | 8.4                                                                                                    |                     | 101,558 |   | 9.4 |   | 74,316 |   | 8.1 |   |
| Reconciliation  of Adjusted EBITDA to income from operations |               |                                                                                                         |               |                                                                                                   |                     |                                                                                                         |               |                                                                                                   |                     |   |   |   |   |   |   |   |   |
| Adjusted EBITDA                                              |               | 47,184                                                                                                       |               | 11.1                                                                                                   |                     | 26,007                                                                                                       |               | 8.4                                                                                                    |                     | 101,558 |   | 9.4 |   | 74,316 |   | 8.1 |   |
| Depreciation and  amortization expense                       |               | (13,447                                                                                                      | )                  | (3.2                                                                                                   | )                        | (14,246                                                                                                      | )                  | (4.6                                                                                                   | )                        | (41,951 | ) | (3.9 | ) | (41,707 | ) | (4.6 | ) |
| Interest income  from restricted assets                      |               | (705                                                                                                         | )                  | (0.2                                                                                                   | )                        | (720                                                                                                         | )                  | (0.2                                                                                                   | )                        | (2,069 | ) | (0.2 | ) | (2,160 | ) | (0.2 | ) |
| Income from  operations                                      |               | $                                                                                                            | 33,032             |                                                                                                   | 7.8                      | %                                                                                                            | $                  | 11,041                                                                                                 |                     | 3.6 | % | $ | 57,538 |   | 5.4 | % | $ | 30,449 |   | 3.3 | % |
|                                                         |     |                    |     |                   |      |                    |     |                   |      |                    |     |                   |      |                    |     |                   |   |

**EmCare**

** **
| ** **                                                   | ** **         | **Quarter ended  September 30, 2008**                                                    | ** **         | **Quarter ended  September 30, 2007**                                              | ** **               | **Nine months ended  September 30, 2008**                                           | ** **         | **Nine months ended  September 30, 2007**                                     | ** **               |
|--------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------------------|--------------------------|--------------------------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------------------|--------------------------|
| ** **                                                   | ** **         | ** **                                                                                                   | ** **         | **% of net  revenue**                                                                   | ** **               | ** **                                                                                                   | ** **         | **% of net  revenue**                                                                   | ** **               | ** ** | ** ** | **% of net  revenue** | ** ** | ** ** | ** ** | **% of net  revenue** | ** ** |
| Net revenue                                                  |               | $                                                                                                            | 253,993            |                                                                                                   | 100.0                    | %                                                                                                            | $                  | 218,823                                                                                                |                     | 100.0 | % | $ | 740,870 |   | 100.0 | % | $ | 655,442 |   | 100.0 | % |
| Compensation and  benefits                                   |               | 199,813                                                                                                      |               | 78.7                                                                                                   |                     | 170,543                                                                                                      |               | 77.9                                                                                                   |                     | 586,576 |   | 79.2 |   | 502,775 |   | 76.7 |   |
| Operating  expenses                                          |               | 8,933                                                                                                        |               | 3.5                                                                                                    |                     | 10,791                                                                                                       |               | 4.9                                                                                                    |                     | 26,078 |   | 3.5 |   | 31,442 |   | 4.8 |   |
| Insurance  expense                                           |               | 14,415                                                                                                       |               | 5.7                                                                                                    |                     | 6,713                                                                                                        |               | 3.1                                                                                                    |                     | 32,846 |   | 4.4 |   | 25,197 |   | 3.8 |   |
| Selling, general  and administrative expenses                |               | 5,443                                                                                                        |               | 2.1                                                                                                    |                     | 4,960                                                                                                        |               | 2.3                                                                                                    |                     | 16,548 |   | 2.2 |   | 13,774 |   | 2.1 |   |
| Interest income  from restricted assets                      |               | (918                                                                                                         | )                  | (0.4                                                                                                   | )                        | (1,199                                                                                                       | )                  | (0.5                                                                                                   | )                        | (3,044 | ) | (0.4 | ) | (3,134 | ) | (0.5 | ) |
| Adjusted EBITDA                                              |               | 26,307                                                                                                       |               | 10.4                                                                                                   |                     | 27,015                                                                                                       |               | 12.3                                                                                                   |                     | 81,866 |   | 11.0 |   | 85,388 |   | 13.0 |   |
| Reconciliation  of Adjusted EBITDA to income from operations |               |                                                                                                         |               |                                                                                                   |                     |                                                                                                         |               |                                                                                                   |                     |   |   |   |   |   |   |   |   |
| Adjusted EBITDA                                              |               | 26,307                                                                                                       |               | 10.4                                                                                                   |                     | 27,015                                                                                                       |               | 12.3                                                                                                   |                     | 81,866 |   | 11.0 |   | 85,388 |   | 13.0 |   |
| Depreciation and  amortization expenses                      |               | (3,546                                                                                                       | )                  | (1.4                                                                                                   | )                        | (3,563                                                                                                       | )                  | (1.6                                                                                                   | )                        | (10,205 | ) | (1.4 | ) | (10,458 | ) | (1.6 | ) |
| Interest income  from restricted assets                      |               | (918                                                                                                         | )                  | (0.4                                                                                                   | )                        | (1,199                                                                                                       | )                  | (0.5                                                                                                   | )                        | (3,044 | ) | (0.4 | ) | (3,134 | ) | (0.5 | ) |
| Income from  operations                                      |               | $                                                                                                            | 21,843             |                                                                                                   | 8.6                      | %                                                                                                            | $                  | 22,253                                                                                                 |                     | 10.2 | % | $ | 68,617 |   | 9.3 | % | $ | 71,796 |   | 11.0 | % |
|                                                         |     |                    |     |                   |      |                    |     |                   |      |                    |     |                   |      |                    |     |                   |   |

23

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***Quarter ended September 30, 2008 compared to thequarter ended September 30, 2007***

 

***Consolidated***

 

Our results for the threemonths ended September 30, 2008 reflect an increase in net revenue of$149.6 million and an increase in net income of $13.9 million compared to thethree months ended September 30, 2007.  The increase in net income isattributable primarily to hurricane deployments under AMR’s national FEMAcontract, growth in income from operations, which includes an increase ininsurance expense, and a decrease in interest expense, partially offset byincreased income tax expense.  Basic and diluted earnings per share were$0.69 and $0.66, respectively, for the three months ended September 30,2008.  Basic and diluted earnings per share were $0.35 and $0.34,respectively, for the same period in 2007.

 

*Netrevenue.* Forthe three months ended September 30, 2008, we generated net revenue of$679.3 million compared to $529.8 million for the three months ended September 30,2007, representing an increase of 28.2%.  The increase is attributableprimarily to an increase of $90.6 million of FEMA deployment revenue, increasesin rates and volumes on existing contracts and increased volume from net newcontracts and acquisitions.

 

*AdjustedEBITDA.*AdjustedEBITDA was $73.5 million, or 10.8% of net revenue, for the three months ended September 30,2008 compared to $53.0 million, or 10.0% of net revenue for the three monthsended September 30, 2007. The 2008 period includes the Adjusted EBITDAimpact related to increased deployment under the FEMA contract.

 

*Interestexpense.* Interestexpense for the three months ended September 30, 2008 was $11.1 millioncompared to $12.7 million for the three months ended September 30,2007.  The decrease is attributable primarily to the lower rate under ourinterest rate swap agreement, which became effective in the fourth quarter of2007.  The swap agreement converts $200.0 million of variable rate debt tofixed rate debt with an effective rate of 6.3%.

 

*Incometax expense. *Incometax expense for the three months ended September 30, 2008 was $18.1million compared to $8.7 million for the same period in 2007.  Oureffective tax rate for the three months ended September 30, 2008was 38.9%, and 37.4% for the same period in 2007.  The increase is dueprimarily to growth in income from operations.

 

***AMR***

 

*Netrevenue. *Netrevenue for the three months ended September 30, 2008 was $425.3 million,an increase of $114.4 million, or 36.8%, from $310.9 million for the sameperiod in 2007.  The increase in net revenue was due primarily to anincrease of $90.6 million of FEMA deployment revenue, and rate increases offsetby lower transport volume.  Excluding theimpact of FEMA deployments, net revenue per weighted transport increased 8.2%,or $25.5 million and was offset by a decrease of 0.6%, or $1.7 million, inweighted transport volume.  The increase in net revenue per transport isattributable primarily to rate increases in several markets includingadjustments for increased fuel costs.  Weighted transports decreased 4,100from the same quarter last year.  Ambulance transports, includingacquisitions, increased 17,500 offset by a reduction of 19,300 transports inmarkets exited since last year. Same market ambulance transports increased 1.0%from last year.

 

*Compensationand benefits. *Compensationand benefit costs for the three months ended September 30, 2008 were$226.9 million, or 53.4% of net revenue, compared to $196.3 million, or 63.1%of net revenue, for the same period last year. The increase was due primarilyto compensation costs incurred as a result of increased hurricane deploymentsunder our national FEMA contract, annual salary increases and additionalambulance unit hour deployment. Excluding the estimated impact of the increased FEMA deployment, ambulancecrew wages per ambulance unit hour increased by approximately 6.4%, or $7.2million primarily attributable to wage rate increases.   Ambulanceunit hours increased period over period by 1.2%, or $1.4 million, excluding theimpact of hurricane deployments.  Theincrease is attributable to our recent acquisitions partially offset by therestructuring and exit of certain of our operations in 2007.  Benefitcosts increased by $4.0 million, excluding FEMA deployment benefit costs, forthe three months ended September 30, 2008 compared to the same period in2007.  The change is attributable to increased health insurance costs andadditional benefit costs related to our acquisitions.

 

*Operatingexpenses. *Operatingexpenses for the three months ended September 30, 2008 were $126.2million, or 29.7% of net revenue, compared to $71.7 million, or 23.1% of netrevenue, for the three months ended September 30, 2007.  The changeis due primarily to increased external provider expenses from our FEMAdeployment of $46.3 million, increased fuel costs of $3.5 million andadditional operating expenses of $1.7 million from our acquisitions.

 

*Insuranceexpense. *Insuranceexpense for the three months ended September 30, 2008 was $10.7 million,or 2.5% of net revenue, compared to $6.8 million, or 2.2% of net revenue, forthe same period in 2007.  We recorded a reduction of prior year 

 

24

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insurance provisions of$1.7 million during the three months ended September 30, 2008 and $4.7million during the three months ended September 30, 2007.

 

*Selling,general and administrative. *Selling, general and administrative expense for thethree months ended September 30, 2008 was $15.1 million, or 3.5% of netrevenue, compared to $10.9 million, or 3.5% of net revenue, for the threemonths ended September 30, 2007. The increase is due primarily to travel and other administrative costsassociated with our increased FEMA deployment.

 

*Depreciationand amortization. *Depreciation and amortization expense for the three months ended September 30,2008 was $13.4 million, or 3.2% of net revenue, compared to $14.2 million, or4.6% of net revenue, for the same period in 2007.

 

***EmCare***

 

*Netrevenue. *Netrevenue for the three months ended September 30, 2008 was $254.0 million,an increase of $35.2 million, or 16.1%, from $218.8 million for the threemonths ended September 30, 2007. The increase was due primarily to anincrease in patient visits from net new hospital contracts and net revenueincreases in existing contracts. Following June 30, 2007, we added 74 netnew contracts which accounted for a net revenue increase of $24.9 million forthe three months ended September 30, 2008.  Of the 74 net newcontracts added since June 30, 2007, 16 were added in 2007 resulting in anincremental increase in 2008 net revenue of $6.1 million.   The remaining 58 net new contracts were addedin 2008, resulting in an increase in net revenue of $18.8 million for the threemonths ended September 30, 2008. During the three months ended September 30, 2008, EmCare added atotal of 63 new contracts and terminated 25 contracts.  Of the 63 newcontracts added in 2008, 45 were from our acquisition of Clinical Partners in August 2008with related management fee revenue totaling $1.1 million in the quarter.  Net revenue under our “same store” contracts(contracts in existence for the entirety of both periods) increased $10.3million, or 5.3%, for the three months ended September 30, 2008.  Thechange is due to a 3.3% increase in revenue per visit and an increase in samestore patient visits of 2.0% over the prior period.  Retroactive revenueadjustments in the third quarter of 2008 were not material.

 

*Compensationand benefits. *Compensationand benefits costs for the three months ended September 30, 2008 were$199.8 million, or 78.7% of net revenue, compared to $170.5 million, or 77.9%of net revenue, for the same period in 2007. Provider compensation and benefitscosts increased $18.3 million from net new contract additions. Same store providercompensation and benefits costs were $9.4 million over the prior period due toa 5.4% increase in provider compensation per patient visit attributableprimarily to higher net revenue and patient visits.

 

*Operatingexpenses. *Operatingexpenses for the three months ended September 30, 2008 were $8.9 million,or 3.5% of net revenue, compared to $10.8 million, or 4.9% of net revenue, forthe same period in 2007.  Operating expenses decreased due primarily tolower collection agency fees.

 

*Insuranceexpense. *Professionalliability insurance expense for the three months ended September 30, 2008was $14.4 million, or 5.7% of net revenue, compared to $6.7 million, or 3.1% ofnet revenue, for the three months ended September 30, 2007.  The change is related primarily to anincrease in prior year insurance provisions of $3.9 million for the threemonths ended September 30, 2008, compared to a reduction of prior periodinsurance provisions of $3.1 million for the same period last year.

 

*Selling,general and administrative. *Selling, general and administrative expense for thethree months ended September 30, 2008 was $5.4 million, or 2.1% of netrevenue, compared to $5.0 million, or 2.3% of net revenue, for the three monthsended September 30, 2007.

 

*Depreciationand amortization. *Depreciation and amortization expense for the three months ended September 30,2008 was $3.5 million, or 1.4% of net revenue, compared to $3.6 million, or1.6% of net revenue, for the three months ended September 30, 2007.

 

***Nine months ended September 30, 2008 compared to thenine months ended September 30, 2007***

 

***Consolidated***

 

Our results for the ninemonths ended September 30, 2008 reflect an increase in net revenue of$246.4 million and an increase in net income of $17.6 million compared to thenine months ended September 30, 2007. The increase in net income isattributable primarily to increased hurricane deployments under AMR’s nationalFEMA contract, growth in income from operations, higher realized gains oninvestments and a decrease in interest expense partially offset by increasedincome tax

 

25

----

 

expense.  Basic anddiluted earnings per share were $1.54 and $1.49, respectively, for the ninemonths ended September 30, 2008. Basic and diluted earnings per share were$1.12 and $1.08, respectively, for the same period in 2007.

 

*Netrevenue. *Forthe nine months ended September 30, 2008, net revenue was $1,816.2 millioncompared to $1,569.8 million for the nine months ended September 30, 2007,representing an increase of 15.7%. The increase is attributable primarily toincreased FEMA deployment revenue at AMR, increases in rates and volumes onexisting contracts and increased volume from net new contracts andacquisitions.

 

*AdjustedEBITDA. *AdjustedEBITDA was $183.4 million, or 10.1% of net revenue, for the nine months ended September 30,2008 compared to $159.7 million, or 10.2% of net revenue for the nine monthsended September 30, 2007.  The ninemonths ended September 30, 2007 included incremental positive revenueadjustments with an Adjusted EBITDA impact of $9.9 million. The 2008 periodincludes the Adjusted EBITDA impact related to increased deployment under theFEMA contract.

 

*Interestexpense. *Interestexpense for the nine months ended September 30, 2008 was $31.4 millioncompared to $35.3 million for the nine months ended September 30,2007.  The decrease is attributable primarily to the lower rate underour interest rate swap agreement, which became effective in the fourth quarterof 2007.  The swap agreement converts $200.0 million of variable rate debtto fixed rate debt with an effective rate of 6.3%.

 

*Incometax expense. *Incometax expense increased $12.0 million for the nine months ended September 30,2008, compared to the same period in 2007, resulting primarily from increasedoperating income, increased realized gain on investments and lower interestexpense.  Our effective tax rate for the nine months ended September 30,2008 was 38.6% compared with 38.0% for the same period in 2007.

 

***AMR***

 

*Netrevenue. *Netrevenue for the nine months ended September 30, 2008 was $1,075.3 million,an increase of $161.0 million, or 17.6%, from $914.3 million for the sameperiod in 2007. The increase in net revenue was due primarily from $90.9million of additional FEMA deployment revenue, rate increases and highertransport volume.  Excluding the impactof the FEMA deployments, net revenue increased due to a 5.3%, or$49.2 million increase in net revenue per weighted transport and 2.3%, or$20.9 million as a result of higher weighted transport volume.  Theincrease in net revenue per transport is attributable primarily to rateincreases in several markets including adjustments for increased fuelcosts.  Weighted transports increased 50,900 from the same period lastyear.  The change was due to an increase in weighted transports of 95,400from acquisitions and an increase in weighted transport volume in existingmarkets of 0.5%, offset by a decrease in weighted transports of 55,000 from therestructuring and exit of certain of our operations.

 

*Compensationand benefits. *Compensationand benefit costs for the nine months ended September 30, 2008 were $635.0million, or 59.1% of net revenue, compared to $576.3 million, or 63.0% of netrevenue, for the nine months ended September 30, 2007. The increase was dueprimarily to increases in compensation costs incurred as a result of increasedhurricane deployments under our national FEMA contract, expenses from ouracquisitions, annual salary increases and additional ambulance unit hourdeployment.  Excluding the impact of FEMAdeployments, ambulance crew wages per ambulance unit hour increased byapproximately 3.9%, or $13.1 million, principally from wage rate increases. Ambulance unit hours increased period over period by 2.3% or $7.4 million,excluding the impact of FEMA deployments.  The increase is due to ourrecent acquisitions and increased transport volume in existing marketspartially offset by the restructuring of certain of our operations and exit ofother markets in 2007.  Non-crew wages increased $11.2 million, excludingthe impact of hurricane deployments, due primarily to additional compensationexpenses from acquisitions of $5.8 million and annual salary increases of3.2%.  Benefit costs increased by $10.7 million, excluding FEMA deploymentbenefit costs, for the nine months ended September 30, 2008 due primarilyto increased health insurance costs and additional benefit expense from ouracquisitions.

 

*Operatingexpenses. *Operatingexpenses for the nine months ended September 30, 2008 were $275.9 million,or 25.7% of net revenue, compared to $207.3 million, or 22.7% of net revenue,for the nine months ended September 30, 2007.  The change is due primarily to increasedexternal provider expenses from our national FEMA deployment of $46.4 million,increased fuel costs of $9.2 million and additional operating expenses of $9.4million from our acquisitions.

 

*Insuranceexpense. *Insuranceexpense for the nine months ended September 30, 2008 was $30.8 million, or2.9% of net revenue, compared to $26.0 million, or 2.8% of net revenue, for thesame period in 2007.  We recorded a reduction of prior year insuranceprovisions of $5.3 million during the nine months ended September 30, 2008and $11.9 million during the nine months ended September 30, 2007.

 

*Selling,general and administrative. *Selling, general and administrative expense for thenine months ended September 30, 2008 was $34.1 million, or 3.2% of netrevenue, compared to $30.3 million, or 3.3% of net revenue, for the nine monthsended

 

26

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Tableof Contents

 

September 30,2007.  The increase is due primarily totravel and other administrative expenses for our national FEMA deployment.

 

*Restructuringcharges. *Restructuring charges of $2.2 million wererecorded during the nine months ended September 30, 2007, related to theclosure of one of our billing offices and the restructuring of our operationsin Los Angeles and Orange Counties in California.

 

*Depreciationand amortization. *Depreciation and amortization expensefor the nine months ended September 30, 2008 was $42.0 million, or 3.9% ofnet revenue, compared to $41.7 million, or 4.6% of net revenue, for the sameperiod in 2007.

 

***EmCare***

 

*Netrevenue.* Net revenue for the nine months ended September 30,2008 was $740.9 million, an increase of $85.4 million, or 13.0%, from $655.4million for the nine months ended September 30, 2007. The increase was dueprimarily to an increase in patient visits from net new hospital contracts andnet revenue increases in existing contracts. Following December 31, 2006, we added 75 net new contracts whichaccounted for a net revenue increase of $57.9 million.  Of the 75 net newcontracts added since December 31, 2006, 17 were added in 2007 resultingin an increase in 2008 net revenue of $21.1 million.  For the nine monthsended September 30, 2008, EmCare added 108 new contracts and terminated 50contracts resulting in an incremental increase in net revenue of $36.8million.  Of the 108 new contracts added in 2008, 45 were from ouracquisition of Clinical Partners in August 2008 with related managementfee revenue totaling $1.1 million.  Netrevenue under our same store contracts increased $27.5 million, or 5.1%, forthe period ended September 30, 2008 due to a 1.1% increase, or a 5.6%increase excluding retroactive revenue adjustments discussed below, in revenueper visit and an increase in same store patient visits of 4.0% over the priorperiod.  Retroactive adjustments, which increased revenue for the ninemonths ended September 30, 2008 and 2007, were approximately 0.9% and 4.3%of EmCare’s net revenue, respectively.

 

*Compensationand benefits.* Compensation and benefits costs for thenine months ended September 30, 2008 were $586.6 million, or 79.2% of netrevenue, compared to $502.8 million, or 76.7% of net revenue for the sameperiod in 2007. Provider compensation and benefits costs increased $49.7million from net new contract additions. Same store provider compensation and benefits costs were $29.2 millionover the prior period due to a 4.6% increase in provider compensation perpatient visit.  The increase is due primarilyto higher net revenue per patient visit and additional staffing due to growthin patient volumes.

 

*Operatingexpenses.* Operating expenses for the nine months ended September 30,2008 were $26.1 million, or 3.5% of net revenue, compared to $31.4 million, or4.8% of net revenue, for the same period in 2007.  Operating expensesdecreased due primarily to reduced off-hours radiology coverage, lowercollection agency fees, and bank fees of approximately $2.1 million, which arenow included in selling, general and administrative expenses.

 

*Insuranceexpense.* Professional liability insurance expense forthe nine months ended September 30, 2008 was $32.8 million, or 4.4% of netrevenue, compared to $25.2 million, or 3.8% of net revenue, for the nine monthsended September 30, 2007. An increase of prior year insurance provisionsof $1.3 million was recorded during the nine months ended September 30,2008 compared to a  reduction of $9.7million recorded for the nine months ended September 30, 2007.

 

*Selling,general and administrative.* Selling, general andadministrative expense for the nine months ended September 30, 2008 was $16.5million, or 2.2% of net revenue, compared to $13.8 million, or 2.1% of netrevenue, for the nine months ended September 30, 2007.  The increaseis due primarily to an increase in regional travel expense associated with theincrease in contracts during the period and increased bank fees ofapproximately $2.1 million, which bank fees were previously included inoperating expenses.

 

*Depreciationand amortization.* Depreciation and amortization expensefor the nine months ended September 30, 2008 was $10.2 million, or 1.4% ofnet revenue, compared to $10.5 million, or 1.6% of net revenue, for the ninemonths ended September 30, 2007.

 

**CriticalAccounting Policies**

 

For a discussion ofaccounting policies that we consider critical to our business operations andthe understanding of our results of operations that affect the more significantjudgments and estimates used in the preparation of our unaudited condensedconsolidated financial statements, please refer to Item 7, “Management’sDiscussion and Analysis of Financial Condition and Results of Operations —Critical Accounting Policies” contained in our annual report on Form 10-Kfor the year ended December 31, 2007 and incorporated by reference herein.As of September 30, 2008, there were no significant changes in ourcritical accounting policies or estimation procedures.

 

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**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-related assets and insurance-related deposits.

 

We believe our cash andcash equivalents, cash provided by our operating activities, and amountsavailable under our senior secured credit facility will meet the liquidityrequirements of our business through at least the next 12 months. We have availableto us, upon compliance with customary conditions, $100.0 million under therevolving credit facility, less outstanding letters of credit of $34.5 millionat September 30, 2008. Further, we have a conditional right under oursenior secured credit facility to request new or existing lenders to provide upto 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.

 

| ** **                       | ** ** | **Nine months ended**  | ** ** | **Nine months ended**  | ** ** |
|----------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                       | ** ** | **September 30, 2008** | ** ** | **September 30, 2007** | ** ** |
| Net cash  provided by (used in): |       |                             |       |                             |       |
| Operating  activities            |       | $                                | 130,426    |                             | $          | 56,946 |   |
| Investing  activities            |       | (30,357                          | )          | (111,142                         | )          |
| Financing  activities            |       | 6,699                            |       | 37,254                           | )          |
|                                  |            |                                  |            |                                  |            |  |  |

 

*Operatingactivities*. Net cash provided by operating activities was$130.4 million for the nine months ended September 30, 2008 compared to$56.9 million for the same period last year.  Increases in accountsreceivable decreased operating cash flows by $54.5 million for the nine monthsended September 30, 2008 compared to $71.0 million for the same period in2007.   Accounts receivable increasedduring 2008 due to FEMA deployment receivables outstanding as of September 30,offset by increased collections for receivables delayed in 2007 for billingsystem conversions and for delays in obtaining provider numbers. Increases in accounts payable and accrued liabilities increased operating cashflows by $42.0 million in 2008 compared to $5.3 million in 2007 primarily as aresult of FEMA-related deployment accruals.

 

We regularly analyze dayssales outstanding, or DSO, which is calculated by taking our net revenue forthe quarter divided by the number of days in the quarter.  The result isdivided into net accounts receivable at the end of the period.  DSOprovides us with a gauge to measure receivables, revenue and collectionactivities.  The following table outlines our DSO by segment and in totalexcluding the impact of the deployment under AMR’s FEMA contract:

 

| ** ** | ** ** | **Q3 2008** | ** ** | **Q2 2008** | ** ** | **Q1 2008** | ** ** | **Q4 2007** | ** ** | **Q3 2007** | ** ** | **Q2 2007** | ** ** |
|------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| AMR        |       | 83               |       | 86               |       | 87               |       | 89               |       | 89               |       | 90               |       |
| EmCare     |       | 72               |       | 76               |       | 79               |       | 79               |       | 81               |       | 78               |       |
| EMSC       |       | 78               |       | 82               |       | 84               |       | 85               |       | 86               |       | 85               |       |

 

EMSC’s DSO decreased 7days for the nine months ended September 30, 2008, 10 days including theimpact of FEMA deployment revenue and related accounts receivablebalances.  AMR’s DSO decreased 6 days forthe nine months ended September 30, 2008 and was primarily from thecollection of receivables delayed as a result of the billing system conversionin several markets during 2007. AMR’s DSO increased 8 days in 2007, of which 6days were related to this conversion.

 

EmCare’s DSO declined 7days for the nine months ended September 30, 2008.  The reduction wasdue to improved cash collections and from the collection of Medicare andMedicaid billings which had been delayed as a result of the time required toobtain provider numbers.  During the nine months ended September 30,2008, the total enrollment delayed amount decreased by approximately 33% andhas been negatively affected by recent contract starts. The Company expects tocollect these net Medicare and Medicaid receivables, which currently representapproximately 5 days of EmCare’s DSO.

 

*Investingactivities*.  Net cash used in investing activities was$30.4 million for the nine months ended September 30, 2008 compared to$111.1 million for the same period in 2007.   The decrease in cash flowsused in investing activities was affected by insurance collateral requirements,net capital expenditures and acquisitions of businesses.  Net insurance collateral requirementsprovided $16.0 million during 2008 compared to cash required for insurancecollateral of $7.3 million during the 2007 period.  Net capitalexpenditure spending was $21.4 million during the nine months ended September 30,2008 compared to $31.3 million for the same period last year due primarily tothe timing of capital purchases and the completion of system upgrades in thefirst 

 

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half of 2007.  Cashused in the acquisition of businesses during the nine months ended September 30,2008 was $28.3 million compared to $75.6 million during the same period in2007.

 

*Financingactivities.* For the nine months ended September 30,2008, net cash provided by financing activities was $6.7 million compared to$37.3 million for the nine months ended September 30, 2007.  The change in net cash from financingactivities is due to net debt repayments of $4.0 million for the nine monthsended September 30, 2008 compared to net borrowings of $34.5 million forthe same period in 2007.  Net cash fromfinancing activities for the nine months ended September 30, 2008 alsoincludes an increase in bank overdrafts of $8.8 million and issuance of commonstock from exercises of stock options totaling $1.9 million.  At September 30,2008 there were no amounts outstanding under our revolving credit facility.

 

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

 

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

 

We monitor the risk fromchanging interest rates and evaluate ways to mitigate possible exposures, asappropriate, using derivative and hedging instruments.  Our use of derivative instruments is limitedto highly effective fixed interest rate swap agreements used to managewell-defined interest rate risk exposures. At September 30, 2008, we were party to one interest rate swapagreement.  The swap agreement is withmajor financial institutions and amounts to $200 million of our variable ratedebt.  This swap agreement effectivelyconverts $200 million of variable rate debt to fixed rate debt with aneffective rate of 6.3%.  The Company continues to make interest paymentsbased on the variable rate associated with the debt (based on LIBOR which hadan average rate of 4% at September 30, 2008) and periodically settles withits counterparties for the difference between the rate paid and the fixedrate.  The swap agreement expires in December 2009.

 

As of September 30,2008, we had $474.1 million of debt excluding capital leases, of which $22.4million was variable rate debt under our senior secured credit facility ($200million of which was fixed through an interest rate swap which expires in December 2009)and the balance was fixed rate debt, including $250.0 million aggregateprincipal amount of our senior subordinated notes. An increase or decrease ininterest rates of 0.125% will change our interest costs on our senior securedcredit facility by less than $0.1 million per year based on outstandingindebtedness at September 30, 2008.

 

**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 September 30, 2008 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 NINE MONTHS ENDED**

 

**SEPTEMBER30, 2008**

 

**ITEM 1.LEGAL PROCEEDINGS**

 

For additionalinformation regarding legal proceedings, please refer to note 5, under thecaption “Commitments and Contingencies” of the notes accompanying theconsolidated financial statements included herein, to our Annual Report on Form 10-Kfiled with the SEC on February 27, 2008 and to our Quarterly Reports on Form 10-Qfiled with the SEC on May 9, 2008 and August 7, 2008.

 

**ITEM1A. RISK FACTORS**

 

Other than with respectto the risk factors below, there have been no material changes from the riskfactors disclosed in the “Risk Factors” sections of the Company’s Annual Reporton Form 10-K for the year ended December 31, 2007 and in the Company’sQuarterly Report for the quarter ended June 30, 2008.

 

***Volatilityin current market conditions could negatively impact insurance collateralbalances and result in additional funding requirements.***

 

The Company’s insurancecollateral is comprised principally of government and investment gradesecurities and cash deposits with third parties.  The recent volatility experienced in themarket has not had a material impact to the Company’s financial position orperformance.  Future volatility could, however,negatively impact the insurance collateral balances and result in additionalfunding requirements.

 

***Volatility and disruption of financial markets could affect access tocredit.***

 

The current economicmarket environment is causing contraction in the availability of credit in themarketplace. This could potentially reduce the sources of liquidity for theCompany. While there have not been changes to date regarding the Company’sability to access credit under its revolving credit facility or additionalborrowings under our senior secured facility, future volatility could have anegative impact on our financial position and performance which could put us indefault of the credit conditions and impact our ability to access credit.  Additionally, future volatility and financialmarket disruptions could impact the creditor’s ability to honor the terms ofthe Company’s credit agreements.

 

***Our consolidated revenue and earnings could varysignificantly from period to period due to our national contract with theFederal Emergency Management Agency.***

 

Our revenue and earningsunder our national contract with the Federal Emergency Management Agency, orFEMA, are likely to vary significantly from period to period.  In thefirst two years of the FEMA contract, our annual revenues from servicesrendered under this contract have varied by approximately $90 million.  Inits present form, the contract generates revenue for us only in the event of anational emergency and then only if FEMA exercises its broad discretion toorder a deployment.  Our FEMA revenue therefore depends largely on circumstancesoutside of our control. We therefore cannot predict the revenue and earnings,if any, we may generate in any given period from our FEMA contract. This maylead to increased volatility in our actual revenue and earnings period to period. 

 

***We may be required to enter into large scale deployment ofresources in response to a national emergency under our contract with FEMA,which may divert management attention and resources.***

** **

We do not believe that aFEMA deployment adversely affects our ability to service our local 911contracts. However, any significant FEMA deployment requires significantmanagement attention and could reduce our ability to pursue other localtransport opportunities (such as IFT) and to pursue new business opportunities,which could have an adverse effect on our business and results of operations.

 

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**ITEM 6.EXHIBITS**

 
| 4.13   |   | Supplemental  Indenture No. 7, effective as of July 10, 2007, among Nevada Red  Rock Holdings, Inc., Nevada Red Rock Ambulance, Inc., the Issuers  named therein, the other Guarantors named therein and U.S. Bank Trust  National Association, as trustee.*                                                                     |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.14   |   | Supplemental  Indenture No. 8, effective as of August 10, 2007, among Medicwest  Holdings, Inc., Medicwest Ambulance, Inc., the Issuers named  therein, the other Guarantors named therein and U.S. Bank Trust National  Association, as trustee.*                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.15   |   | Supplemental  Indenture No. 9, effective as of August 17, 2007, among Mission  Care Services, LLC, Mission Care of Illinois, LLC, Mission Care of Missouri,  LLC, Access2Care, LLC and Abbott Ambulance, Inc., the Issuers named  therein, the other Guarantors named therein and U.S. Bank Trust National  Association, as trustee.* |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.16   |   | Supplemental  Indenture No. 10, effective as of October 19, 2007, among Arizona  Oasis Acquisition, Inc., the Issuers named therein, the other Guarantors  named therein and U.S. Bank Trust National Association, as trustee.*                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.17   |   | Supplemental  Indenture No. 11, effective as of March 14, 2008, among Radiology  Staffing Solutions, Inc. and RadStaffing Mangement Solutions Inc., the Issuers  named therein, the other Guarantors named therein and U.S. Bank Trust  National Association, as trustee.*                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.18   |   | Supplemental  Indenture No. 12, effective as of March 28, 2008, among River  Medical Incorporated, the Issuers named therein, the other Guarantors named  therein and U.S. Bank Trust National Association, as trustee.*                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 31.1   |   | Certification of the  Chief Executive Officer of Emergency Medical Services Corporation pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 31.2   |   | Certification of the  Chief Executive Officer of Emergency Medical Services Corporation, as general  partner of Emergency Medical Services L.P., pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002.*                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 31.3   |   | Certification of the  Chief Financial Officer of Emergency Medical Services Corporation pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 31.4   |   | Certification of the  Chief Financial Officer of Emergency Medical Services Corporation, as general  partner of Emergency Medical Services L.P., pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002.*                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 32.1   |   | Certification of the  Chief Executive Officer and the Chief Financial Officer of Emergency Medical  Services Corporation pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 32.2   |   | Certification of the  Chief Executive Officer and the Chief Financial Officer of Emergency Medical  Services Corporation, as general partner of Emergency Medical Services L.P.  pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.*                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |

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*            Filedwith this Report

 

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**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)                                |
|                  |       |                                        |   |
| November 4, 2008      |       | By:                                         | /s/ William A. Sanger |   |
| Date                  |       |                                        | William A. Sanger |   |
|                  |       |                                        | Chairman and Chief Executive Officer |   |
|                  |       |                                        |   |   |
| ** **            | ** ** | **EMERGENCY MEDICAL SERVICES L.P.**         |
|                  |       | (registrant)                                |
|                  |       |                                        |   |
|                  |       | By:                                         | Emergency Medical Services Corporation, its   General Partner |
|                  |       |                                        |   |   |
| November 4, 2008 |       | By:                                         | /s/ William A. Sanger |   |
| Date                  |       |                                        | William A. Sanger |   |
|                  |       |                                        | Chairman and Chief Executive Officer |   |

 

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**EXHIBITINDEX**

 
| 4.13   |   | Supplemental  Indenture No. 7, effective as of July 10, 2007, among Nevada Red  Rock Holdings, Inc., Nevada Red Rock Ambulance, Inc., the Issuers  named therein, the other Guarantors named therein and U.S. Bank Trust  National Association, as trustee.*                                                                     |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.14   |   | Supplemental  Indenture No. 8, effective as of August 10, 2007, among Medicwest  Holdings, Inc., Medicwest Ambulance, Inc., the Issuers named  therein, the other Guarantors named therein and U.S. Bank Trust National  Association, as trustee.*                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.15   |   | Supplemental  Indenture No. 9, effective as of August 17, 2007, among Mission  Care Services, LLC, Mission Care of Illinois, LLC, Mission Care of Missouri,  LLC, Access2Care, LLC and Abbott Ambulance, Inc., the Issuers named therein,  the other Guarantors named therein and U.S. Bank Trust National Association,  as trustee.* |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.16   |   | Supplemental  Indenture No. 10, effective as of October 19, 2007, among Arizona  Oasis Acquisition, Inc., the Issuers named therein, the other Guarantors  named therein and U.S. Bank Trust National Association, as trustee.*                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.17   |   | Supplemental  Indenture No. 11, effective as of March 14, 2008, among Radiology  Staffing Solutions, Inc. and RadStaffing Mangement Solutions Inc., the  Issuers named therein, the other Guarantors named therein and U.S. Bank Trust  National Association, as trustee.*                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 4.18   |   | Supplemental  Indenture No. 12, effective as of March 28, 2008, among River  Medical Incorporated, the Issuers named therein, the other Guarantors named  therein and U.S. Bank Trust National Association, as trustee.*                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |
| 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.*                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                 |

----

*            Filedwith this Report

 

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